Vertical Farming Takes Root In Taiwan

BY JULES QUARTLY

Exposed root system for hydroponically grown plants at YesHealth's iFarm in Taoyuan. Photo: Jules Quartly

After becoming a world leader in semiconductors and other electronic products, Taiwan is now looking to smart agriculture as its next vine to climb. The island aims to supply much of the world’s fruit and vegetables within the next 30 years.

This might seem rather unlikely until you consider that the future of farming is not land and labor but factories and robots. Furthermore, Taiwan already possesses in abundance the tools that tomorrow’s smart farmers will use, including solar and advanced light technology, chemicals, gene editing, drones, smart sensors, software, algorithms, data mining, and big data.

Many of these technologies are being put to use in a glittering new 14-story vertical farm at Copenhagen Markets in Denmark’s capital. The first phase of construction of the 7,000-square-meter facility finished in early December. It is one of Europe’s biggest and most efficient vertical farms and was built using a blueprint of patented technologies from Taiwan’s YesHealth Group.

The result of a partnership between YesHealth and Danish agritech startup Nordic Harvest, the farm looks like a fancy warehouse from the outside. The interior is fitted with rows upon rows and columns upon columns of trays containing leafy greens, growing under an intense battery of more than 20,000 smart LED lights. The plants are tended by engineers in lab coats and guided by software that processes over 5,000 individual data points to optimize plant health.

Rows of fresh produce grown under batteries of LED lights at iFarm. Photo: Jules Quartly

The LEDs provide variable spectrum light for 100 different kinds of plants, nanobubble hydroponics oxygenate the roots and inhibit bacterial growth, and liquid microbial fertilizers derived from oyster shells, brown sugar, and soy milk provide essential nutrients for plants and soil. Even the music played to the plants is science-infused, with classical or light jazz music ranging between 115 and 250 Hertz seeming to work best.

Production at the new vertical farm is set to begin in the new year and will scale up to around 3,000 kilograms of leafy vegetables per day by the end of 2021, equating to approximately 1,000 tons of greens annually. Crucially, unlike most farms, these figures are close to guaranteed since production is not at the mercy of climate, the weather, pests and disease, pesticide residue, nitrate levels, or hundreds of other variables that affect traditional farming. 

According to Jesper Hansen, YesHealth Group’s Chief Communications Officer, the partnership with Nordic Harvest has been a productive one so far. It took just five months to install the farm and all the produce is pre-sold to ensure the operation is profitable by Q3 of 2021.

“This collaboration is just the start of a long-term journey together,” Hansen said in an email from Denmark. He notes that the two partners plan to expand to other Scandinavian countries over the next several years.

Hansen credits Taiwan for its efficient development of the technology and know-how to reproduce vertical farms all over the world and calls the Danish development “a crucial milestone in our international expansion.” He adds that the company is eyeing new partners in Europe, Asia, and the MENA (the Middle East and North Africa) region.

YesHealth is the brainchild of serial tech entrepreneur Winston Tsai, who started an LCD screen company at age 21. His “eureka moment” came after being diagnosed with liver cancer and partly linking his illness to pollution in foods. After recovering, he made it his mission to produce affordable, pesticide-free produce by harnessing the power of technology.

He founded YesHealth Agri-Biotechnology Co. Ltd. in 2011 and six years later established YesHealth iFarm in Taoyuan’s Luzhu District. The iFarm cultivates an ever-expanding range of leafy vegetables and herbs in a 2,500-square-meter warehouse factory. It produces 1,500 kilograms of leafy greens per day, a yield which the company says is 100 times more efficient than a traditional farm using the same space and requires only 10% as much water. In addition, YesHealth has a farm in China’s Shenzhen, which harvests up to 2,500 kilograms per day.

A tour of iFarm is well worth a visit and introduces the wide variety of plants grown there. Photo: Jules Quartly

YesHealth’s products are sold to major retailers both in Taiwan and abroad, including restaurants, hotels, and airports. Its stated aim is to supply a total of 7,000 kilograms of leafy greens per day worldwide in 2021.

Diners enjoy a meal at iFarm’s restaurant, which overlooks the vertical farm. Photo: Jules Quartly

Having sampled the produce at the iFarm, I can confirm the arugula grown there is as tasty as any I have tried, while the lettuce and leguminous alfalfa is a perfectly clean, green, and crunchy eating experience – the result, I was informed, of an optimal growing environment and harvesting at exactly the right time.

