A Deep Dive into Vertical Farming and its Global Impact

The future of agriculture is changing, largely due to the growing population, which, in turn, is putting significant stress on the food production ecosystem. However, solving this problem through traditional farming alone is unsustainable and potentially detrimental to the environment.

In fact, over the past 40 years, we’ve lost a third of our arable land, which is land capable of being plowed and used to grow crops. This urgent need for sustainable solutions is paving the way for revolutionary farming practices—among them, vertical farming stands out as a promising frontier. And here, we will look into how this innovative approach is transforming our approach to agriculture.

What is Vertical Farming?

Vertical farming is the cultivation of plant life in tiered systems that stack vertically, contrasting with the expansive, flat farmlands typically used in conventional farming. By using vertical surfaces, farmers can maximize food production while limiting resource usage, It includes: 

• Shipping containers
• Skyscrapers
• Used warehouses
• Abandoned mine shafts
• Greenhouses

In vertical farming, crops are grown indoors, hence sometimes also known as indoor farming. This farming practice requires artificial temperature, light, water, gasses, and humidity control. And if the delicate balance of these components is not maintained, it’s possible to lose the entire crop, much like a traditional farm might in the event of a drought or flood.

Benefits of Vertical Farming

Vertical farming, which is considered a highly efficient and sustainable way of producing food, has tons of advantages to offer to farmers, consumers, and beyond:

Optimum Space Usage

Traditional farming methods require acres of fertile arable land, something that is not the prerequisite for vertical cultivation techniques. This farming method uses tower-like structures to grow crops, making it possible to achieve higher productivity on a small land area. In addition, these crops can grow in all sorts of areas as they use non-soil mediums and can prosper even under adverse climatic conditions.

Reduced Cost

Since vertical farms can be constructed in urban areas, this makes their delivery points easily accessible. Instead of shipping across multiple countries and oceans, as in traditional farming, crop producers can set up farms in areas close to their customer locations. 

Besides transportation costs, this farming method, which is almost entirely dependent on technology, also saves on labor costs. So, by adopting a fully automated mode of operation, a farm can lower labor costs and enjoy a higher yield.

Reliable Crop Production

With vertical farming independent of external factors like sunlight, seasons, water, and area, among others, it offers the benefit of reliable crop production all year round. 

And once you remove the effects of nature, there's no such thing as a ‘seasonal crop.' Consistent crop production then translates to an overall higher yield. 

Not worrying about the impact of adverse weather conditions on both the quality and quantity of production also brings assurance and peace of mind to growers. 

Energy Efficiency

Vertical farms utilize a combination of technologies to promote sustainability, such as: 

• Artificial lighting
• Metal reflectors
• LED lighting
• Rotating beds 

In-built power generation units in these farms meanwhile lower power consumption costs. Also, they can use the excess energy to power other business equipment. Moreover, by using hydroponic growing methods, this farming technique reduces the need for water. 

On top of that, the water from hydroponic systems remains uncontaminated post-use, enabling it to be recirculated and employed in subsequent growing cycles, thereby cutting expenses and diminishing waste.

Free of Pesticides 

Vertical farms generally have little to no use for chemical pesticides. The carefully monitored and controlled conditions eliminate the entry of disease-causing pests or weeds. This, in turn, reduces the need for crop protection products, and as a result, the end product becomes better, healthier, and safer for consumption, adding to food safety. 

Environmentally Friendly

By massively reducing the amount of fossil fuels, indoor farming can prove beneficial for our environment. Moreover, the urban location of these farms reduces the distance and travel between farms and grocery stores, lowering their carbon footprint. 

Shortening the supply chain also means food stays fresher longer, creating less food waste. This approach to farming also supports biodiversity, as it does not harm nearby plants and animals and can actually contribute to their growth.

Minimized Occupational Hazard

Vertical farming is not just eco-friendly – it also lowers the risk of accidents that come with using large farm machinery. This is unlike traditional farming, which is fraught with health and safety risks. So, with no heavy machinery or chemicals used for indoor agriculture, it significantly reduces the risk of injury.

