🍓 Vertical Farming: Don't Sleep on this Opportunity
🍓 Vertical Farming: Don't Sleep on this Opportunity
Why vertical farming is poised to pay out big for early investors
What is Vertical Farming?
Vertical farming is quite literally what it sounds like, farming vertically. While traditional farming has always grown outwards (horizontally) on fertile land, vertical farming changes this by growing vegetables indoors via height instead of width.
The vertical farming sector is growing rapidly in the U.S., at a CAGR of more than 24% between 2018-2024, when it is expected to reach $3 billion annually. By comparison, the total U.S. fruit and vegetable industry were worth over $104.7 billion in 2016. According to one account, "Shoppers can now find produce grown indoors by more than 23 large vertical farms in more than 20 supermarket chains in nearly every major metropolitan area in the country."
Growing crops vertically has many advantages:
It takes up considerably less space since you can in theory build anywhere that is enclosed and provides ample height
Uses up to 95% less water by growing crops in a very efficient and reusable way
Because of a controlled environment, there is no need for pesticides or herbicides which is great for you and the environment - this also helps with the taste since it doesn’t need to be double or triple-washed before eating
Utilize a fraction of soil and fertilizer needed to grow produce
Does not rely on ‘seasons’ to grow and can grow all year round. Meaning, that you can even grow in areas that were historically thought to not support crops, like desert space
New technological insights can provide farmers with critical data about optimizing light, water, soil, etc. to produce higher yields
In a nutshell, vertical farming reduces waste, is healthier for the environment due to no pesticides and herbicides while taking up far less square footage to grow produce.
Why is this important?
There are a few finite resources on this planet that we are quickly running out of.
Tillable land
Fresh drinking water
Globally agricultural land area is approximately five billion hectares or 38% of the global land surface. About one-third of this is used as cropland, while the remaining two-thirds consist of meadows and pastures) for grazing livestock.
Earth has a lot of water, we’re surrounded by it, but only 1.2% of all the water in the world is technically ‘drinkable’. Out of this 1.2%, 70% is used for agriculture.
Besides that, we only have a certain amount of water and a certain amount of land, we are forgetting about one very important variable in all of this. Humans.
By 2050, the world’s population is expected to grow to 9.7 billion people, and feeding it will be a huge challenge.1
Due to industrial development and urbanization, we are losing arable lands every day. In 2015, scientists reported that the Earth had lost a third of its arable lands over the previous 40 years.2
We don’t know how much more we are going to lose in the next 40 years. Increasing food demand due to a growing population along with ever decreasing arable lands poses one of the greatest challenges facing us. Many believe that vertical farming can be the answer to this challenge.
The technology side of Vertical Farming
There’s an emerging consensus that the agriculture industry needs to adapt to use less water and chemicals, make crops less vulnerable to changes in the climate, and produce more reliable yields. Part of the answer may lie in the emerging start-ups growing produce in indoor environments, where growing conditions can be better managed.
The indoor farming technology market was valued at $23.75 billion in 2016, and is projected to reach $40.25 billion by 2022. Yields are typically much higher than traditional farming methods because crops from indoor farming are grown in three dimensions, rather than two – and can be grown all year round, independent of external weather conditions.
For example, one of Square Roots’ indoor farms produces the same amount of food as a two or three-acre farm annually, just from 340 square feet. This yield is achieved by growing plants at 90 degrees and using artificial intelligence (AI) to ensure the environment is optimal for each specific plant, including the day and night temperatures and amount of CO2 needed.
AppHarvest, which I’ve written about before, recently acquired Root AI, an artificial intelligence farming startup that creates intelligent robots to help manage high-tech indoor farms.
AppHarvest expects the game-changing advantage of the technology to be in the data the robots can collect as they harvest, which can help evaluate crop health, precisely predict yield, and optimize overall operations of the controlled environment agriculture (CEA) facility.
“The data gathered can exponentially deliver more insights that help us predict and control crop quality and yield”
Highly fragmented market
In 2020, $929 million poured into U.S. indoor-farming ventures, more than double the investments in 2019, according to PitchBook data. Grocery chains and California’s biggest berry growers are partnering with vertical farms, too.
Given the state of this new(ish) industry, there are many small and large players that currently exist. While some have chosen to build their farms in larger swaths of land in the U.S. to reach a larger population, others have set up shop closer to urban cities like New York and LA.
Vertical farms built next to urban centers, like lettuce, for example, don’t have to sit inside a truck for days as it makes its way from California to the East Coast, losing both quality and nutritional value. Vegetables can be bred for flavor rather than storage and yield.
With so many small players in the space, consolidation is inevitable as we start to see companies acquire/merge in an effort to gain market share and grow through economies of scale.
Companies taking the plunge
Public Companies
AppHarvest - article I wrote here, 35% gain from a SHORT position
Private Companies
Agricool
BADIA FARMS
Bowery Farming Inc.
BrightFarms
Gotham Greens
InFarms
Plenty Unlimited Inc.
Sky Greens
Spread
YesHealthFarms
Facts to be aware of
Food innovation could become a $700 billion market by 2030; that’s a 5x jump from the $135 billion market today.
There were 2.3 million square feet of indoor farms worldwide as of 2016. That number is expected to grow to between 8.5 million and 16.5 million square feet by 2021.
Indoor farming is 170x more productive than outdoor fields.
There is faster growth and more harvest cycles with indoor farming; for example, indoor lettuce farming has 4x as many crop turns as outdoor growers in a given year.
Indoor growers yield 10-15x more than outdoor farms.
NASA, along with other international space agencies, have experimented with hydroponic systems in space.
Conclusion
Vertical Farming is an amazing industry that is growing rapidly. Though it is in its infancy, the upside opportunity for the long haul is immense. You can even play it from many angles since it’s more about the technology and what it’s used for.
Traditional farming of vegetables
Growing cannabis
Technology to yield better results and cut on operating costs
These are the three ways you can currently invest in today that are available on the public markets.
I’m incredibly bullish on this industry and the best part is that it has overlaps in many areas while supporting a thesis of the world NEEDING it to exist in one way or another in the future.
United Nations. "World Population Prospects 2019: Highlights," Page 1. Accessed Dec. 16, 2020.
Grantham Centre for Sustainable Futures. "A Sustainable Model for Intensive Agriculture," Page 2. Accessed Dec. 16, 2020.