In urban farms, “urban farming” or “vertical farming”, different cultivation systems and structures can be used. From urban and small-scale agriculture to high-tech fully controlled and semi-automated greenhouses in rural areas, and everything in between. In practice, we still see an few projects in the Netherlands, and that is strange. Because it turns out that there are quite a lot of problems in realizing a potentially successful project. Unfortunately, it is true that in the Netherlands the cause of failure often lies in the fact that those, mostly involved in individual projects, are not open to or familiar with the knowledge from other countries. Except for the Gurus, such as J.Apeos. But a realistic view and thorough research would show that it is actually impossible, because it is too expensive, to put commercial indoor farming in the Dutch market. The question is therefore: “Why should we?” The answer is quite simple: prestige, fashion and zeitgeist. The titles concerning projects alone: ”European first with vertical farming in Drontense factory” or “The Hague has largest Urban farm in Europe” (Ferme Abattoir in Brussels is actually the largest with 2000m2).
That is why this article, in which I like to share knowledge and information about and for individual projects such as from the Rabobank, which investigates the possibilities for vertical farming in the Netherlands. Or of the five students from Inholland Delft who, on behalf of the Rotterdam Food Cluster, investigated the opportunities for business models in vertical farming and unfortunately only looked at the cities of Tokyo, Las Vegas and Rotterdam. But the project The Urban Tree Village in Amsterdam can also use some information. And there are more in the world. This article is based on a study that was announced at the beginning of this year (Hortinext wrote something brief about this), but where few people apparently know.
Information for starting a project
Agrilyst is an organization from America would like to share their information with us. The purpose of the report that they recently published (this year) is to look at the emerging trends, challenges and benefits of, among other things, vertical farming. This report not only provides an overview of this industry, but also provides a new, updated analysis. This year, more than 150 growers from all over the world were involved in the realization of this result, and through their reactions to the organization was this the result. The basic data of this report come from respondents who are mainly active in greenhouses and vertical farming, and use hydroponics as their growth system; 49% hydroponics, 15% aquaponics, 24% soil, 6% aquaponics and hydroponics and soil combination and 6% aeroponics. The number of companies can be subdivided as follows: 12% tunnel greenhouse (plastic), 7% container farm, 47% glass greenhouse or poly, 30% vertical farming (indoor), 4% DWC.
The farms are divided into two categories: large and small farms. The small projects are min.1000m2. The reason for this threshold is that the 1000m2 nurseries are commercially more viable. From an analysis perspective they discovered that growers from 1000m2 achieved more consistent revenue per square meter than smaller companies (using different measurement points (turnover, costs, budgets, etc.) This year 61% of the respondents were small companies and 39% large companies. The five most important crops grown were: leafy vegetables, microgreens, herbs, flowers and tomatoes, with more than half of the respondents growing leafy vegetables, but the full list of products that were grown includes next to the five most cultivated (leafy vegetables, microgreens, herbs, flowers and tomatoes) also cannabis, strawberries, cucumbers, peppers, mushrooms, onions, leeks, hops, figs, sweet corn, eggplant, fish, insects, roots and shrimps.
One of the most important advantages of vertical farming is the higher yield compared to conventional agriculture. The control of a facility creates an ideal growth environment so that in a short time a crop can grow from seed to harvest. It has higher yields and each cycle can be repeated several times a year. For example, it appears that the average yield of conventionally grown Roman lettuce is 3.34 kg per m2, compared with 42.63 kg per m2 for leafy vegetables grown in a greenhouse by a hydroponics system. The vertical growers reported a yield of 26.69 kilos per m2 for green vegetables and container parks reported relatively the lowest yields at 18.3 kilos per m2 for green leafy vegetables. Indoor vertical nurseries can increase their total yield by stacking extra layers and increasing their growth area as a percentage of available square meters.
Of course, a number of factors play a role that can influence this. One of the big problems is the high costs. This is a huge challenge for growers. In fact, only 51% of respondents reported working profitably. The average age of the profitable companies was seven years and companies that were not yet profitable were on average five years old. With less conventional financial resources available, for both capital and operating costs, as well as higher operating costs, it takes a long time for the growers make a profit. In addition, many start-ups make miscalculations and underestimate operational costs (labor, HVAC and waste specifically). I have already talked about that in the article the 3-major-reasons-why-vertical-farms-like-drones-will-fail on my site.
When you make a comparison between the various systems, the most profitable system is DWC and the least profitable vertical farming. Of the growers of the five most cultivated crops, 100% reported that floriculture is profitable, in addition to 67% of tomato growers and 60% of microgreens growers. If we look at profitable activities only, the most profitable operation is leafy vegetables based on hydroponics in a greenhouse, with a profit margin of 46%. When you only analyze the income, and both profitable and non-profitable activities, you see that hydroponics and cash activities both had an average turnover of approximately € 183 per m2. Despite the fact that it does not give the highest yield per square meter of all operations, growing leafy vegetables in a hydroponics system in a greenhouse does have one of the lowest operating costs per m2.
The biggest difference between vertical farms and greenhouses from a cost perspective is of course the total expenditure (in contrast to the breakdown). The chart “Financials – Profitable Operations” shows the operating costs of a profitable cash facility (all crops, all systems) at € 127.55 per m2. For comparison: profitable vertical farms (all crops, all systems) spent € 341.32 per m2. With 50% of labor costs, a one-hectare greenhouse grower would cost roughly € 256,000 and a vertical farmer € 684,000.
There is, of course, much more in the report. But what is striking about this vertical farming is that the growers believe that technology can not only generate extra income, but also reduce production costs. Technology is everything and is the main goal of the growers. In fact, 19% of growers believe that technology can save them more than € 17,000 per year. Here is the total lack of the realization that it is food. It has become a makeable product. The question of whether it is healthy and what the nutrient composition of the vegetables is unfortunately not included in the report. But 7% indicates that they want to improve quality.
Efficiency and technology cost a lot and given this report there are only a few options in the Netherlands that would make vertical farming profitable.
For more information go to www.agrilyst.com. CEO Allison Kopf
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© Ed van der Post