Disadvantages of Vertical Farming

Given the many benefits of vertical farming, it is clearly an amazing option to solve many of agriculture’s problems today. But it’s not a complete solution and comes with its own drawbacks.

High Technological Dependency

Automation is the key to efficiency in vertical farming. Software, data science, and robotics are some of the technologies used in these farms to monitor crops and create optimum growing conditions such as lighting, moisture, and temperature.

This makes vertical farming heavily dependent on technology, which requires farmers to make significant investments in diverse technologies and equipment. And if any single piece of equipment fails, it can disrupt the entire cultivation process and, in turn, minimize produce. Not only this, but the technology of this young industry is not yet mature either. 

High Initial & Operational Costs

Vertical farming is simply a cost-intensive endeavor — right from the beginning to every step of the process, it requires a substantial amount of money. This includes land in urban areas, which is usually very expensive, and equipment such as computers, climate controls, shelving units, water lines, LED lights, etc. 

Most of the total production costs of vertical farms come from energy consumption and lighting costs. Then, there is the need for expert personnel to take care of the farm as well as the health of the plants. 

Operating costs, however, largely depend on the farming method employed, as — geoponic, hydroponic, and aeroponic each have their requirements. Nevertheless, the cost of indoor farming equipment is expected to drop dramatically as it becomes more popular and technology advances.

High Maintenance

While the idea of growing plants in cities sounds great, the infrastructure for direct processing of the harvest is usually lacking and often has to be transported. Also, farming under controlled environmental conditions hinders natural pollination, requiring the need to adopt the costly and delicate task of manual pollination.

In addition to this, vertical farms require continuous monitoring, which means replacing or servicing components that break down and taking special care when cleaning and disinfecting plants to avoid the risk of pest infestation.

But this is not all. This technique, so far, is only profitable for a handful of plants. The relatively high cost of growing a plant in virtual farming means cheap foods are simply not worth it, and only those with high economic potential should be chosen.

Moreover, you have to meet all requirements of the local health or regulatory agency, and if done without prior notification, it may result in heavy penalties.

Popularity of Vertical Farming

The worldwide market for vertical farming has been experiencing consistent growth in tandem with the increasing population size and living in urban cities becoming more popular. In 2022, the vertical farming market reached about $5.6 billion and is expected to rise to over $35 billion by 2032, according to Statista. This surge in market value is expected to be driven largely by the popularity of organic food.

So, vertical farming is gradually gaining adoption worldwide, though it is still in the early stages and not spread evenly across the globe.  

The US is currently leading the adoption of vertical farming, having the highest number of vertical farms, with Bowery Farming being the largest vertical farming operation in the country. North America is also the highest shareholder in the global vertical farming market and is anticipated to exhibit a CAGR of 28.9% during 2023–2031, as per Straits Research.

In Asia, vertical farms can be found in several countries like Japan, China, Singapore, South Korea, Taiwan, and Thailand. Taiwan-based YesHealth iFarm is one of the oldest vertical farms in the world, and its Taoyuan City facility is the largest indoor vertical farm in Asia.

In Europe, the UK, France, Germany, and the Netherlands are leading this adoption. The continent is projected to have a growth CAGR of 26.7% over the next eight years. In the UK, the Jones Food Company operates Europe's biggest vertical farm, spanning over 5,000 square meters. The state-of-the-art innovation center is situated near the city of Bristol and is working on growing flowers, fruits, vegetables, and even vines on a commercial scale. With its vertical farm, the company aims to help end the UK’s reliance on imported foods.

As for the Middle East, Kuwait, and UAE are leading the charge, with Badia Farms in UAE single-handedly planning to bring down the country's water consumption and significantly reduce the import of vegetables, while in Kuwait, NOX Management opened the first large-scale indoor farm.