A plate of salad featuring leafy greens grown at the iFarm site. Photo: Jules Quartly

In a sense, it’s back to the future for Taiwan, which had a largely agricultural economy up until the 1950s. Agriculture was one of the pillars supporting the nation’s economic miracle after World War II. With the help of mechanization and productivity gains, agricultural production at that time contributed around a third of Taiwan’s GDP.

In more recent times it has accounted for just 1.8-1.9% of GDP. That greatly reduced figure, which includes animal husbandry, fishing, and forestry, is not due to a decline in agricultural output per se, so much as the growth in manufacturing and the emergence of a pervasive service sector.

Taiwan has a wide range of rich, often volcanic soils that are exceptionally fertile, along with a subtropical climate that provides plentiful sun and rain. It is known as the “Fruit Kingdom” because of the quality of its fruit, with dozens of varieties ranging from bananas and papayas to wax apples and guavas. More than 100 kinds of vegetables grow all year round.

On the other hand, Taiwan’s mainly mountainous geography means just 25% of the land is suitable for farming. Meanwhile, climate change is affecting agricultural production by increasing summer temperatures and making rainfall more unpredictable. At the same time, considerable soil erosion, acidification, contamination by chemicals and heavy metals, and strong pesticide use have diminished soil quality over the last 50 years.

Furthermore, the proportion of Taiwanese involved in farming has rapidly declined, from 37% of the population in the early 1970s to the current 15% or less, according to the Yearbook of the Republic of China. Not only is the farming population declining, but it’s also ageing as well.

Those factors may not pose as much of an issue, however, since the old model of agriculture is being disrupted so dramatically that even economies of scale are being upended. Given the large size and advanced technology of the U.S., it may come as no surprise that it is the world’s biggest exporter of food as measured by value. Second on the list, however, is the Netherlands, which has just 0.045% the area of the U.S.

According to a National Geographic report in September 2017, the Netherlands’ achievement can be attributed to the work coming out of Wageningen University & Research, 80 kilometres from Amsterdam in the heart of Food Valley – the world’s agricultural equivalent of Silicon Valley in California. The university strives to come up with ways to increase yields and sustainability, and then to disseminate that knowledge.  

New generation

With its strong background in information technology, Taiwan is in a good position to follow that example. The island manufactures everything required for what is known as precision agriculture, a farming management concept that uses IT to collect data from multiple sources as a means of increasing crop yields and boosting profitability. Taiwan is thus the ideal place for putting together prototypes relatively quickly and cheaply.

YesHealth, for example, makes its own LED lights through a local contractor rather than relying on a major manufacturer like Philips, which means it’s nimbler in terms of bringing focused, new tech to the market – and reaping the dividends. According to the company’s Program Manager, Dennis Jan, Taoyuan’s iFarm has the sixth generation LED lighting, while new iterations that are increasingly productive and energy-efficient are being rolled out on an almost annual basis.

The Council of Agriculture (COA) recognized some time ago the need for a precision approach to farming. In 2016, it developed the “Smart Agriculture 4.0 Program,” which was passed by the legislature a year later.

COA realized that the nation’s “calorie-based food self-sufficiency rate is relatively low” and that “shortages in food supplies and escalations in food prices” will inevitably occur as the world’s population expands from 7.5 billion to an expected 10.5 billion by 2050. 

The Food and Agriculture Organization of the United Nations says that in order to meet the needs of all these additional people, about 70% more food needs to be produced. Gains achieved in improving crop yields have plateaued and are unlikely to rise again without a complete transformation of the agricultural landscape through the introduction of city farms, vertical farming, and the application of information technology.

In a written response to Taiwan Business TOPICS, COA commented: “With the rapid development of sensing technology, smart machinery devices, IoT, and big data analysis, smart agriculture has been growing in various fields.

“For example, it can monitor and control the production environment automatically to keep animals and crops in the best condition,” COA said. “It can predict harvesting dates and yields through data analysis and make adjustments to maintain a balance of production and marketing, and it can use smart automated machinery in agricultural operation to significantly reduce the labor burden.” Such uses, says the Council, “make agriculture more competitive.”

Fruitful results

Besides fruit orchards, other sectors that COA has included within Agriculture 4.0 include seedlings, mushrooms, rice, aquaculture, poultry, livestock, and offshore fisheries.

