Monday, 9 January 2017

Great technology but lousy business - the urban farming revolution that isn't

There's an article in the New Yorker about 'vertical farming' - this is the use of redundant urban spaces to create farms:
No. 212 Rome Street, in Newark, New Jersey, used to be the address of Grammer, Dempsey & Hudson, a steel-supply company. It was like a lumberyard for steel, which it bought in bulk from distant mills and distributed in smaller amounts, mostly to customers within a hundred-mile radius of Newark. It sold off its assets in 2008 and later shut down. In 2015, a new indoor-agriculture company called AeroFarms leased the property. It had the rusting corrugated-steel exterior torn down and a new building erected on the old frame. Then it filled nearly seventy thousand square feet of floor space with what is called a vertical farm. The building’s ceiling allowed for grow tables to be stacked twelve layers tall, to a height of thirty-six feet, in rows eighty feet long. The vertical farm grows kale, bok choi, watercress, arugula, red-leaf lettuce, mizuna, and other baby salad greens.
Pretty interesting stuff especially when you look at the technology involved where the production system uses a tiny proportion of the water typically used to grow those baby salad greens. Indeed this sort of technology holds out considerable opportunity for the further intensification of high added value salad vegetable production - anyone driving through the Fens will see the polytunnels and greenhouses that might form the basis for this technology, especially in a world where water is more expensive, to really make a difference.

The problem is that urban spaces really aren't the best places - even with multistorey production - to do such a business. Here's a clue:
The AeroFarms clamshell package (clear plastic, No. 1 recyclable) appears to be the same size as its competition’s but it holds slightly less—4.5 ounces instead of five. It is priced at the highest end, at $3.99. The company plans to have its greens on the shelves soon at Whole Foods stores and Kings, also in the local area. Greens that come from California ride in trucks for days.
So we've a product that is significantly more expensive that the more traditionally produced product. Even were a tighter ship to be run it is unlikely that AeroFarms will be able to compete with the mass production in California leaving it with a niche market of people who want to buy 'local' production.

This vertical farming requires the acquisition of expensive urban real estate and a significant capital investment just to grow stuff for a niche part of a niche market for salad vegetables. The idea that this sort of production will somehow release current agricultural land for rewilding is pretty much nonsense. The plant in New Jersey featured in the article will have cost some $39 million (including nearly $9 million in government grants) to create a little more than an acre of vertical farmland - right now agricultural land in New Jersey sells for about $10,000 an acre.

The technology here is genuinely exciting but, even in run down urban areas, there is no way that vertical farming on expensive real estate is the solution. And this is before we recognise that businesses like AeroFarms focus on agricultural products with pretty much the highest margins - salad leaves for yuppies - rather than on the sort of production that dominates arable farming in the USA: corn, wheat, potatoes, barley and so forth. Lovely technology but lousy business.


1 comment:

Bill Sticker said...

Surely to make such a concept work it would be better to buy cheaper real estate, like in Chicago or any other part of the 'Rust belt' rather than high priced NYC.