(Reuters) – Investors used to brush off Amin Jadavji’s pitch to buy Elevate Farms’ vertical growing technology and produce stacks of leafy greens indoors with artificial light.
“They would say, ‘This is great, but it sounds like a science experiment,'” said Jadavji, CEO of Toronto-based Elevate.
Now, indoor farms are positioning themselves as one of the solutions to pandemic-induced disruptions to the harvesting, shipping, and sale of food.
“It’s helped us change the narrative,” said Jadavji, whose company runs a vertical farm in Ontario, and is building others in New York and New Zealand.
Proponents, including the U.S. Department of Agriculture (USDA), say urban farming increases food security at a time of rising inflation and limited global supplies. North American produce output is concentrated in Mexico and the U.S. Southwest, including California, which is prone to wildfires and other severe weather.
Climate-change concerns are also accelerating investments, including by agribusiness giant Bayer AG, into multi-storey vertical farms or greenhouses the size of 50 football fields.
They are enabling small North American companies like BrightFarms, AppHarvest and Elevate to bolster indoor production and compete with established players AeroFarms and Plenty, backed by Amazon.com Inc founder Jeff Bezos.
But critics question the environmental cost of indoor farms’ high power requirements.
Vertical farms grow leafy greens indoors in stacked layers or on walls of foliage inside of warehouses or shipping containers. They rely on artificial light, temperature control and growing systems with minimal soil that involve water or mist, instead of the vast tracts of land in traditional agriculture.
Greenhouses can harness the sun’s rays and have lower power requirements. Well-established in Asia and Europe, greenhouses are expanding in North America, using greater automation.
Investments in global indoor farms totaled $394 million in 2020, AgFunder research head Louisa Burwood-Taylor said.
The average investment last year doubled in size, as large players including BrightFarms and Plenty raised fresh capital, she said.
A big funding acceleration lies ahead, after pandemic food disruptions – such as infections among migrant workers that harvest North American produce – raised concerns about supply disruptions, said Joe Crotty, director of corporate finance at investment bank KPMG, which advises vertical farms.
“The real ramp-up is the next three to five years,” Crotty said.
Vegetables grown in vertical farms or greenhouses are still just a fraction of overall production. U.S. sales of food crops grown under cover, including tomatoes, cucumbers and lettuce, amounted to 790 million pounds in 2019, up 50% from 2014, according to the USDA.
California’s outdoor head lettuce production alone was nearly four times larger, at 2.9 billion pounds.
USDA is seeking members for a new urban agriculture advisory committee to encourage indoor and other emerging farm practices.
PLANT BREEDING MOVES INDOORS
Bayer, one of the world’s biggest seed developers, aims to provide the plant technology to expand vertical agriculture. In August, it teamed with Singapore sovereign fund Temasek to create Unfold, a California-based company, with $30 million in seed money.
Unfold says it is the first company focused on designing seeds for indoor lettuce, tomatoes, peppers, spinach and cucumbers, using Bayer germplasm, a plant’s genetic material, said Chief Executive John Purcell.
Their advances may include, for example, more compact plants and an increased breeding focus on quality, Purcell said.
Unfold hopes to make its first sales by early 2022, targeting existing farms, and start-ups in Singapore and the United Kingdom.
Greenhouses are also expanding, touting higher yields than open-field farming.
AppHarvest, which grows tomatoes in a 60-acre greenhouse in Morehead, Kentucky, broke ground on two more in the state last year. The company aims to operate 12 facilities by 2025.
Its greenhouses are positioned to reach 70% of the U.S. population within a day’s drive, giving them a transportation edge over the southwest produce industry, said Chief Executive Jonathan Webb.
“We’re looking to rip the produce industry out of California and Mexico and bring it over here,” Webb said.
Projected global population growth will require a large increase in food production, a tough proposition outdoors given frequent disasters and severe weather, he said.
New York-based BrightFarms, which runs four greenhouses, positions them near major U.S. cities, said Chief Executive Steve Platt. The company, whose customers include grocers Kroger and Walmart, plans to open its two largest farms this year, in North Carolina and Massachusetts.
Platt expects that within a decade, half of all leafy greens in the United States will come from indoor farms, up from less than 10% currently.
“It’s a whole wave moving in this direction because the system we have today isn’t set up to feed people across the country,” he said.
‘CRAZY, CRAZY THINGS’
But Stan Cox, research scholar for non-profit The Land Institute, is skeptical of vertical farms. They depend on grocery store premiums to offset higher electricity costs for lighting and temperature control, he said.
“The whole reason we have agriculture is to harvest sunlight that’s hitting the earth every day,” he said. “We can get it for free.”
Bruce Bugbee, a professor of environmental plant physiology at Utah State University, has studied space farming for NASA. But he finds power-intensive vertical farming on Earth far-fetched.
“Venture capital goes into all kinds of crazy, crazy things and this is another thing on the list.”
Bugbee estimates that vertical farms use 10 times the energy to produce food as outdoor farms, even factoring in the fuel to truck conventional produce across country from California.
AeroFarms, operator of one of the world’s largest vertical farms, a former New Jersey steel mill, says comparing energy use with outdoor agriculture is not straightforward. Produce that ships long distances has a higher spoilage rate and many outdoor produce farms use irrigated water and pesticides, said Chief Executive Officer David Rosenberg.
Vertical farms tout other environmental benefits.
Elevate uses a closed loop system to water plants automatically, collect moisture plants emit and then re-water them with it. Such a system requires 2% of the water used on an outdoor romaine lettuce operation, Jadavji said. The company uses no pesticides.
“I think we’re solving a problem,” he said.
(Reporting by Rod Nickel in Winnipeg, Manitoba; additional reporting by Karl Plume in Chicago; Editing by Caroline Stauffer and Lisa Shumaker)
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