Key Takeaways:
- Eastern Europe, Latin America, Africa, and Central Asia are seeing a rise in indoor farming projects, aiming to address food security, climate change, and limited arable land.
- Eastern Europe has been a strong agricultural player, but challenges like the Russian war and climate change have impacted growth.
- Africa is positioned as a potential powerhouse for indoor farming, but challenges such as high costs and lack of infrastructure slow down progress.
- Latin America is experiencing rapid growth in vertical farming, driven by urbanization and climate concerns, while facing competition from the traditional agro-industry.
- Central Asia is developing indoor farming solutions, but fragmented industries and geopolitical factors present obstacles.
In recent years, indoor farming has gained significant attention as a solution to the growing challenges faced by agriculture worldwide. While much focus has been on the Western world, emerging markets in regions like Eastern Europe, Latin America, Africa, and Central Asia have started embracing these technologies to address food security, climate change, and economic instability. These regions present a mix of opportunities and challenges as they invest in vertical and indoor farming projects, with each region facing unique hurdles.
Eastern Europe: A Halted Growth Due to War and Climate Change
Eastern Europe has historically been an important crop producer, representing 10.8% of the European Union’s total agriculture output in 2019. Countries such as Romania and Poland contribute significantly to Europe’s vegetable output and provide over 30% of its agricultural workforce. Despite these contributions, the region faces critical challenges from decreasing arable land and the growing effects of climate change. Droughts and heatwaves have taken a toll, costing the region around 1% of GDP annually. Countries like Romania and Hungary are projected to suffer the most from future heat-related economic damages, with GDP losses of 1.5% and 1%, respectively.
To mitigate these risks, Eastern European countries have turned to indoor farming. Romania, for instance, has made strides in vertical farming. Companies like Fresh Microgreens have invested USD 2.2M in microgreenhouses to supply local retailers such as Kaufland. Additionally, Ultragreens inaugurated the first vertical farm in Romania, marking a shift towards urban, hyper-localized agriculture.
However, the Russian war in Ukraine has disrupted this momentum. Rising energy prices and inflation have forced some greenhouses to halt production, as operational costs exceed revenue. The war has also impacted consumer behavior, with inflation pushing customers to choose cheaper produce, further squeezing the profitability of indoor farming ventures.
Africa: A Land of Opportunity, but Is It Affordable?
Africa, home to the world’s second-largest population, offers significant potential for indoor farming. The continent faces severe challenges, including climate change, population growth, and an underdeveloped agricultural sector, making it ripe for innovation. Countries like South Africa have already embraced indoor farming, with companies like Kobus Vertical Farming and Future Farms of South Africa leading the way. International players have also shown interest, partnering with local companies to develop new projects.
However, the economic viability of large-scale vertical farms in Africa remains in question. High upfront costs, such as the USD 100M required for advanced facilities, are prohibitive given the low retail prices for produce in many African markets. Moreover, the implementation of AI and high-tech solutions would require significant investments in training and infrastructure, further complicating the situation. While low-tech indoor farms have emerged to meet growing demand, many of these projects focus on supplying European and Asian markets rather than local consumers.
The African Association for Vertical Farming is working to address some of these challenges by partnering with organizations like KilimOrgano to create training centers for vertical farming in Tanzania. Meanwhile, North African countries such as Morocco, Tunisia, and Egypt have become key players in horticulture, exporting a significant portion of their greenhouse produce to Europe.
Latin America: Rapid Growth Amidst Competition
Latin America is poised to become a vertical farming powerhouse, with the market projected to reach USD 1.93Bn by 2030, growing at a compound annual rate of 21%. Urbanization, decreasing farmland, and the impact of climate change are driving this growth. Companies like AgroUrbana in Chile and Pink Farms in Brazil are leading the charge, both launching large-scale vertical farms aimed at increasing food production while reducing environmental impact.
AgroUrbana, for example, recently closed a USD 4M Series A funding round to expand its operations. Meanwhile, Pink Farms has opened a new facility in Sao Paulo capable of producing up to 120 tons of produce at a 35% cheaper OPEX than its predecessor. Despite this growth, Latin American vertical farms face stiff competition from the traditional agro-industry, which accounts for over 10% of the region’s GDP. The lower cost of traditional produce restricts the market for vertical farms to high-end consumers, restaurants, and hotels.
Central Asia: Growing Potential, Immediate Challenges
Central Asia holds significant potential for indoor farming, particularly in regions where access to international markets is restricted due to geopolitical factors. Iran, the largest country in the Persian Gulf, is seeing unprecedented growth in greenhouse construction, driven by government initiatives. The country’s Greenhouse Expansion Project aims to develop 48,000 hectares of greenhouses by 2025, producing 21 million tons of agro-products annually.
Other Central Asian countries, such as Kazakhstan, have also made strides in indoor farming. Kazakhstan increased its greenhouse area to over 1,164 hectares by 2018, and the government plans to build 40-50 hectares of additional greenhouses in the coming years. Mongolia is also seeing interest in indoor farming, with PlanTFarm partnering with the Premium Group of Mongolia to build the country’s first indoor vertical farm.
However, the region’s agricultural sector remains fragmented, with limited financial capacity to invest in high-tech indoor farming solutions. Government support and foreign investments will be crucial to realizing the region’s potential.
Conclusion: Challenges and Opportunities Ahead In Indoor Farming
While Eastern Europe, Africa, Latin America, and Central Asia represent significant opportunities for indoor farming, each region faces unique challenges. The high cost of setting up advanced vertical farms, regulatory issues, and the impact of geopolitical conflicts are slowing progress.
To unlock the full potential of indoor farming in these emerging markets, governments, investors, and private companies must work together to reduce costs, improve access to high-quality consumables, and develop frameworks that ensure sustainable growth. As these regions continue to adapt to new technologies and address their specific challenges, indoor farming could become a vital solution for food security and climate resilience in the years to come.
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