COA cites Taiwan Lettuce Village as an enterprise that has benefited from precision farming. The company halved fertilizer use but improved harvest efficiency 1.5 times by introducing a fertilization recommendation system, a harvesting date and yield prediction system, synchronous fertilizing technology, and transplanter and harvester technology.

According to COA the application of precision farming increased yield prediction accuracy by 5% and prevented 350 metric tons of overstocking. In addition, plant disease and pest control were improved through the use of a cloud-based system and machine learning algorithm. “The results were very fruitful,” COA concluded.

Agriculture 4.0 doesn’t just apply to the growing of produce; it also looks at the storage, transport, and export of goods. As an example, COA points to a relatively new fruit hybrid that was originally developed in Israel in the late 1960s. The atemoya – or pineapple sugar apple (鳳梨釋迦), as it is known in Taiwan – is a heart-shaped fruit with green, scaly skin. A cross between wax apples and the cherimoya (often referred to as Buddha’s head fruit locally), it has become synonymous with Taiwan and export success, much like the kiwi fruit and New Zealand.

Previously, 90% of the country’s atemoya exports went to China because it is so close. Later, the Taitung District Agricultural Research and Extension Station introduced a frozen whole-fruit technique that enables 95% of thawed fruit to have a “consistent ripening texture and dramatically improved the raw material quality.”

The technique involves a quick freeze to -40° Celsius, which inhibits bacteria, allowing the whole fruit to be transported at a fairly standard -18°C. After thawing, it can meet the rigorous food safety standards of Japan and South Korea.

Traditional farmers may harbor concerns about agriculture becoming a primarily manufacturing process, taking place under artificial light. However, Kevin Lin, Head of Business Development at YesHealth, insists that what the company is doing is still agriculture.

“This is nature; we are just optimizing it,” he says. “Sustainability is at the forefront of what we do, and our focus now is on ensuring the energy costs of vertical farming – such as heating and lights – are lowered and the source is sustainable.”

In this way, Lin says, Taiwan can produce cheap, healthy, and environmentally friendly food that can help feed the world, even as the global population approaches the staggering 10.5 billion mark.

Pandemic Proof: S2G Ventures on Why Resilient, Sustainable And Healthy Food Systems Are More Important Than Ever

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by guest 18 May 2020

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Sanjeev Krishnan

This is a guest post by Sanjeev Krishnan, Chief Investment Officer and Managing Director at S2G Ventures

The COVID-19 pandemic has caused a global health and economic crisis like none we have seen in our lifetime. In the food supply chain, this has impacted employees that ensure that food is planted, harvested, and processed, grocery shelves are stocked and food is available to all people. It takes a global village to feed the world, and we have seen selfless sacrifice and silent grit to ensure the continuity of our food system. Because, if our food supply breaks down, this pandemic may move from a crisis to a catastrophe.

Over the past several month’s several cracks have shown up in the food supply chain. The pandemic is challenging the nature of our global supply chain, stressing logistics networks, and reinforcing the importance of labor. There are concerns about food nationalism, continued access to labor, and redefining the nature of food security from global to national systems. While now is the time for urgent action – from government and private sector – there is a need for longer-term investments required for building a more innovative and resilient future food system.

Our team at S2G Ventures spent several months researching and monitoring COVID-19 and its implications to better understand these questions, keeping a close eye on the news cycle, conducting extensive desktop research, and speaking with various experts across many fields. We spoke to epidemiologists, healthcare professionals, farmers, entrepreneurs, philanthropists, and other investors to gather insights and develop our perspective on the implications of COVID-19 on the world of food and agriculture. We have compiled our findings into a report that explores the implications of the COVID-19 pandemic to the food and agriculture industry and identifies the areas of innovation critical to building a healthier and more sustainable food system.

As an investor in companies across all stages of the food system, we believe our role in the recovery is to ensure we build a more stable, resilient, sustainable, and healthy system. We will continue to invest in entrepreneurs and innovations that are the catalysts for meaningful progress. Below, we offer a summary of our report, which can also be downloaded in full here.

Pandemics 101: A History of Recovery & Innovation

Taking a look back in time, the world suffered a deadly pandemic in 1918. The Spanish flu, whose origin is believed to be a farm outside of Kansas City, spread quickly across the globe. Although the world was not as connected, World War I was still ongoing, and troops were being shuttled between the United States and Europe. Between 1918 and 1919, the Spanish flu is believed to have infected nearly a third of the global population and killed between three and 20 percent of those who were infected. In the end it killed between 40 and 50 million people. In the years following the Spanish flu, there was a bright period of innovation that included the adoption of the Bell telephone and modern medicine. It was an event that helped shape the future.

