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Is Warehouse Farming the Future of Agriculture?

Electricity usage hampers vertical farming’s profitability.

No matter what industry you’re in, you need to be looking ahead for technological changes, the cost-effectiveness of your competition, changing customer behavior, and potential government regulation. 

One threat to the status quo I would like to explore is the potential for large-scale warehouse, or vertical farming. Could it reduce the need for row-crop production? 

If so, what kinds of crops will be first to face competition? And, what kinds of crops may never be grown indoors?

Because of shortages of arable land in some places, like Asia, indoor vegetable production has been in play for years. Alibaba.com, a Chinese internet retailer, advertises that it offers 2,466 vegetable warehouse products, including pre-fabricated buildings.

Companies like Philips are developing red and blue spectrum LED lights specifically for growing plants, while others are building sensors that detect optimal lighting levels for various crops.

Some companies on the West Coast are growing fruit and vegetables in 20-foot-tall towers inside of climate-controlled facilities with LED lights.

They claim to use no pesticides, herbicides, synthetic fertilizers, or GMOs. They do use thousands of infrared cameras and sensors to collect data in order to optimize lighting, water supply, and temperatures. Some warehouse type growers claim that this technology can achieve yields that are many multiples of traditional farming.  

However, vertical farming still has one inefficient component: electricity usage. Without sunlight, plants require intense artificial lighting for 16 or more hours a day. That adds up to sky-high energy bills. Improvements in lighting efficiency may bring the overall cost of warehouse-grown crops into competition with outdoor crops, but that tech is still in the works.

You may not have heard of it, but there is an Association for Vertical Farming. On the group’s website it states that they expect crop productivity for indoor farms to double every five years in the near future.

You can find many articles about the following crops being grown indoors: lettuce, kale, herbs, tomatoes, green beans, and peppers.

One company is growing greens on the roof of a Whole Foods in Brooklyn, New York. Another company claims to be growing 2 million pounds a year of greens in a 70,000-square-foot warehouse in Newark, New Jersey. There is also a 215,000-square-foot indoor ag facility in Las Vegas growing 16 types of greens and 11 types of herbs.

One company is even putting hydroponic farming systems inside of 40-foot shipping containers. They claim you can grow about 3 tons of herbs and greens out of it in one year.

On the flip side, you can find examples of vertical farms shutting down.

In the Chicago area there was a company called FarmedHere that was maintaining a 90,000 sq ft indoor farming operation and selling to about 100 grocery stores.  It shut down a couple of years ago due to lack of profitability.  Like any business, some operators figure out how to make it work, and others don't.

With labor shortages in some vegetable producing states, like California, it’s easy to envision warehouse production of vegetables becoming cost-effective eventually due to reduced labor requirements – plants covering fewer square feet, harvests happening year-round, and stationary robot vegetable pickers.

However, could warehouse production ever supplant the traditional row-crop production of corn, soybeans, or wheat?  Answer: Probably not any time soon. I haven’t found any examples of commercially viable indoor grain production.  

One executive with a vertical farm tech company suggested the optimal indoor crop mix as 80% greens and 20% herbs. Why? They need crops that turn fast and grow year-round. They need crops with high per-pound values in order to cover the labor, power, building, and equipment costs.

Waiting four to five months for an ear of corn is a big cash flow problem for a warehouse farm.

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