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Vertical Farming Resolves Production Headwinds and Environmental Concerns
Vertical farming, the practice of growing crops in vertically stacked layers in a controlled indoor environment, solves many of the production and environmental setbacks facing the agriculture industry today.
For one, a major threat to crop production continues to be water scarcity amid extreme drought conditions spreading across the globe. As MRP recently highlighted, weather conditions have limited harvests and stoked food inflation further, yet those problems are nonexistent when vertical farming is implemented.
In a controlled indoor environment, farmers no longer have to worry about weather disruptions like drought, floods and frost that have ruined harvests from California to Brazil. Indoor farms allow for production 365 days a year, less reliant on traditional farming cycles where crops are only grown and harvested on a cyclical basis.
Year-round production with no disruptions would help alleviate rising food inflation, as the Food and Agriculture Organization of the United Nations (FAO) notes a steady increase in demand for food and unfavorable weather conditions are among the main factors leading to rising food prices. Further, world farmers will need to increase yields by almost 70% over the next 30 years to combat rising populations.
Fortunately, vertical farming technology is highly efficient, as a report from Big Think predicts these farms could increase annual yields by 700%.
Since these farms are vertical in structure, they require significantly less acreage and can be constructed in urban areas, reducing both transportation time and expenses. According to Free Think, some farms will be able to reach hundreds of millions of Americans in just one day of distribution, compared to a week or more under some current farming systems.
Vertical farms also use a fraction of the water that traditional agriculture necessitates. According to Pure Greens, the technology utilizes roughly 70% to 95% less water than typical farming practices, and due to the vertical structure, water runoff is easily recycled and reused for future crop production.
High Startup Costs Stunt Growth, Greater Investment Will Drive Adoption
Despite the vast potential vertical farms possess, the costs that go into the construction and maintenance of these projects remain very expensive, subsequently slowing the technology’s adoption and sending vertical farm stocks sliding through 2021 as they have yet to turn profits.
Firstly, indoor farms utilize artificial light instead of natural sunlight. Sunlight is obviously cheaper than artificial sunlight, and the electricity that goes into a vertical farm’s air conditioning, water systems and automated technology hinders makes it challenging to start a farm expand their business.
A study from Precedence Research, highlighted by PRNewswire, found that a significant hurdle for the industry is a lack of technically skilled workers. The abundance of cameras, sensors, artificial intelligence, aeroponic, hydroponic and aquaponic systems is not only expensive but clearly requires a highly skilled workforce.
However, even with the challenges that face indoor vertical farms, the industry has continued to garner significant investor interest. Precedence Research predicts the vertical farming market could surpass $31.15 billion by 2030, up from just $4.12 billion in 2021, growing at a CAGR of 25.2% over the next nine years.
In 2021 alone, vertical farming startups raised $1.9 billion globally, 86% higher than a year prior, according to Pitchbook Data, and the budding industry is already off to a hot start in topping that record in 2022.
Walmart made headlines last week as CNBC reports the retailer recently invested in Plenty, Inc., an indoor vertical farming company, as a part of a $400 million funding round. Walmart is easily the largest grocer to dive into the budding area of food technology as grocers look to limit waste and promote sustainability practices. CNBC notes that Plenty has already raised over $900 million, and CEO Arama Kukutai says the Walmart deal is a step toward fresh, clean produce far more accessible and affordable.
Similarly, Upward Farms, another vertical farming startup, recently announced plans to launch a massive 250,000 square foot vertical farm in Northeastern Pennsylvania early next year, which would be the largest vertical farm in the world. Due to its geographical location, Upward will have ability to reach over 100 million consumers in a single day of distribution. The company has already raised over $120 million in just the last year and has plans for further expansion across the country in the coming year.
Meanwhile, Bowery Farming, the largest vertical farming company in the US, just received a $150 million credit facility from global investment firm KKR, bringing the company’s total amount of capital raised to roughly $647 million, per Produce Blue Book. Bowery has plans to open two new farms in the Atlanta, Georgia region as well as the Dallas-Fort Worth region of Texas, bringing fresh produce to tens of millions of consumers.
The promise of vertical farming technology has clearly piqued the interest of investors as startups were able to raise nearly two billion dollars last year. If retailers follow in Walmart’s footsteps, vertical farming could see its adoption accelerate, overcoming cost hurdles to provide solutions for the headwinds currently facing the agriculture industry.
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