T.The global food industry has been concerned with increasing yields and low costs for centuries, but in recent years technological advances have accelerated. Some would argue that the science of doing this has not always produced the best results for both the environment and, in some cases, humans. However, the convergence of hard and soft science over the past decade has led many companies to refine existing methods and, in some cases, develop entirely new approaches. This usually offers new opportunities for investors.
There have been numerous innovations in agricultural technology over the centuries, from upgrading wooden tools to metal tools, from oxen to tractors and so on. But the only thing that has remained constant over the millennia is that no matter what you grow, the first thing you do is plant seeds in the soil.
In a meaningful way, this is beginning to change.
Hydroponics, or growing plants in nutrient-rich water with no land use, is a Practice that has been around for decades However, it has only been used in relatively small applications and has generally focused on high quality crops such as tomatoes, cucumbers, peppers, fresh lettuce, basil, and spinach. In recent years, a number of forces have come together to reduce costs and achieve economies of scale. It is estimated that a 30-story building with a footprint of 5 acres would be capable produce the same amount than a 2,400 acre farm. Bringing plants indoors also means air conditioning, so problems like an unexpected freeze in Florida would not affect the orange juice markets. Another positive effect is the growth of hydroponics uses between 70% and 95% less water than conventional agriculture.
Since the plants are grown indoors and in highly controlled environments, the need for pesticides is completely eliminated, which is better not only for consumers but also for farm workers and of course the environment.
Vertical farming has at least one major hurdle to do with pollinating all of these plants: since there are no insects flying around, pollination has to be done manually, which is manageable on small farms but potentially problematic on a scale.
Another potential problem is that plants require sunlight in traditional farming and lightbulbs are used in vertical farming. Getting light isn’t the problem, but electrical infrastructure and redundancy are a must. In agriculture, some countries that would benefit greatly from agritech solutions are often countries that lack the infrastructure to support this innovation.
With that in mind, let’s recap some numbers: The North American fresh fruit and vegetable market was valued at around $ 90 billion at the end of 2019 expected to grow to $ 134 billion U.S. vertical agriculture is estimated at $ 3.3 billion by 2020 and is growing at an average annual growth rate of 25.2%. is expected to reach $ 31.6 billion by 2030.
Fruitful opportunities for investors
Listed companies paving the way into vertical farming include companies like Appharvest (APPH), Hydrofarm Holdings (HYFM), and Village Farms International (VFF). Spring Valley Acquisitions (SV) recently announced plans to acquire private Aerofarmsthat focuses on vertical indoor farming. While trading on over-the-counter markets in the US based in Norway Kalera (KSLLF: OTC, KAL: Oslo B)ørs) and Canada Cubicfarm systems (CUBXF: OTC, CUB: TSX Ventures) are both companies committed to bringing innovation on a commercial scale to this emerging segment.
The combined market cap of these companies is just over $ 5.1 billion, suggesting that this segment is still in its infancy from an investor perspective. Investments in indoor farming have more than doubled to $ 1.3 billion in 2020 as part of a larger doubling in agro-food technology investments that reached $ 22.3 billion last year. Vertical agriculture still needs to be optimized before it can reach a truly global scale. However, the customers of the above companies include names such as Costco (COSTS), Aim (TGT), Kroger (KR) and Walmart (WMT) as well as Sysco (REASON), U.S. groceries (USFD) and Marriott (TO DAMAGE) We believe this is a good sign for the industry.
While there are only a handful of public companies, dozens of private companies are entering this space. Speaking of space, one of the projects recently completed aboard the International Space Station focused on how It is best to water plants in space. This is a technology that will serve humanity when we start thinking about interplanetary, if not interstellar, travel.
Products grown in vertical agriculture are now commonplace with the customers of these agritech companies listed above. Given that the world population was estimated by the United Nations to achieve 8.5 billion by 2030 and according to the World Bank The available hectares of arable land are decreasingThere are those who would invoke the spirit of John Malthus and raise resource alarms. We would say that, like every time since his first publication of “An Essay on the Principle of Population” in 1798, there seems to be a constant stream of new technologies that make existing farming practices even more efficient. After all, creating efficiency through vertical alignment has been applied to many things, from property to Solid State Drives. It seems that the technologies underlying hydroponics could be the latest example of vertical innovation.
The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.
