In an article published on June 6th by David Stevenson on PitchBook, Data shows that Venture capitalists throughout the world further their investment in the vertical farming industry as the sector has already totaled nearly USD 800 million in the first 5 months of 2022 compared to USD 1.2Bn throughout 2021.
Nonetheless, the figure is inflated by Plenty’s USD 400 million fundraising in January representing half of the total amount invested since the beginning of the year.
This comes as no surprise as the world seeks potential solutions to face the current disruptions in the food supply chain linked to the war between Russia & Ukraine, the climate hazards affecting the output of certain countries, and logistics problems affecting retailers as well as the end users.
Since the release date of the data (1st of June) other indoor farms have made impressive funding rounds, notably: Little Leaf Farms who bagged USD 300 million in a funding round led The Rise Fund, and Leafood who netted a 6.45 Million euro funding. These funding rounds have further the investment made in the industry thus reaching USD 1.1Bn since the beginning of the year.
Not Just VCs But Governments Further Their Investments In Vertical Farming
The U.S. Department of Agriculture (USDA) recently announced significant investments to support urban agriculture, including USD 43.1 million for grants and cooperative agreements. USDA is investing USD 10.2 million in new cooperative agreements to expand compost and food waste reduction efforts and USD 14.2 million in new grants to support the development of urban agriculture and innovative production projects. Additionally, $18.7 million will fund 75 worthy grant proposals from the 2021 application cycle, which was oversubscribed.
“Investing in urban agriculture innovations helps us build a fairer, more transparent food system and promote equity by increasing nutrition security and economic opportunity in underserved communities,” said Natural Resources Conservation Service (NRCS) Chief Terry Cosby. “These projects will help urban farmers create new, more affordable, and better local market options and help urban communities produce fresh and healthy food locally, reducing food waste while building nutrient rich compost.”
The United Arab Emirates also furthers its investment in indoor farming technologies as, according to the Abu Dhabi Agriculture and Food Safety Authority (ADAFSA), two agreements have been awarded, the first (Valued at USD 71 million according to ME Construction News) being with Emirates Hydroponics Farms to build and operate a hydroponic farm for the production of vegetables, fruits, and mushrooms in controlled environments with a surface area of 325,000 sqm.
The second was signed with the Emirates International Agricultural Advanced Company for the construction of an Aquaponic farm costing about USD 13.6 million and with a surface area of 750,000 sqm.
What Could Affect The Growth?
Given that most indoor vertical farming solutions rely heavily on energy to produce, the current increase in energy price already affects many growers throughout the world. In a recent article featured in Hortidaily and written by Thijmen Tiersma, Dutch greenhouses were facing perhaps the greatest crisis they’ve ever seen as increasing operating costs have driven many facilities out of profit.
“Each grower’s situation depends on the type of contract they have with their gas supplier and the equipment they use. Growers with fixed gas prices have a price of €0.80 while others have daily gas prices. The profitability thus varies largely depending on the crop they grow and the energy prices they have. Depending on the future price fluctuations, some growers may have to decide whether they launch a production or not.”
To counter this, an increasing number of companies are seeking solutions by either reducing their energy consumption or seeking other energy sources, or even relying on 100% renewable energy.
From a regulation perspective, GreeneHurlocker Warns About The Various Zoning Law Challenges Vertical Farming May Face. In an article published in AgFunder news, Jared Burden warns about the various challenges vertical farming facilities located in urban areas may face because of zoning laws as urban planners and other developers have not anticipated the rapid growth of such a sector. He explains that in many cities across the country, zoning laws enable a single usage in a defined area which, in most cases, does not include farming activities. This may hamper the growth or the scaling of certain facilities and in the end, the growth of urban vertical farms in the United States and elsewhere.
Other notable issues that we can foresee are the lack of labour force, in an interview with Jacopo Monzini, a senior natural resources manager at the FAO he highlighted the lack of dedicated and state-of-the-art univertisty degrees adapted to the technology involved in vertical farms.
“If countries do not start investing in adapting education programs to the current technology trends, the sector will not only face a skill gap but will face higher operational expenses as qualified employees will be more expensive and rare to find. In turn this would harm the entire sector” – Jacopo Monzini, Senior natural resources management officer at the FAO. “Vertical farming and the technologies involved are a game changer that inevitably catch the eye of everyone at the moment because of its potential productivity, quality and freedom from the limitations and risks inherent of more traditional urban farming approaches.”
“Nonetheless, it will take time to adopt such technology because traditional farming and vertical farming are two completely different business. This will need to be also through investments in expanding and sharing knowledge about high tech in agriculture across the sector and in reducing existing risks related to OPEX and diversification.” He adds
Finally, current investigations against publicly-listed companies such as AppHarvest, Agrify or Affinor Growers for, respectively, failing to discolse to investors regarding their training capacity and thus affecting their discolsed production output & quality, creating artifical demand for its product and misleading investors regarding private funding rounds. Though the investigation are still undergoing and remain accusations, a lack of industry-wide transparency will definitely affect the sectors’ future growth. The transparency issue throughout the industry has also been highlighted in Agritecture’s most recent Global CEA Census.
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