Indoor Farming
The Rollercoaster Year
2023 has been a tumultuous year for the indoor farming industry, marked by a significant wave of bankruptcies from Q1 to Q3. Prominent players like Infarm, AppHarvest, Aerofarms, and Kalera didn't just face setbacks; they symbolized the broader industry's struggle. As these companies closed operations and filed for bankruptcy, the sector saw funding dry up and project numbers plummet. Amidst this downturn, a critical question arises: Is indoor farming facing a mere hiccup on its path to sustainability, or are these challenges indicative of deeper, systemic issues?
Despite the early setbacks, Q4 brought a flicker of hope with a rise in the value and scale of new projects. Notable among these is the ambitious ReFarm project in Dubai's FoodTech Valley, a 900,000 sqft vertical farming facility. Designed in partnership with Intelligent Growth Solutions, this project aims to redefine resource efficiency in indoor farming. But is this uptick a sign of recovery or a temporary respite?
Expert Insights: A Reality Check
Experts offer divergent views on the future of indoor farming. Michael Koziol of Amplified Ag reflects on the industry's journey: "Definitely a more stable recovery. Our view for the industry is that CEA and vertical farming will develop into essential elements of the overall agricultural ecosystem... While it was stressful and many casualties over the last three years, the industry needed this reconciliation to move forward."
Conversely, Daniel Plant of Plant Dynamics offers a more critical view, pointing out a fundamental flaw: "This category of outcome is by and large due to a particular conceptual flaw or weakness: scaling production with a technology in a market without having achieved positive unit economics." He warns against the rush to large-scale projects, suggesting, "If a greenhouse can do the job, the vertical farm attempting to do that job will not succeed."
Geographical Trends: Where the Future Lies
The Middle East, particularly the UAE & Saudi Arabia, emerged as hotspots for indoor farming, attracting significant investments and attention. Michael Koziol notes, "We pay a lot of attention to what’s happening around the world in our space, and many of the innovations from The Netherlands, Israel, Dubai, Singapore, and more are inspiring."
Daniel Plant sees the Middle East as a burgeoning hub: "The vision for CEA that is painted in the press releases from the region will not be what comes to fruition, but the ambition plus the fundamental need now has the region on track to become a significant CEA hub."
United Kingdom: Poised for Growth
Daniel Plant expresses cautious optimism about the UK's potential: "I hope when you ask me next year to choose the United Kingdom as my answer... If the United Kingdom allows agricultural markets to reach equilibrium, greenhouse development will boom on that island nation. Seeing the Dyson group lead the way with the strawberry example is certainly great."
The United States: Yet To Reach Its Peak
Chris Higgins points to specific states as emerging leaders: "There have been some interesting developments in the Middle East & South East Asia, but we are hyper-focused in the United States,?Canada, Mexico, and the Caribbean islands.??States in the East and Northeast, like Virginia, Pennsylvania, and North Carolina, are attracting investments that allow farms to target the largest population concentrations, while states like Colorado rapidly expanded to service the cannabis industry and now have quite interesting opportunities for local food producers. The USA market is so big that there is plenty of space, unlike smaller countries such as the UAE or Singapore.”
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“Maybe we’re a bit biased, but we are extremely encouraged by what’s happening from a research perspective in the United States. The USDA through its Agricultural Research Service (ARS) is investing considerably in the study of indoor agriculture - from technology to crop production to productivity - to close the gap between traditional farming and modern CEA.” Michael Koziol commented.
Learning From Mistakes: A Path Forward
The industry's downturn has been a harsh teacher. Experts agree that many startups faltered by building capital-intensive models and failing to establish efficient supply chains. Daniel Plant candidly observes, "Last week, I had the management team at one vertical farming company tell me about the opportunity to grow kiwis in vertical farms. This is detached from reality and not learning from past mistakes."
Chris Higgins notes, "Growers that have been in business for a while now have had the opportunity to learn and pivot as their businesses grow.? This also allows them to create?a step-by-step model avoiding?hard and costly mistakes.”
Michael Koziol hopes for a well-learned lesson: "We do not expect that the over-hyped investment mindset that created unrealistic expectations will come back and hope that there will be a more moderated cycle of investment with the appropriate horizons for value creation."
2024 and Beyond: Predictions and Perspectives
As we look to the future, experts like Chris Higgins suggest a return to more traditional business models, emphasizing technologies that enhance operational profits. Michael Koziol envisions a closer integration of CEA with traditional agriculture, suggesting a shift towards more collaborative and technologically advanced farming practices.
Daniel Plant predicts more institutional capital flowing into greenhouses and warns of the potential pitfalls for at-scale vertical farms. He emphasizes the need for agriculture to become more like infrastructure, requiring "institutional rather than agricultural capital."
Conclusion: Navigating an Uncertain Future
Indoor farming stands at a pivotal point. The lessons of 2023, coupled with technological advancements and a shifting geographical focus, are shaping a new path forward. Yet, as this editorial suggests, the journey is fraught with challenges and uncertainties. It's up to the industry stakeholders, investors, and innovators to steer this ship wisely, learning from the past while embracing a future where sustainability and economic viability must coexist. The question remains: Will indoor farming rise to the challenge, or will it be another cycle of highs and lows?
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1 年One of the fundamental mistakes is the drive to replace traditional ag. Indoor farming can complement traditional ag in many ways. Growing during the off-season, growing closer to urban areas to reduce travel costs and product loss, and growing in regions like the Middle East or cold climates are all ways that CEA can fill the gaps where traditional ag doesn't work as well. The goal shouldn't be to replace outdoor growing, but to strengthen our food supply in ways that traditional ag alone can't do.