Report Synopsis

Vertical Farming: does the economic model work?

Media coverage of Vertical Farming and Controlled Environment Agriculture suggest it’s the panacea to all our problems, ranging from: feeding a growing population, solving the environmental issues surrounding conventional horticulture as well as producing a high-quality crop where customers are prepared to pay premium prices. Is there any truth in these claims and if so what are the economics behind this growing system?

As a grower of edible flowers, which are processed and sold into a high value niche market, and living on a mixed sheep and beef farm in a Less Favoured Area of the UK, can the Vertical Farming model have anything to offer me? With increasing land prices, a shrinking and ageing rural workforce, increased climate variability and business challenges and opportunities post-Brexit - can this compact and highly productive growing system stack up economically as a viable way to grow a crop?

The report considers Vertical Farming and Controlled Environment Agriculture systems, the different crops and business models available, the main costs involved in the systems, advances in technology, the effects of automation and robotics, the stakeholders and investors and, finally, where is the UK currently in this industry.

The primary aim of the report was to look at examples in countries identified as being at the forefront in this type of growing system: Japan, the Netherlands, the USA, Dubai and Germany. It also covers other areas of technological advancement in the conventional glasshouse growing system to see if lessons could be learned here too. The findings should prove useful to growers considering investing in this technology, as well as stakeholders and investors considering ventures and partnerships.

The main issues occur when potential stakeholders focus on the growing method first i.e. Vertical Farming production techniques without first finding the best way to produce the crop as part of a robust business model. The technology is available to grow a wide range of crops under controlled conditions, but this requires high levels of technical skill and investment both of which can be difficult to access.

There are business models where Vertical Farming/Controlled Environment Agriculture would work well, such as seed breeding and medicinal plants; however other models, such as niche crops, fodder and leafy greens, appear more marginal.

Some of the arguments for sustainability are difficult to substantiate in relation to energy use, even if it is renewable energy. However they are more convincing when applied to water use. Data collection and plant growing algorithms are a valuable piece of intellectual property for companies, and the advances in light manipulation and the effect it has on plant growing characteristics are a new area of knowledge in this industry.

There is an exciting future for controlled environment agriculture and Vertical Farming, but it may not be in the crop areas which are hitting the headlines now. For conventional horticultural products a hybrid system may be the answer, taking the best of both systems to maximise growing production.

For those thinking of using this growing system the ideal would be to model all the variable costs of each different Controlled Environment Agriculture system to assess its economic viability. This could be revisited if the situation changes: for example as LED lighting costs reduce, electricity costs change, or conventional production method costs increase. This would allow potential businesses to assess when the ‘sweet spot’ was hit in terms of economic viability.

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