Last week New York City was host to the Indoor AgTech Innovation Summit, an event which drew 600 attendees, featured 90 speakers and included representatives from 42 countries. For a sector with some history of hyperbole about its role in feeding the world, the presentations and discussions during this event featured an overall balance of optimism and pragmatism. Many different kinds of “indoor” facilities were being considered at this meeting ranging from basic greenhouses all the way to multi-level “vertical farms” of the type pictured above. Industry players prefer to call their sector “controlled environment agriculture” or CEA. That is in contrast to mainstream agriculture which has the advantage of free solar energy and rainfall, but which must also deal with all the variables associated with weather and the limitations determined by geography.
The origins of CEA stretch at least as far the 17th and 18th century when “orangeries” in France were used in the winter to protect citrus trees grown in pots. For the last eight decades the Dutch have been technology leaders in the increasingly sophisticated and international greenhouse industry. In recent years CEA has been expanding world wide and trending towards a higher degree of control of the growing conditions including light, temperature, humidity, water, and carbon dioxide concentration. Fertilization in these systems is increasingly micromanaged in a soil-free setting such as “hydroponics” or “aeroponics.” Many tasks and process controls are automated.
This is an expanding industry with 7-8% annual growth projected for greenhouses and 15% per year for vertical farming. Greenhouses are commonly used to produce leafy greens, tomatoes, peppers, and cucumbers. The highest tech, vertical farming systems are currently focused on leafy greens and herbs. Even so, the packaged salad and leafy greens market is said to be in the range of $8.7 billion and projected to grow to between $13 billion and $25 billion within the next 5 years and CEA is likely to account for an increasing share.
Highly controlled growing systems are expensive to build and operate, but they have a number of operational advantages relative to outdoor agriculture:
- Consistent production independent of the weather
- Substantially higher crop production per unit of land area
- Highly efficient use of water and and fertilizer
- Food safety advantages via protection from environmental sources of human pathogens
- Exclusion of most crop pests
- Fresh appeal for consumers
These facilities can be built closer to markets that are far removed from traditional produce growing regions. This reduces transportation time and cost while also delivering a fresher product. That reduces food waste at the retail and consumer level. The Northeastern US online marketing/home delivery players, Fresh Direct, that has already shortened farm to consumer delivery for west coast produce, sees a further 4-7 day advantage from regional CEA sources. The indoor growers can also speed up and slow down production with input about demand fluctuations from marketers who are taking online orders.
There are also global trends that favor CEA expansion including Climate Change. Prolonged drought is compromising crop production in major growing regions like California, and climate change is disrupting historically important growing microclimates across many regions. As panelist at at the Indoor AgTech meeting from the berry industry put it, there is a need to “future-proof” the produce business.
Recent supply chain disruptions and conflict-driven trade limitations are driving an already growing desire for “food autonomy,” particularly in countries or regions that are highly dependent on imports. CEA is being actively promoted by governments in the Middle East and in Singapore as a strategy to overcome their particular land and/or water limitations for local food production.
The CEA sector as represented at the New York event also acknowledged several major challenges. Energy was described as the “elephant in the room” or the “Achilles heel” of high tech indoor agriculture. Energy for lighting has already been largely optimized through the use of LED bulbs that only produce the wavelengths that are most important for plant photosynthesis. HVAC is a major energy sink to deal with the need for heating, cooling and humidity control. Even with less fuel used for shipping, this industry is always going to be fairly energy intensive, and so its goals are to optimize the energy use per-product and renewable sourcing. The predictability of their demand is a negotiating advantage with utilities, and there is strong interest in access to “micro-grids.” Some companies in this space buy carbon credits in order to meet footprint goals.
As with many industries, labor cost and availability can be issues for CEA as there will always be important roles that cannot be automated. However, it was reported that there are many people who are interested in getting involved because of the high tech and food connections.
Other challenges that were discussed included landlord education, and permitting hurdles. For efficient expansion there is a need for modularity in design. There is also a need to transplant the “culture” of the operational employees to new installations in order to avoid a repeat of the learning.
One reminder that was repeated by several of the presenters was that “consumers buy food, not technology.” The sustainability features of the story has some resonance but that differs by generation and can be difficult to communicate. Local has strong appeal, but freshness, taste/texture quality and shelf life seem to be the biggest selling points for CEA products. Another common thread was the recognition that the cost at retail has to be reasonable and that quality premiums can only go so far.
At retail there is only so much that can be communicated on a package label. QR codes and websites can help, but online marketing for home delivery opens the door for more informational content as well as feedback from the consumer. Initially consumers may be uncomfortable with the idea of purchasing fresh produce without the ability to hand pick based on appearance, smell or touch, but once they try it and have a positive experience they can become loyal customers that give feedback and even join on-line discussion groups.
Additional crops mentioned at this meeting that are in the research or early development phase include strawberries, blueberries, beans and peas, young root vegetables, and potatoes (at least the seed crop for outdoor planting). Hops are of interest because their optimal growing microclimates are being compromised by Climate Change. Wasabi is of interest since much of what is sold today is a fake substitute for that flavor. There is also interest in microalgae for “super foods,” and there is very active development for medicinal plants. Several speakers addressing alternative crops emphasized the importance of genetics – of breeding for varieties that are adapted to take full advantage of controlled conditions. Ironically for a tech-focused industry, advanced genetic technologies like transgenics were clearly “off the table” and even the newest approaches like gene editing were unlikely to be employed.
The meeting finished with a “Crystal Ball Session” asking “how will the industry shape up in 5-10 years. One expectation was selection down to winners from among the current set of players. It was pointed out that many innovation-driven industry go through a similar consolidation stage. There are still companies looking for venture funding, but overall the industry is moving beyond that stage. In terms growth the greenhouse sector was predicted to increase at a rate of 7-8% per year and the vertical farm sector by 15% per year. The packaged salad business was projected to grow from its current value of $8.7 billion to between 13 and 25 billion in five years. More crops are projected to move indoors particularly in response to California’s water shortages. Even so there was agreement that costs will have to be lowered for CEA operation with labor and energy costs being particularly challenging.