Between the Spanish flu and today’s pandemic, there have been seven major epidemics or pandemics. Each varies in mortality, duration, and contagion, but ultimately all come to an end. The economic recovery period that follows a pandemic-induced recession is generally different from traditional economic recessions. Pandemic-induced recession recoveries have generally seen a V-shaped recovery, while traditional recessions have varied between V-, U-, W-, and L-shaped recoveries. The global financial crisis of 2008 saw an L-shaped recovery. Typically, economic recessions have a longer duration and deeper economic consequences.

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The coronavirus pandemic is unique among prior events. While many events have temporarily shut down regions, none have had the same global shutdown that we are currently facing today. So, despite being able to draw comparison and insights to learn from pandemic economics, the situation is different due to a staggering rise in globalization, digitalization across many sectors, and the rise of fiat currencies. Pandemic economic history teaches us that one of the hallmarks is that innovation plays a critical role in the future normal that emerges. As Professor Katherine A. Foss notes, “disease can permanently alter society, and often for the best by creating better practices and habits. Crisis sparks action and response.”

While the direct effect of COVID-19 is on the population – with infection rates, social distancing, and shelter-in-place restrictions and continued operations of only essential businesses – there are significant implications across many industries. The second-order consequences of coronavirus are reshaping industries, catalyzing innovation, and encouraging resilience in business planning. Although the lasting impact on many industries is unknown, we see exciting innovation accelerating across automation, telemedicine, virtual reality, and transparency systems (i.e., blockchain or similar technologies).

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Everyone Eats – Pandemic Proof Demand, but Supply?

While the food and agriculture sectors are generally more resilient in bad economic situations, there are several sub-sectors that rely heavily on in-person labor and are currently strained due to the unique social distancing pressures placed on businesses. One significant pressure point is meat processors. Several large meat companies have been forced to shutter processing facilities due to COVID-19 outbreaks. Smithfield had to shut down one of its pork processing facilities that supplied roughly 5 percent of the U.S. pork supply, while JBS had to close a Pennsylvania facility that processed beef. The second-order consequence of these closures is the farmer, who may be forced now to cull their herds of cattle and hogs. The strain on this pressure point affects not only the farmer but also the consumer. Wendy’s felt the effects of this during this past week when nearly one-fifth of all 1,043 locations ran out of beef.

While it will take an extended period of time to fully understand the implications of consumer purchasing data coming out of the pandemic – more specifically if the duration of the consumer behavior shift will be a ‘fad’ or ‘trend’ – certain areas of the market are seeing a quick adoption of trends that were previously accelerating. As slaughter-house closures have increased, plant-based meats sales have jumped 200 percent. Plant-based meats remain a small portion of the market, but this is a significant and notable demand signal from consumers.

Coronavirus is notably changing how consumers shop, prepare and consume food. Between 2009 and 2018, out-of-home eating rose from 50.1 percent to 54.4 percent of the market. Now, with social distancing limited the ability to eat at restaurants, many are turning to preparing food at home or ordering delivery or takeout. And, despite food being a resilient sector, the bifurcation between grocery and foodservice has become clear.

In the grocery store, private label market-share gains are poised to accelerate, as consumers tighten spending and look for value-focused alternatives. However, we expect consumers to prioritize a balance of value and better-for-you brands instead of a complete tradeoff to value, consistent with the consumer megatrend towards better-for-you products.

Taking a step back, and observing the broader food value chain, we observed three primary delivery vulnerabilities in the food system:

1. Agricultural inputs to farms (e.g., seeds, animal feed, fertilizer, et al.)

2. Farm products to processors, packagers, spot markets and export markets

3. Food to retail distribution

This is important because the global food system relies on a just-in-time economy, where inventory levels are intentionally kept low. Meaning, that regardless if there is enough supply in existence, it may not be able to reach its proper destination if the supply chain is disrupted.

