Growing Pains: Vertical Agriculture Stunted By Rising Real Estate, Energy, And Labor Costs
Growing Pains: Vertical Agriculture Stunted By Rising Real Estate, Energy, And Labor Costs
Author Cathy Siegner
May 11, 2018
Dive Brief:
A growing number of startups in the U.S. and abroad are raising produce inside buildings to dramatically cut back on water use and transportation costs, but these growers are finding real estate, energy, and labor costs daunting, according to an Associated Press story in Food Manufacturing.
Once all those inputs are in place, the harvest may be tasty and locally grown, but the prices it attracts may not be enough to cover the expenses, the story noted.
Plenty, an indoor-farming enterprise based in San Francisco and supported by Amazon's Jeff Bezos, raised $200 million last year in the largest ag-tech funding round to date. Its CEO, Matt Barnard, said less expensive power is needed to make indoor farms sustainable. "We believe society should consider investing in this new form of agriculture in the way it invested in agriculture in the 1940s," he told the AP.
Dive Insight:
Vertical farms, or indoor facilities where produce is grown in towers without soil or pesticides and are flooded with LED lights, have been advertised as a way to provide cheaper, healthier and more local produce. They're popular with businesses and consumers, but not as cost-effective as they should be.
Unless indoor farms can find a way to lower costs, the segment is likely to bottom out without more investment — or public subsidies, as Plenty's CEO Matt Barnard suggested to the AP. The government is generous with public subsidies to conventional farms, he pointed out, with $9.3 billion directly going to American farmers in 2017. Crop insurance in case of weather problems is also subsidized.
There could be other ways to solve the cost problem. BrightFarms, an indoor growing company based in New York, has been expanding operations by partnering with big retailers in large cities to deliver fresh produce within 24 hours. Its retail partners — Walmart, Albertsons, Kroger and Giant — comprise about 60% of the current grocery market, the company said.
The model seems to be working so far. BrightFarms has installed produce-growing facilities in Illinois, Virginia, and Pennsylvania, with one more in Ohio scheduled to come online this summer.
Another option is growing produce on the roof of grocery stores. This cuts back on real estate and utility costs, though weather may be an issue in some locations.
Despite financing challenges in the space, Plenty has expansion plans. It not only wants to expand its operations to Seattle this year, but it has big plans to install 300 vertical farms in China starting in 2019. The idea, according to Business Insider, is to position these facilities in or near large cities where organic produce can be sustainably grown and sold.
Labor costs aren't likely to be as challenging in China as in the U.S. This type of farming is still labor intensive because even if automation is used for lighting and heating, people are needed to maintain drip systems, and clip and ship produce when it's ready to consume. Workers are also needed to expand the types of produce grown because while mixed greens, herbs, and other leafy vegetables do fine on flat spaces, it's tough to thin and prune tomatoes and carrots on walls or growing towers.
Indoor farmers might also enlist public help in their efforts by doing more than just tapping into consumer preference for fresh, locally grown produce. The sustainability factor is an important add-on for consumers looking for products from mission-driven companies. Touting that, along with much lower water use and safer growing conditions, could help bolster growth. Whether it helps justify higher produce prices needed to cover increasing costs remains to be seen.
Recommended Reading:
- Food Manufacturing People, Power Costs Keep Indoor Farming Down To