Vertical Farming Companies 

With vertical farming gaining traction and expected to grow substantially, the market is seeing a growth of companies utilizing this farming technique. Let’s take a look at some prominent names in this space:

1. AeroFarms 

This leading agricultural technology company focuses on revolutionizing agriculture by developing sustainable, efficient, and scalable farming solutions. AeroFarms grows a wide range of leafy greens, including lettuce, kale, arugula, and microgreens. The company uses artificial intelligence (AI) and plant biology to improve the way fresh produce is grown and distributed locally and globally.

Located in Abu Dhabi, the company has partnered up with the likes of US retail giants Whole Foods and Walmart to sell its leafy greens. AeroFarms is also the first indoor farming business recognized as a certified B Corporation, and it has created aeroponic technology that delivers ideal growing conditions for plants. The company was set to go public after merging with Spring Valley in 2021 in a transaction that would have put the company's value at $1.2 billion, only to call it off later that year.

2. CubicFarms

The Canada-based CubicFarms’ HydroGreen Grow System and HydroGreen Automated Vertical Pastures technologies empower farmers to grow their own nutritious fresh livestock feed indoors, reliably and consistently. 

It has a market cap of $5.7 mln, and its stock price (CUBXF) is currently trading at $0.0269, down 10.3% YTD. The company’s EPS (TTM), earnings per share trailing twelve months is -0.20, and price-to-earnings ratio P/E (TTM) is -0.13. For the second quarter of 2023, the company reported revenue of $3.3 million.

3. AgriCool

This French-based agricultural technology start-up grows local and pesticide-free fruits and vegetables, especially strawberries, parsley, basil, and coriander, in urban farms. 

AgriCool uses a closed-loop water system to provide optimum growing conditions, LED lights to regulate light intensity and spectrum, and recycled shipping containers called cooltainers to produce food with zero preservatives.

The company has secured $41.9M over five funding rounds, with its valuation reaching $38.36M as of July 2017. The latest influx of funds came from an asset sale on June 2, 2022.

4. Bowery Farming

Bowery Farming has been using indoor vertical farming to produce crops ranging from strawberries to lettuce and other greens that can be purchased at Walmart, Safeway, WholeFoods, FreshDirect, and Amazon. 

Its proprietary technology integrates software, hardware, sensors, AI, computer vision systems, machine learning models, and robotics to monitor each crop and alert farmers when it’s time to harvest. The company has three vertical farms in Maryland, New Jersey, and Pennsylvania.

Bowery has raised a total of almost $631 million over nine rounds, with the latest one for $8.4 million in Feb. 2022, as per CB Insights. The company’s valuation in May 2021 was $2.3 bln.

5. Agrify Corporation

With a market cap of $2.647 million, Agrify Corporation (NASDAQ: AGFY) offers vertical farming units as well as Agrify Insights Software-as-a-Service software. The company also sells LED grow lights and purifiers targeting the cannabis space.

Its stock is currently down 75% this year as it trades at $1.63, and its reported revenue trailing 12 months is $77.64 million.

6. Hydrofarm Holdings

Hydrofarm Holdings is a publicly listed company (NASDAQ: HYFM) that manufactures and distributes equipment and supplies such as high-intensity grow lights and climate control solutions for vertical farming. It has nine distribution centers: six in the US, two in Canada, and one in Spain.

The $45 million market cap company’s stock is currently trading at $0.99, down 36.7% year-to-date (YTD). HYFM hit its all-time high at around $95.50 in early 2021. Meanwhile, its EPS (TTM) is -1.96, P/E (TTM) -0.51, and the Price To Sales (TTM) ratio is 0.17. For Q2 of 2023, the company reported net sales of $63.1 million and $2.5 million in adjusted EBITDA. 

Concluding Thoughts

As we saw, vertical farming is poised to change the agriculture landscape, offering fresh local produce and helping increase food production as the world’s population surpasses 8 billion in 2023.

While time and money remain the biggest hurdle, those who are on the path of vertical farming may have an early-start advantage to maximize yield against minimal usage of natural resources.