China, which provides a good example because it is further along in the lifecycle of the pandemic, has been suffering from this problem in the last several months. Upstream and downstream logistics are a major challenge; at the ports, there are thousands of frozen meat containers piling up because the trucking has effectively collapsed. Meanwhile, ports are running out of power, stoking fears that much of the food currently stored there will go bad. There is also an American company that makes immunization equipment for chicken that said their containers had been docked at Chinese ports for four weeks. Although China is doing its best to ensure that the grain planting season is not missed, the logistics of this supply chain are making it increasingly difficult.

 The Future of Food – COVID-19 and Calories

While we continue to watch the situation and the strain it is placing on the food system, we view the common threat that could bridge the existing system to the future as technology. Consumer purchasing behavior coupled with innovation may drive changes in market share and pressure existing players in the market. Although we have not seen COVID-19 create a new trend, we have seen several trends that were in motion pre-coronavirus further accelerated by the pandemic, including alternative protein, indoor agriculture, digitalization of agriculture, and grocery and food as medicine.

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Although animal agriculture remains a large and growing market, the pandemic has exposed challenges with the industries long production cycles, centralized production and limited processing facilities. It has allowed for faster consumer adoption of alternative proteins, including plant-based protein, fungi, algae and other biomass concepts including cellular meat. Notably, some of these technologies are further along than other, for example plant-based protein has been a trend for several years, while cellular meat remains in a research and development phase. We continue to believe that whatever the next generation of protein is, it will be driven by production speed, price and taste.

A second trend we believe is accelerating is food as an immunity. The convergence of food, science and technology may unlock this sector and usher in a new era in microbiome, functional ingredients, precision and personalized nutrition and medical foods. Prior to COVID-19, this was largely driven by nutrition-related disease, but the pandemic has exposed at-risk populations, with approximately 90 percent of hospitalized patients having one or more underlying condition, with the most common underlying condition being obesity.

Beyond specific trend acceleration, several themes emerge throughout this research that we believe may be catalyzed and emerge in a post-COVID-19 world. Digitalization will likely be driven by dis-intermediation to allow for new relationships with the consumer and to reduce risk throughout the supply chain. Decentralized food systems allow for the automation of local (alternative protein and produce) and the reshaping of complex perishable supply chains to reduce shrink and waste. They are also more omnichannel congruent as e-commerce, specifically online grocery, adoption accelerates. De-commoditization in the food supply chain, coupled with technologies that place deflationary pressure on the industry, may help catalyze breeding for attributes beyond yield (taste, protein content, et al), a return to polyculture farming and a shift from a strict focus on yield to profit per acre. Lastly, food as an immunity has the potential to bridge healthcare and food production and consumption for the treatment of specific nutrition-related chronic lifestyle diseases, as well as change the future of brands to focus on unique, functional ingredients. a

Our full report, The Future of Food in the Age of COVID,  is available online.

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Sanjeev Krishnan, Chief Investment Officer and Managing Director at S2G Ventures

Sanjeev has nearly 20 years of experience in sourcing, executing, managing, and exiting venture and private equity investments, including a focus in agriculture and food companies. As Managing Director, Sanjeev is active in developing investments and managing portfolio companies including, serving on many portfolio company boards. His portfolio work ranges from genetics, crop protection, soil health, digital/IoT, crop insurance, merchandising, indoor agriculture, novel flavor, and ingredients, new protein development, unique processors, and brands that will feed this changing consumer.

He is passionate about the role of innovation, entrepreneurship, markets, and system investing as a theory of change. Sanjeev has worked in the intersection of sustainability, technology, and health in many regions, including Europe, Africa, Asia, and North America.  He has invested over $500 mm in venture and growth-stage firms throughout his career.

Sanjeev began investing as a co-founder of the life sciences practice of the IFC, the $99 billion private investment arm of the World Bank. His previous investment roles include CLSA Capital Partners, Global Environment Fund, World Bank Group’s IFC, and JPMorgan. Sanjeev is a graduate of the London School of Economics and Political Science.

About S2G Ventures: 

S2G Ventures (Seed to Growth) is a multi-stage venture fund investing in food and agriculture. The fund’s mission is to catalyze innovation to meet consumer demands for healthy and sustainable food. S2G has identified sectors across the food system that are ripe for change and is building a multi-stage portfolio including seed, venture, and growth-stage investments. Core areas of interest for S2G are agriculture, ingredients, infrastructure and logistics, IT and hardware, food safety and technology, retail and restaurants, and consumer brands.

For more information about S2G, visit www.s2gventures.com or connect with us on Twitter and LinkedIn.