Supermarket are becoming an important sales channel for fruit and vegetables, benefiting the larger industry players.
Melbourne, Australia (PRWEB) December 07, 2014
Operators in the hydroponic crop farming industry in Australia are flourishing, with revenue forecast to increase by an annualised 7.0% over the five years through 2014-15. Hydroponically grown produce uses only one-fifth the amount of water soil-grown crops require. The ability of hydroponic farmers to grow crops with higher water efficiency and under controlled conditions has enabled them to better withstand unfavourable weather conditions that have plagued the agricultural sector. According to IBISWorld industry analyst Brooke Tonkin, “Reduced rainfall levels over the past five years have negatively affected crop supplies of soil-based farmers, and thus reduced competition for the industry in retail markets.” This reduced competition has increased demand for hydroponic produce, thus boosting revenue. Industry revenue is forecast to rise by 7.2% in 2014-15, to reach $816.6 million.
Hydroponic crop output has increased over the past five years, as increased capital investment has helped to boost yields and overall productivity. Investment in automation to regulate variables such as temperature and moisture is increasingly being undertaken to optimise the cultivation process and improve yield and quality. Increasing automation has reduced imputed wage requirements, which has weakened the industry's average profit margin over the past five years. “The industry has a multitude of small owner-operator enterprises but is exhibiting moderate levels of consolidation, as firms that spend on capital investment gradually obtain smaller unit costs and larger margins,” says Tonkin. Also, supermarket chains Coles and Woolworths are becoming an increasingly important sales channel for fruit and vegetable produce. This has particularly benefited larger players, which are able to supply large quantities and are more likely to attain economies of scale. The industry has a low level of market share concentration.
The future remains bright for the Hydroponic Crop Farming industry. A marginal increase in health consciousness and rising vegetable consumption will support industry demand over the next five years. The major supermarket chains are expected to increase in importance for the industry, as their interaction with farmers reduces the need to sell produce through wholesalers. Enhanced production methods and better storage techniques, driven by ongoing capital investment, will help boost production.
For more information, visit IBISWorld’s Hydroponic Crop Farming industry in Australia report page.
Hydroponics is a method of growing plants without soil, using mineral nutrient solutions in water or using different forms of media. Operators in the industry grow crops under protective cover or outdoors.
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