AUSTRALIA'S erratic climatic habit of delivering long spells with frustratingly little rainfall, or deluging farms with too much wet weather, is pushing the $3.5 billion vegetable production industry to take cover.
While the vast majority of Australian horticulture crops still grow in open paddocks, the moisture efficiency gains, improved yields and better product quality achieved from greenhouse or shadehouse protection are prompting a serious push to covered crop development.
Rising demand for vegetables, plus pressure from supermarkets to supply consumers with superior quality produce all year regardless of seasonal constraints, have helped fuel an expansion in covered vegetable investment.
Revenue in the sector is expected to grow by 5.2 per cent this financial year, to be worth about $512 million - about $50m of which will be profit - says business research firm IBISWorld.
Annual growth during the next five years is tipped to average about 2.6pc, taking the sector's value to about $583m by 2020.
"Outdoor production still accounts for most vegetable industry production, partly because of the large areas required to grow certain crops, but the profits, crop quality, and savings on water and fertiliser inputs achieved under cover have become clearer in the past five to 10 years," said research analyst Brooke Tonkin.
Risk-defensive horticulture
Tomatoes, cucumbers, capsicums, lettuce, egg plant, Asian vegetables, herbs and mushrooms have been among the main crops grown under cover, mostly in NSW and Queensland.
Dry South Australia boasts the highest proportion of businesses relative to its population.
Under-cover produce generally has superior appearance, taste and prices when compared with similar field-grown lines, particularly after hot, wet or windy weather sets in.
Ms Tonkin said a surge in hydroponic production was part of the new risk-defensive horticulture era picture, but vegetables did not have to be grown in fully enclosed glasshouse environments to reap benefits from a protected or semi-controlled environment.
She noted the extreme damage caused to the unprotected Sydney Basin horticulture sector by torrential rain in April, where the biggest daily registrations in 13 years - up to 130 millimetres - damaged yields and left production schedules bogged in mud for a month or more.
"While the transition and expansion phase has been concentrated on a core group of big businesses, we've seen grower-run co-operatives establish to help individual farmers reach the level of scale needed to compete with the larger growers."
According to Ms Tonkin, smaller family operated establishments still dominate the covered industry's numbers - about 750 in total.
However, individual producers were often unable to significantly expand or afford the top-notch technology required to reach the big scale output demanded by the cost-competitive supply chain.
Attracting corporates
Not so surprisingly, Ms Tonkin said the industry was proving well suited to big-scale corporate investment with further acquisitions by, or partnerships with, local and foreign private equity firms expected to take advantage of the market's growth potential.
In fact, the biggest player in the glasshouse and covered vegetable market, the vertically integrated Costa Group, is about to float on the Australian Securities Exchange (ASX) and has been drumming up investor interest in the US.
Costa Group, based in Ravehall in Victoria, is a major berry, tomato and mushroom producer, with more than 40 farming and wholesale businesses supplying to the supermarket giants, produce markets and an export fruit, vegetable and grains business.
Its farming interests range from vineyards to avocado orchards and a powerful 27pc share of the covered vegetable sector, including its huge 20-hectare hydroponic glasshouse tomato operation at Guyra on NSW's New England tablelands.
The Guyra site, which produces the bulk of the company's 10 million tonnes of annual output, is now being duplicated with two more 10ha glasshouse stages to be built on a nearby farm in the district.
Costa's total business interests generated revenue of $711m last financial year and IBISWorld expects its under-cover vegetable ventures are currently growing by 6.8pc annually and likely to turn over about $138.1m in 2014-15.
That growth was partly driven by acquiring smaller vegetable operations in recent years, including Adelaide Mushrooms in 2013.
IBISWorld has noted while the company actually made losses in the three years to 2013-14, private equity firms still saw Costa and other similar integrated horticulture players, such as the Sydney-based Perfection Fresh Australia, as worthwhile investments.
Perfection Fresh, which bought the big Moraitis horticulture group's tomato business early this year, including five hectares of glasshouses at Tatura in northern Victoria, has about 5pc of the covered cropping market in Australia.
Moraitis Group itself was 70pc sold to the Hong Kong-based Chevalier International two years ago as part of Chevalier's plans to provide funds to boost Moratis' production, farm management and distribution services and explore markets in mainland China.
Co-operation is key
While generally far more input efficient than field cropping, the intensive covered vegetable industry's rate of expansion is likely to depend on reliable access to irrigation water and greater co-operation between smaller farmers, says IBISWorld.
Its recent study of the industry found growers' abilities to form production or marketing co-operatives and jointly invest in greenhouse technology to cut production costs and boost output would define the pace of change in the industry.
Creating more competition with large integrated produce companies would also expand the variety and volume of produce available to shoppers and assist public perceptions of non-field grown crops.
While greenhouses made of glass or polycarbonate panels significantly mitigated the risk of erratic weather problems for crops by controlling the growing environment with advanced ventilation and automated temperature and watering systems, they were not cheap.
Even low-tech greenhouses represented a notable step up in investment costs.
National industry body Ausveg noted while some crops adapted well to compact production systems under cover, the trade-offs may include notably higher energy costs for heating, cooling and water reticulation; specialised equipment and infrastructure installation and maintenance costs, and high-technology skills for management and workers.
Water also remained a potentially risky input for covered vegetable production, according to the IBISWorld report.
Despite being more water efficient and the increased use of water recycling, covered growing operations still needed consistent water quality and reliable supplies, in particular when seasonal conditions turned dry and farm storages across the vegetable industry were depleted.