Some Urban Farmers Are Going Vertical

2017

In a factory parking lot in Brooklyn, a crowd of about 100 people gasped and murmured as Tobias Peggs cracked open the heavy metal doors of a white shipping container, allowing pink light to spill out from within. The interior of the container looked like a dance club, or a space station: Strips of dangling LED lights glowed red and blue, illuminating white plastic panels. Leafy green vegetables grew from the walls.

Mr. Peggs, 45 years old, chief executive of a new company called Square Roots, recently was leading a farm tour of his new urban agriculture operation in the Bedford-Stuyvesant neighborhood of Brooklyn. The shipping container was a vertical farm, one of the company’s 10 located in the parking lot, each capable of growing the equivalent of 2 acres of crops in a carefully controlled indoor environment, he said. Square Roots, which uses hydroponic technology to raise a variety of herbs and greens, is one of the latest companies to join the expanding industry of high-tech indoor farming. Proponents of vertical farming say it is designed to meet the increasing demand for locally grown food—fueled by distrust of large-scale industrial agriculture—at a time when more people are moving into cities.

Square Roots, co-founded by Kimbal Musk, brother of famed inventor and businessman Elon Musk, isn’t only growing vegetables. The company is trying to cultivate a network of food entrepreneurs by operating a kind of apprenticeship program. Each of its 10 shipping-container farms is run by a different entrepreneur selected from hundreds of applicants.

Messrs. Musk and Peggs have a grand vision: A network of Square Roots farms in urban centers across the U.S., each supplying locally grown produce to city-dwellers, while transforming mostly young people into urban farmers and food entrepreneurs. While there is no age limit, the farmers in the first group range from 22 to 30 years old, Mr. Peggs said. Growing vegetables inside windowless metal boxes, however, has its difficulties. Critics of vertical farming point to extreme energy use, high price points of the final product, and the limited selection of vegetables that can be grown this way. Mr. Peggs acknowledges these challenges but says they can be overcome with rapidly improving technology. LED lights are quickly becoming more efficient, for instance, and the addition of solar panels could take the containers entirely off the grid in coming years, he noted.

Square Roots started last summer with $3.4 million raised from a first round of investors, Mr. Peggs, said. The company spent more than $1 million building the farm—buying and setting up 10 shipping containers from a Boston company called Freight Farms for more than $80,000 each. Farming began in November. Each entrepreneur selected was required to invest several thousand dollars in his or her farm, refundable at the end of the year, Mr. Peggs said. Nine of the farmers received microloans from the U.S. Department of Agriculture. The new farmers took an eight-week course, learning how to cultivate hydroponic crops, and then decided what vegetables to grow and how to sell them. The farmers soon began cultivating crops such as watercress, basil, lettuces, Swiss chard, bok choy, and cilantro.

Square Roots plans to make money through a revenue-sharing model, taking a cut of whatever income the 10 farmers generate. Along the way, each entrepreneur is given mentoring and guidance on farming, as well as branding and marketing, Mr. Peggs said. The company is generating revenue, but is deliberately not running at a profit, to establish the platform, he said. Mr. Peggs declined to detail the profit share with farmers.

One of the farmers, Erik Groszyk, said recently that he had only just started making money from his farm. He raises arugula, mustard greens, and tatsoi, fueled by a $12,000 microloan from the USDA. He said he sells his produce directly to restaurants and is part of a companywide sales program called Farm-To-Local, a subscription service that delivers bagged greens to office workers at their desks around New York City.

Packets of salad greens—about the size of a bag of chips—cost between $5 and $7. At that price point—higher than New Yorkers might find at their supermarket—Square Roots won’t achieve its goal of making fresh local food accessible to everyone. But Mr. Peggs is quick to point out that Starbucks sells millions of coffee drinks a day at a similar cost. Neil Mattson, a professor of plant science at Cornell University, notes there are other drawbacks to shipping-container farms, such as a carbon footprint two to three times greater than a greenhouse because of the large amount of electricity required to run the lighting and ventilation systems.

Mr. Peggs said each shipping container costs about $1,500 per month to operate, with electricity and rent as the biggest expenses at about $600 each. Transportation costs are low because most deliveries are made by bike or subway. Mr. Mattson said greenhouses, which offer the same control of growing conditions as a vertical farm and can include LEDs to supplement sunlight, are often a better option for producing crops in or near urban areas. Mr. Peggs, however, contends that shipping-container farms are still the best option for Square Roots, which is less interested in scaling up to large operations that can replace industrial farms, and more interested in cultivating many farmers working smaller operations, so everyone knows their grower and where their foods comes from.