Vertical Farming: building more than castles in the air…

Long ago, human race realized it was possible and even beneficial to have a planned and rather
predictable pattern to produce food. In present jargon, we call it Agriculture.

In the era of skyscrapers and artificial intelligence, it was quite reasonable for the same race to
understand that the practice could be improved upon and optimized to serve the human needs as
necessitated by time.

What exactly is Vertical Farming?

Vertical farming is yet another conquest of human mind over the practices of nature, by creating similar
circumstances as nature does, but with a difference.

Dickson Despommier; Professor Emeritus, Microbiology and Public Health at Columbia University who
has been one of the pioneers of vertical farming, explains it to David Pakman on latter’s info show.

“Anything that is more than single story tall, even if it does not have separations or floors inside that
particular building or warehouse, as long as you are growing food inside that larger than the
greenhouse, that’s a vertical farm.”

By providing, inter alia, the same nutrients, exposure to artificial light, air and creating almost similar an
environment, through the procedures known as Hydroponics and Aeroponics, the technique is already
able to generate value and is projected to have a market worth $3.8 billion by 2020 at a CAGR on the up
of 30% between 2015 and 2020, as per MarketsandMarkets forecast.

How does it look from the demand side?

It has to be well kept in the mind, that as per the UN Department of Economic and Social Affairs
estimates, current human population count of 7.3 billion is projected to grow to 8.5 billion in the year
2030, 9.7 billion in the year 2050 and 11.2 billion in the year 2100.

This is an addition of 1.2 billion in over 10 years, 2.4 billion in over 30 years and 3.9 billion in over 80
years to the number of resource grazers globally.

An estimated billion hectare of new land will be needed to grow enough food to feed the increased
numbers, if conventional farming practices are to be relied upon.

Given the dynamics of increasing food demand due to population growth, degradation of existing
cultivable land and limits of conventional farming to increase productivity, it is inherent that disruptive
technologies have to come forward to provide a solution.

And what the supply side has to say?

Vertical farms are majorly used today to produce leafy vegetables which have a constant and
predictable demand in the local markets, including salad green, lettuce and tomatoes, among others.
Questions concerning its benefits and feasibility need to be answered.

As David Rosenberg, co-founder and CEO of Newark based AeroFarms explained to CNBC, the company
is able to replicate the production cycle in 16 days in comparison with a similar 30 days cycle on field,
while claiming to use 95% less water, about 50% less fertilizers, and almost no pesticides, herbicides and
fungicides.

However, at the same time, it is capital-intensive to start a vertical farm. Lighting is one of the biggest
expenditures. As per Rosenberg, specifically designed LED lights comprise 50% of the capital
expenditure.

Also, due to the absence of soil in the production cycle, the produce doesn't get an organic label, while
costing almost equal to organic products.

Interestingly, more players are venturing in the market, including FarmedHere, Vertical Harvest, Green
Spirit Farms and Alegria Fresh based in the US. Apart from the US; countries like China, Germany, Japan,
Singapore and Sweden are catching up too.

But has it got the attention of investors?

Prudential Financial has invested “patient capital” in the venture run by ‘Aerofarms’, which has already
spent over 30 million dollars. The investment by Prudential is to finance social impact projects that are
unlikely to yield benefits right away.
Much of the funding is coming from impact investing arms of big-ticket investors like Goldman Sachs
and Prudential Financial.

In the US, 32 million dollars as venture capital was invested in indoor agriculture in 2014, and
proponents claim that the industry has a revenue potential of 9 billion dollars.

Several individual investors are also lining up to provide angel investment.

The billion dollar question: is it really feasible?

Like any other human invention, Vertical farming has its own share of doubts and naysayers.

These include the limited number of crops that could be grown, small proportion of food needs that
indoor crops could satisfy, current reliance on the strategy of market skimming and the irrelevance of
indoor agriculture to the diet patterns of economically stressed vast rural regions.

Also considerable are the energy requirements and heavy climate impact of the technology.

Environmental writer Stan Cox argues against growing food in the manner because of the method’s
large energy requirement, specifically, the need for LED lighting in lieu of sunshine.

But proponents of vertical farming say that counterclaims are based on outdated information. The
efficiency of LED lighting has increased dramatically, by 50% between 2012 and 2014.

In nutshell, innovation is going to be the key here.

So what to conclude?

The factors such as continuous growth in overall and urban population, low availability of cultivable
land, demand for high quality food, and government incentives are expected to drive the vertical
farming market.

Whether we going to witness yet another phenomenon of agricultural revolution, the answer will
depend upon the abilities of some of the fields of human expertise.

Science has to provide the technology to expand the production, while minimizing the impact on
environment; entrepreneurship has to be vigilant in tapping upon the opportunity and capital has to
assist.

In the end, Ceteris Paribus, Economics will nod to the Finance, to consider it to be worth an effort of the
current times…