USA – Vertical farming is an emerging technique within agriculture that involves growing crops indoors under controlled environmental conditions by tuning the growing environment to the exact needs of the plant and using soil-free growing techniques.

By carefully tailoring the environment to the exact requirements of the crop, such as through using LED lighting to produce the exact light spectrum needed for optimal photosynthesis, it is possible to obtain yields hundreds of times higher than traditional agriculture.

Vertical farms can be set up almost anywhere, making it possible to grow crops in the middle of populous urban centres, meaning that it is possible for crops to reach consumers within minutes of harvest.

This contrasts with traditional agriculture, where fresh produce can take weeks to reach consumers, losing freshness and increasing contamination risk along the way.

With supporters claiming that vertical farming could revolutionise food production, the technology has been the subject of a lot of hype in recent years. Investors are also feeling the hype, with vertical farming start-ups raising over a billion dollars in investment in the last five years alone.

To explore the technologies and markets around the fast-growing vertical farming industry, research and consultancy IDTechEx, has released a report ‘Vertical Farming: 2020-2030’ highlighting how business can succeed in this emerging market.

Striking the balance

IDTechEx, however says that despite the optimism, the industry does face some major challenges and the sector has more than its fair share of bankruptcies.

PodPonics, once the most well-funded vertical farming company in the world, and FarmedHere, which once operated what remains the largest vertical farm ever built, both went bankrupt.

Additionally, David Rosenberg, Chief Executive of New Jersey based vertical farming outfit AeroFarms, recently said he wouldn’t be surprised if 90% of the players in the industry went out of business within the next three years.

Broadly, IDTechEx observes that many vertical farms struggle for the same reasons. “As well as costing a lot of money to set up, vertical farms can be very expensive to run, largely because they require continuously running artificial lighting and climate controls,” the company says.

The research firm adds that this, compounded by high labour costs and logistical difficulties that often get more difficult as the vertical farm gets larger, makes it very difficult to compete on price with produce grown on conventional farms, which typically have razor-thin profit margins.

According to the report, it is because of these challenges that vertical farmers generally only grow crops where the whole of the plant can be consumed, in order to maximise space efficiency and avoid wasting energy on growing inedible stems and leaves.

“Therefore, almost all vertical farmers are restricted to growing herbs and leafy greens. These are still a large market, but fall somewhere short of the lofty claims made by some supporters of the industry,” IDTechEx says.

The Do’s and Don’ts in vertical farming

However, it is not a lost course for business already in operation or companies willing to venture into vertical farming. Infact, it is certainly possible to run a successful vertical farming business.

Markedly, fast growing players such as Bowery Farming and InFarm can attest to this. IDTechEx observes that success in this sector requires a carefully planned out strategy and consideration of all the variables and trade offs involved in vertical farming, in addition to a fair amount of investor capital.

The recent IDTechEx report outlines the keys to success in vertical farming outlined and discusses several factors that can contribute to the success or failure of a vertical farm. Some of the factors highlighted include:

Whether or not to automate. Automation can significantly reduce labour costs while streamlining the logistical processes. However, investing in advanced automation equipment can lead to extremely high start-up costs.

Choice of crops. Should vertical farming try to branch out beyond leafy greens, or should it corner the market it has? What about higher value crops inaccessible to conventional agriculture?

How large is too large? Larger centralised facilities could lead to economies of scale but could also face spiralling logistical difficulties. However, smaller localised facilities may face much higher start-up costs relative to the output capacity.

The importance of location: is a city centre location really the best place to set up a vertical farm?

The need for experience in the food industry. Crops are living organisms and are not always predictable. Despite this, there is a relative lack of food and agriculture experience in the vertical farming sector.

Nevertheless, the firm observes that enthusiasm remains high and technology is helping to decrease the costs of vertical farming and make large scale urban food production a reality.

High profile investments include New Jersey-based start-up AeroFarms raising US$100 million in 2019 to expand its aeroponic growing facilities, and Californian start-up Plenty raising US$200 million in 2017 in a funding round led by SoftBank Vision Fund, along with backers including Jeff Bezos and Alphabet chairman Eric Schmidt.

 The report then forecasts the future of the vertical farming industry, predicting that it will rise from its current value of US$709 million to US$1.5 billion by 2030.