CANADA MISSING OUT ON INDOOR FARMING
Flourishing sector seen as urgent if climate catastrophes get worse
There's a popular vision among academics and executives in the agriculture world that involves windowless warehouses outside every city, each growing commercial amounts of fruit and vegetables indoors with LED lamps. The facilities are far smaller than traditional farm fields, but collectively pump out much higher volumes of produce, all without the assistance of sun or rain.
It apparently isn't so bizarre to imagine a Canadian supermarket stocked, in the dead of winter, with fresh produce grown locally at a vertical farm, rather than thousands of kilometres away in a field in California or Mexico.
Many industry experts say this vision of a thriving controlled environment agriculture sector, as it's formally known, is not only a nice idea, but necessary, especially if climate catastrophes start to pose more and more challenges for field crops. Some experts are even warning that weening Canada off imported produce is a matter of national security, given recent events such as the extreme drought this summer that has devastated crops in California, which the country has historically depended on for billions-of-dollars worth of fruits and vegetables each year.
Despite the stakes, however, the growth of Canada's nascent indoor farming sector is lagging behind other countries, amid concerns that major investors and governments here haven't fully bought into the promise of vertical farming, or the technology that enables it.
Without that support, the sector might not become the sort of global powerhouse that could export indoor-farming hardware, software and intellectual property.
The market for closed environment agriculture is a potentially lucrative one, with revenue expected to exceed US$170 billion in 2025, up from roughly US$74.5 billion last year, according to a report from KD Market Insights.
“The trick is, if you're doing this right, you're not just selling the lettuce, you can also sell the technology all over the world,” said Lenore Newman, director of the Food and Agriculture Institute at the University of the Fraser Valley in Abbotsford, B.C.
Her “holy grail” has Canadian companies developing indoor farming systems so successfully that they can be marketed as a farm in a box — the sort of thing you “put on a truck, drop off and start growing.”
It isn't as simple as it sounds. Vertical farming — the most buzzed-about method in controlled environment agriculture — features warehouses stacked several storeys high, with irrigation and lighting systems, and robots that pick and transport crops from one area to another.
But the company that manages to get all that right will have more than a farm in a box, Newman said. It will be able to collect data from its growing list of client operations that will allow it to further perfect its formulas.
“Every single plant is being monitored,” she said. “The data itself is incredibly valuable.”
For example, if a particular strawberry plant is outproducing others due to a slight change in conditions, a company can use that to its advantage. The optimal number of plants and stacks, the most effective configuration of LED lamps, and the recipes for soil and hydroponic liquid can all become precious IP.
Vancouver-based CubicFarm Systems Corp. is one of Canada's leading indoor agriculture technology firms, selling a system that grows salad greens, and another one that grows livestock feed. Chief executive Dave Dinesen said a prospective indoor farmer would need access to roughly $25 million in capital and about five acres of space for one of the company's systems.
Even with enough capital and space, farmers can still run into problems. One of the more glaring signs that the country isn't keeping up with the pace of change in agriculture has to do with zoning laws.
It makes the most sense to build such facilities on agricultural land, because that's the cheapest kind — and one of the main goals is to compete with lower-priced field-grown crops. But some jurisdictions don't recognize indoor farming as, well, farming, so getting approval to put a facility on land zoned for agriculture can be complicated.
“There's often not a box to tick for permits,” Dinesen said. “Why aren't we going all-in on localizing as much food production as possible, with policy, grants, incentives?”
Indoor farm operators can build facilities on more expensive industrial land, which might make sense to some, but Dinesen said the idea of a farm in the middle of an urban area just isn't viable.
“It's another one of these romantic notions that has to be dispelled,” he said. “This is still farming. You want to find the least expensive agricultural land, put up buildings for as low a cost as possible.”
Cubic Farm's systems are also getting larger and larger, so it makes sense to build them near a main distribution hub outside a city to further cut down on transport.
“I don't think the solution is hundreds of people having small farms, selling their stuff at a farmers' market. That's romantic. It's not going to replace California. Never,” Dinesen said. “Large retail groups, large food service, they don't want 1,000 suppliers for their salad products. They want five. That's what we're focused on.”
Meanwhile, Canada is lagging behind the leaders in this space — including the Netherlands, Israel, the United States and Singapore — which have helped grow their domestic indoor agricultural tech sectors using a raft of grants and incentives.
To be sure, some big investments into the next generation of vertical farming have been made in Canada, including $65 million for a commercial vertical farming company by French fry empire McCain Foods Ltd. Quebec has also invested in the sector as part of its push to become more self-sufficient in food production, including earmarking $91 million to double the volume of its indoor production of fruit and vegetables.
The federal agriculture department said some support is already provided for indoor farming through several funding programs for the development of agricultural innovation and clean energy technology. The feds are also involved in a pilot project that is operating a vertical farm in Nunavut.
In the private sector, there has been a “tsunami of investment capital” in North American agtech, said Steve Hansen, an analyst at Raymond James Ltd. who follows the industry.
But large, traditional lenders haven't been as forthcoming with seed money to get these operations and tech developers on their feet, mostly because the farms aren't profitable yet.
High energy costs, along with the cost of the facilities themselves, mean the farms have to reach a significant scale before they start to become economically viable.
“There's a lot of skepticism about whether that's going to be capital well spent,” Hansen said. “It's still very difficult for some of these groups to get financing.”
That's a problem considering how expensive the farms are to build. Canadian companies also haven't seen a high level of coordinated government support, and often don't get the sort of funding afforded to traditional farmers, Hansen said.
One of the reasons for the slow start could be that farmers, tech developers, investors, academics, bankers and government agencies aren't mingling in the same place. Without that healthy “ecosystem,” as Hansen calls it — where players at different ends of the business know each other and work together — it's harder for a young industry to mature.
“That's still the piece that I think is missing a bit,” he said.