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Urban Transformation

Vertical farming can change the future of food,so why isn’t it scaling faster?

Vertical farming in action

Why some vertical farming is taking a new direction. Image: Plenty/Spencer Lowell

Arama Kukutai
CEO, Plenty
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This article is part of: Centre for Urban Transformation
  • By 2050, we need to produce 70% more food, but only 10% of farmable soil will be available.
  • We need to change how we feed the world and indoor vertical farming has the potential to bring local food production to any community.
  • But vertical farming has struggled to scale up for several reasons, including design, financing and clean energy costs.

We need to rethink how we feed the world.

Climate change, severe weather, natural disasters, conflict and many more issues are disrupting global food supply and reducing food security. The need to produce 70% more food by 2050 to feed the growing global population adds to the pressure. Yet, we’ll have far less farmland to produce that food – at the current erosion rates, only 10% of all farmable soil will be left by 2050.

Vertical farming is an approach to growing plants indoors at much greater yields than conventional field farming. For example, Plenty, the indoor vertical farming company I run, yields up to 350 times more per acre than conventional farming, while using a fraction of the land and water. Vertical farming meets a need that greenhouses and field agriculture can’t: growing a steady supply of fresh fruits and vegetables year-round, anywhere in the world.

With that potential to change how we feed the world, and meet retailers’ and consumers’ desire for year-round availability of seasonal crops, why are there so many negative headlines about a vertical farming crash? In short, they’re getting the story wrong.

Vertical farming is at an inflexion point. This is the end of the beginning for indoor agriculture, not the beginning of the end. Shakeouts aren’t a signal of its demise.

They are a natural part of the maturity cycle for emerging sectors as businesses move from start-up to scale-up – particularly in high-tech, high-innovation industries, such as indoor agriculture. It’s no surprise that a small set of companies will crack the code and emerge as winners.

Two critical factors will determine the success of vertical farming: proving the economics and maturing how its growth is funded.

Have you read?

Solving unit economics

One of the fundamental differences among vertical farming companies is how they grow.

Most take a 'stacked-tray vertical' approach. Here, plants grow horizontally in trays stacked vertically on top of each other. This makes better use of floor-to-ceiling space than greenhouses, but this approach has some major flaws.

The biggest is that stacked trays trap heat, which limits the intensity of lights they can use without cooking the plants, since more intense lights generate more heat. Since light is the biggest lever indoor farms have to drive yield (light spurs photosynthesis, which spurs growth), limiting light limits yield.

That leads to less profitable farms. Stacked tray systems also struggle to support crops outside of leafy greens at mass commercial scales – and we can’t transform the food system if we’re limited to lettuce.

By contrast, a 'true' vertical approach maximizes the density of plants in a three-dimensional space by growing on massive, uninterrupted vertical growing planes. This architecture enables the use of ultra-intense lighting, thanks to efficient air circulation in vertical aisles.

Coupled with increased plant density, this drives exponentially greater yields. A true vertical system has a modular, flexible architecture that can support a wide variety of plants and bring crop diversity to vertical farming. This is how Plenty can grow more than 50 different crops in its vertical growing system.

Vertical farming must diversify beyond greens to address unmet market demand and support food and nutrition security. To meet those needs, more caloric crops must be grown at a commercial scale and at a price point that can ultimately be competitive with field-grown counterparts.

Indoor vertical farming must scale massively to impact the global food supply. As the vertical farming industry works to move from the startup to scale-up stage, there will be a shakeout of growing approaches that don't meet basic unit economics. This will lead to more failures in the vertical farming space in the coming months and years but also create an opportunity for those still standing to increase the fresh food supply.

Financing the future of farming

One of the greatest challenges this sector faces is how capital-intensive it is to scale infrastructure-heavy businesses. With agritech VC funding drying up, the vertical farming industry must change how it finances growth. The solution is accessing more efficient capital through asset-level financing – financing vertical farms as assets, rather than primarily seeking company-level financing.

There are a number of potential financing partners industry players can pursue. One is real estate investment trusts (REITs), which support expansion by providing capital for farm sites and buildings. Another is farm-location financing, which is available from the public sector via grants, incentives and policy.

A third financing avenue is public-private collaboration. Vertical farms deliver local food production and green jobs to communities, states should be actively competing to attract these farms to their regions via incentives and tax legislation. Public-private collaborations are critical to shaping sensible policy that supports innovation in the agritech sector, while achieving other social impact goals, such as providing healthy food to underserved communities.

With all the negative headlines about failed vertical farms, de-risking investment is critical. Vertical farms ultimately need to demonstrate profitability and consistent, predictable returns – a challenge for those taking a 'stacked tray' vertical approach. With increased yields and signed agreements with large grocery stores and other retailers, Plenty has secured low-cost financing to invest in its growth.

Agriculture is the only industry still manufacturing outside. As we grapple with the impacts of climate change on the global food supply, we must bring more food production indoors to create supply stability and we must scale this up rapidly. By leading with innovation and funding to scale, vertical farming can change the future of food.

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