University of Arizona students work in the University of Arizona’s Controlled Environment Agriculture Center vertical farming facility for research, education and outreach. (Photo courtesy of Austin Smith)

Introduction

A 2017 UN study suggests that the world population will increase by approximately 86 million per year over the coming decade, leading to rapidly rising populations, especially in emerging markets.These increases will need to be accompanied by increases in food production, and that too in a world where arable land is becoming an increasingly scarce resource. To address this problem, some have turned to a relatively new agricultural practice known as Vertical Farming (VF), which relies on height, rather than width, to generate agricultural produce. This article’s aim is to investigate whether it is ecologically, socially, and above all, economically viable.

 

Vertical Farming- What it is and how it works

Vertical farming is based on the idea that one can minimize land use and increase overall production efficiency by farming on multiple levels, in controlled indoor environments. In a vertical farm, one will typically see tall stacks of racks in which the produce is grown. This dramatically increases the area in which crops can be cultivated, compared to traditional farming, and is the main advantage of the method. To supply the energy needed for plant growth, LEDs are mounted above each rack, whilst nutrients are delivered to the crops either via sprays of aerated water solutions, or from a running water supply. The compact construction of the farms also allow them to be placed anywhere, which in turn allows for shorter transport distances, leading to lower emissions and costs. Buzzwords like ‘locally grown’ and ‘organic’, allow the farm owners to charge a slight premium compared to conventionally grown produce. However, studies suggest that many VF’s tend to sell their crops at approximately the same price as that of normal crops (Chris Michael, Medium, 2017).

 

Environmental sustainability

When it comes to the environmental aspects of the operation, there is evidence (Agrihouse, 2011) that suggests that these methods of farming lead to a 90% decrease in water use and a 60% decrease in fertilizer use, compared to traditional farming. The artificial lighting enables farmers to speed up the plant’s growth cycles, allowing for 45-75% more crops to be grown per square meter, and as mentioned earlier, shorter transport distances lead to lower emissions. These benefits, however, come at a cost. Compared to production in a greenhouse, it takes 14 times as much electricity per square meter of land (250 kWh vs 3500 kWh per year) to grow lettuce, for example, using vertical farming techniques (Andrew Jenkins, The Conversation, 2018). So, how ‘green’ vertical farming really is, is heavily dependent on where the electricity is coming from. A kWh produced using coal creates about 1.2 kg of CO₂ (Wingas) whilst a kWh from wind, is roughly equivalent to 0.011 kg CO₂. A study (Dan Blaustein-Rejto, The Breakthrough, 2018), however, suggests that the net operational carbon footprint of vertical farming is typically somewhat lower than that of outdoor farming. For example, 1 kg CO₂/kg lettuce in VF’s, compared to 1.1 kg CO₂/kg lettuce in outdoor farming. It is important to note that this study does not take into account the carbon footprint required to build the vertical farm, nor the potential reduction in carbon emissions which would come from a reforestation of the area which vertical farms ‘save’. Hence, the actual impact of vertical farms on the environment remains somewhat unclear. This is especially true because there seems to be much conflicting data on the subject. Producers, for example, tend to publish more positive data than independent researchers.

 

Table showing net operating carbon footprint, courtesy of (Dan Blaustein-Rejto, The Breakthrough, 2018).

 

Social impact

Two of the main promises of vertical farming are to improve food security, and increase the amount of farmland suitable for agriculture in a country. This means that the technology is best suited for use in countries with little arable farmland, such as desert and tundra nations, that will face food supply difficulties in the coming years. Examples include Saudi Arabia, Sweden, Qatar, Israel, amongst others. The initial capital investments required do not make them suitable for countries with low land cost and low GDP/capita, as there likely exist more labour intensive, and in these cases, cheaper ways of producing food. Therefore VFs might not be suitable for the majority of lower income emerging markets, even if problems like deforestation and pollution are significant in these areas. However, depending on the future scarcity of clean water, vertical farms can become reasonable alternatives, due to their low water use, if energy prices remain at the current level, or are lowered. As of today, there are likely better and more efficient ways of combating hunger, deforestation and social issues, than introducing vertical farms in developing countries.

 

Investment opportunities/Real world examples

According to (Akshay Jadhav, Allied Market Research, 2017), (Grand View Research, 2017) and (Research and Markets, 2018) the expected CAGR for the vertical farming market will be around 22%. Governments in countries like the US, Taiwan and South Korea have stepped in to subsidize the large start up costs, and China and India are expected to follow suit. The main growth market is South Pacific Asia, as well as the United states, following an increased global demand for organically grown food. It should, however, be noted that vertical farms cannot compete price-wise with traditionally farmed food. According to results of a study based on a stimulated farm, the price per kg of biomass, would at its lowest, be 3.17 Euros. Compared to the current wholesale market price per head of iceberg lettuce of 0.50 GBP per head (0.57 Euros as of Oct-21 2018) which is roughly 1.14 Euros per kg, as a head weighs roughly 0.5 kg (Money smart, 2018), it is clear that even with subsidies, sellers have to hope that buyers are willing to pay a premium for the goods. Due to the high price difference, high startup cost and limited social and environmental impact of vertical farming, it would be advisable to wait to invest in vertical farming, until scale advantages have driven costs to a more manageable level.