Is the vertical farming bubble popping already?
Vertical farming had been touted by numerous experts as the future of food production in a warming world. In 2023, however, such companies are already withering, and key players have called it a day.
If farming conditions become untenable due to climate change, we’ll just take our crops indoors, right?
In theory, the concept of vertical farming may seem an easy win for the future of food production. Stacking vegetables from floor to ceiling may not only free up diminishing agricultural space, but also allow conditions to be carefully controlled all year around anywhere.
Growing inside prevents the potential outbreak of plant diseases, eliminates pesticides, and negates the overuse of water and fertiliser. Following unexpected instances of extreme weather — like the flooding recently witnessed in California — the supply chain of herbs and leafy greens could be propped up by these warehouses.
This optimistic train of thought was one expressed by scientists and major food exporters in the experimental phase of vertical farming back in early 2021. Just two years on, however, industry enthusiasm has nosedived amid an onslaught of logistical problems.
The first, and most obvious, is that electricity prices have been hiked up to record levels in the US and Europe following the pandemic and ongoing conflict in Ukraine. This is a fatal issue, considering vertical farms run almost exclusively on automated tech and UV lighting as a substitute for sunlight.
In the back end of 2022, this led to ‘a clear reprioritisation of business strategy away from growth at all costs and towards profitability,’ revealed Pitchbook’s emerging technology analyst Alex Frederick. In laymen’s terms, production costs meant venture funding fell off a cliff.
Quarter 3 industry reports showed that financial endorsement declined by 17% on 2021 and a massive 44% from the previous quarter. Tying the hands of several promising projects, GlowFarms and Fifth Season shuttered their operations entirely.
Meanwhile, Kentucky-based AppHarvest expressed ‘substantial doubt about our ability to continue,’ having just opened a 15-acre vertical farm last October.
Outside of the US, the litany has forced Berlin-based Infarm to lay off more than half its workforce and French company Agricool into receivership to repay huge debts.
With capital rapidly drying up, those still pushing to stay afloat are fighting against an unforgiving business model. The majority of today’s vertical farms sell exclusively leafy greens which just aren’t high value produce.
Some are targeting other revenue streams by growing plants for pharmaceuticals, fragrances, or cosmetics, but overall, investors generally aren’t convinced profits will ever reflect grandiose pledges made by these start-ups.
AppHarvest previously dealt with a lawsuit from investors alleging the company had misrepresented its ability to succeed, and Aerofarms boldly declared it would take annual turnover from $4m in 2021 to $553m in 2026. That seems unlikely, if we’re being kind.
Funding hasn’t died up completely for vertical farming, but pie-in-the-sky pledges of instant riches across the US and Europe likely won’t garner much interest anymore.
Agritecture director Henry Gordon-Smith instead points to the economic model of the Middle East as being promising — as its extreme heat makes outdoor farming impractical and consumers pay handsomely for imported veg.
From an outsider’s point of view, its frustrating to see bold claims that tech will accelerate the fight against global food insecurity fizzle out. We’re now at a fork in the road, and many more vertical farming projects will succumb to economic strife.
Perhaps naively, we’re just hoping that just one will strike the right balance between profitability and productivity.