With the global population expanding and available farmland shrinking, vertical farming has emerged as an innovative solution to meet future food demands. By growing crops indoors in stacked layers, vertical farms can achieve much higher yields using less land and resources. As interest and investment pour into this nascent industry, there are several key benefits and considerations for those looking to invest in vertical farming. Firstly, vertical farms can be located right in cities, slashing transportation costs and emissions. Secondly, crops can be grown year-round in optimal indoor conditions, increasing yields. Lastly, vertical farms utilize less water and land than conventional farms. However, the high startup and operating costs of vertical farms pose financial risks. Finding the optimal business model and access to cheap renewable energy will be key factors. Though still maturing, vertical farming presents exciting possibilities for investors and our food future.
Urban locations reduce food miles and emissions
By situating vertical farms in or near cities, the distance that produce travels – known as food miles – can be drastically reduced. For example, lettuce grown in California may travel over 2,000 miles to reach consumers on the East Coast. Local vertical farms eliminate this transportation, keeping food fresher while cutting costs and emissions. Studies have shown that produce grown in urban vertical farms can reduce food miles and emissions by up to 90% compared to conventional farms.
Optimal indoor conditions increase yields
Unlike outdoor farming which is impacted by weather, seasons and climate, indoor vertical farms allow for precision control of nearly all growing variables like lighting, humidity, temperature, nutrients and more. By optimizing these inputs, some vertical farms report yields over 100 times higher than traditional farms using the same amount of space. For example, vertical farming company Plenty claims their yields are 350x higher per square foot than conventional farms. These hyper-efficient yields are enticing to investors and consumers alike.
Less water and land required
As traditional agriculture struggles with drought and strained water supplies, vertical farming offers a more sustainable solution. On average, vertical farms use 95% less water than conventional farms. For example, to grow one kilogram of tomatoes, a vertical farm may use as little as 2-4 liters of water, versus 250 liters in a greenhouse. The closed-loop irrigation systems recycle and reuse water multiple times. Vertical farms also unlock unused urban spaces like warehouses, parking garages and high-rises for food production instead of clearing new land.
High energy costs pose financial risks
A major challenge facing vertical farms is the high cost of energy for lighting, heating, cooling and dehumidification. Electricity costs can account for up to 25% of operating expenses. Investors must find ways to slash these costs through energy-efficient LED lights and utilizing waste heat. Access to renewable energy like solar or wind energy can also help make vertical farms more cost-competitive with traditional produce.
Business models still developing
Since commercial vertical farming is still in its early stages, companies are still figuring out optimal business models. Many B2B models sell to grocery stores, restaurants and food distributors. Some use branded consumer products or subscription services for more reliable sales. Partnerships with real estate developers and food companies could also spur vertical farm expansion. Investors should closely analyze the sales and marketing strategy.
Though vertical farming shows great promise to sustainably feed the world’s booming urban population, challenges around startup costs, renewable energy and developing scalable business models remain. However, steady technological improvements combined with pressing food security needs ensure vertical farming will continue attracting investor interest and paving the way for a greener food future.