February 25, 2019

What’s driving the growth of indoor farming, and what could the future hold?

By Mike Karst, Senior Partner

During one of our many delicious meals during the holiday season, my family was sitting around the table marveling at the bountiful spread of fresh fruits and vegetables we were enjoying. I asked everyone—do you remember what our table looked like 30 years ago? Did we have grapes in December? Or these fat, bright red strawberries? Back then could we even find fresh tomatoes this time of year? 

And this conversation took place in rural Indiana, where the really good produce may not be as easy to access as it is for someone in an urban area.

Many things have changed over the past several decades in the ag food industry to get more food to more markets, but even with transportation and storage improvements there was still a seasonality to produce. One factor making that seasonality less prevalent is the expansion of indoor farming in new regions all over the U.S.

Greenhouses are becoming more concentrated in both urban and rural areas, particularly in Canada, Mexico and the United States. That’s the beauty of this farming practice—greenhouses can be set up anywhere, even in areas not suitable for a conventional farm at all, and for growing crops that otherwise could not thrive in that region’s climate. That’s how you can find lettuce growing year-round in Indiana. Greenhouses are ideal for growing high-revenue crops like leafy greens, which helps balance the high cost of operating these facilities; and highly perishable crops like tomatoes, which are great for supplying the local markets.

Poly greenhouses, hoop houses, vertical farming with hydroponics, both semi- and fully-automated … these indoor farms come in all shapes and sizes, but the common thread is the way they’re pushing the envelope on what high-tech farming looks like now, and how it will look in the future.

Clear Opportunities

The rapid expansion of greenhouses is aimed at meeting the growing demand for fresh, locally grown produce. People want to eat fresh fruits and vegetables, and not just in the summertime when farmers’ markets abound…they want it year-round. That demand impacts food retailers and foodservice companies, who need consistent product no matter the season.

Greenhouses are proving to be a prolific model for expanding fruit and vegetable production, but what exactly is the appeal? Let’s take a closer look:

Opening new markets

Greenhouses make it possible for grocery stores to source fresh produce locally and regionally, diminishing our reliance on imports. Plus, West Coast producers have been unable to fulfill their normal production load because of environmental stressors and impediments, so indoor farming helps fill that gap. Since indoor farms can be set up anywhere, we can shorten the trip from farm to table and cut back on the shipping and handling that is hard on fresh produce, not to mention costly.

Controlled environment

Growing food indoors makes crops less vulnerable to Mother Nature, who never seems to be in growers’ favor. It can eliminate the pests that invade and threaten open fields by operating in a safe and contaminant-free environment. And greenhouse operators don’t mess around with safety. On a recent greenhouse tour, we had to scrub up before we entered the facility—putting on the protective clothing, booties and all—so we didn’t bring outside contaminants into the pristine and sterile indoor environment. It was reminiscent of my many tours of animal processing plants.

Consistency and quality

Because of the ability to control every aspect of the operation, from temperature to moisture to C02 levels, the end result is a higher-yielding and consistently higher quality product. Growers can alter the conditions inside the greenhouse to make them conducive to achieve optimal nutrition and flavor. LED lighting can supplement sunbeams and be manipulated to achieve optimal plant growth … like turning on the sun exactly when, where, and how much you need it. And, growers can pick when the fruit is ideal for harvest rather than in a time crunch working around Mother Nature’s schedule.

Smart farm

The concept of a “smart farm” is easier to achieve in the more compact, controlled environment of a greenhouse. It’s the same technologies being used in open fields, just applied to a different environment, and it’s certainly proving to be another goldmine for agtech startups. Greenhouses are more conducive to making smart technologies work. And while we’re still figuring out how such technologies as artificial intelligence, robotics and blockchain can work most effectively in the industry, these technologies are much less cumbersome to implement in a greenhouse.

Producing more with less

You can produce so much more, more efficiently, in the controlled environment of a greenhouse. The yield differences are astonishing – lettuce growers can increase yields by over ten times more than open field production. Greenhouse tomatoes can yield 10.59 pounds per square foot compared to 1.85 pounds per square foot when grown conventionally (according to USDA data).

For larger conventional farms, the objective for implementing new technologies is increasing yields and cutting costs. These are important goals for indoor farms as well, but for greenhouses it’s much more about replacing tedious manual labor with automated solutions. They need to be able to carry out complex tasks automatically and collect data without much human intervention.

What does the future hold? Does the farm of the future look more like a research lab than an expansive landscape of tidy rows and tire tracks in the soil? And what are the implications for agribusinesses?
Greenhouses are creating a new kind of grower. Maybe this will encourage younger generations to get on board, given the average U.S. farmer age of 58. Could it help that average skew younger? If smart technologies can replace the mundane tasks involved with operating a greenhouse, perhaps it will entice the next generation to keep the farm going.

Growth is restrained because of the capital and high cost to build and operate smart greenhouses. At about $2 million per acre of greenhouse, most growers will need to partner with an investor with deep pockets.  Is the cost of running a greenhouse going down? Maybe and maybe not. The technology is improving, so growers can maintain consistent conditions for a longer stretch of time, but labor shortages and rising costs hinder consistent productivity.

Is it realistic to think indoor farming operations are going to solve our food gap of the future? They’re certainly not going to replace conventional farms of middle America—there’s no solution on the horizon for growing core grains like corn, wheat and rice in a greenhouse. But without a doubt, greenhouses are shaking things up in the fresh produce markets.

Whether you’re investing in new indoor operations or trying to understand how indoor operations may impact your current field operations, Entira can help you sort out strategies to pursue opportunities and respond to market developments.

Growers will always be interested in new technologies that make them more efficient as they address the ongoing battle with operating costs, and agribusinesses must be ready to support their endeavors.

If you would like to explore how to leverage solutions to support high tech greenhouse environments or how to target this new kind of grower, contact Mike Karst at mkarst@entira.net or 901.753.0470.