Investors seed indoor farms as virus disrupts food supplies

Investors used to brush off Amin Jadavji's pitch to buy Elevate Farms' vertical growing technology and produce stacks of leafy greens indoors with artificial light. "They would say, 'This is great, but it sounds like a science experiment,'" said Jadavji, CEO of Toronto-based Elevate.

Now, indoor farms are positioning themselves as one of the solutions to pandemic-induced disruptions to the harvesting, shipping, and sale of food. "It's helped us change the narrative," said Jadavji, whose company runs a vertical farm in Ontario, and is building others in New York and New Zealand.

Proponents, including the U.S.

Department of Agriculture (USDA), say urban farming increases food security at a time of rising inflation and limited global supplies.

North American produce output is concentrated in Mexico and the U.S. Southwest, including California, which is prone to wildfires and other severe weather. Climate-change concerns are also accelerating investments, including by agribusiness giant Bayer AG, into multi-storey vertical farms or greenhouses the size of 50 football fields.

They are enabling small North American companies like BrightFarms, AppHarvest and Elevate to bolster indoor production and compete with established players AeroFarms and Plenty, backed by Amazon.com Inc founder Jeff Bezos. But critics question the environmental cost of indoor farms' high power requirements.

Vertical farms grow leafy greens indoors in stacked layers or on walls of foliage inside of warehouses or shipping containers. They rely on artificial light, temperature control and growing systems with minimal soil that involve water or mist, instead of the vast tracts of land in traditional agriculture. Greenhouses can harness the sun's rays and have lower power requirements. Well-established in Asia and Europe, greenhouses are expanding in North America, using greater automation.

Investments in global indoor farms totaled $394 million in 2020, AgFunder research head Louisa Burwood-Taylor said. The average investment last year doubled in size, as large players including BrightFarms and Plenty raised fresh capital, she said.

A big funding acceleration lies ahead, after pandemic food disruptions - such as infections among migrant workers that harvest North American produce - raised concerns about supply disruptions, said Joe Crotty, director of corporate finance at investment bank KPMG, which advises vertical farms. "The real ramp-up is the next three to five years," Crotty said.

Vegetables grown in vertical farms or greenhouses are still just a fraction of overall production. U.S. sales of food crops grown under cover, including tomatoes, cucumbers and lettuce, amounted to 790 million pounds in 2019, up 50% from 2014, according to the USDA. California's outdoor head lettuce production alone was nearly four times larger, at 2.9 billion pounds.

USDA is seeking members for a new urban agriculture advisory committee to encourage indoor and other emerging farm practices. Bayer, one of the world's biggest seed developers, aims to provide the plant technology to expand vertical agriculture. In August, it teamed with Singapore sovereign fund Temasek to create Unfold, a California-based company, with $30 million in seed money.

Unfold says it is the first company focused on designing seeds for indoor lettuce, tomatoes, peppers, spinach and cucumbers, using Bayer germplasm, a plant's genetic material, said Chief Executive John Purcell. Their advances may include, for example, more compact plants and an increased breeding focus on quality, Purcell said.

Unfold hopes to make its first sales by early 2022, targeting existing farms, and start-ups in Singapore and the United Kingdom. Greenhouses are also expanding, touting higher yields than open-field farming.

AppHarvest, which grows tomatoes in a 60-acre greenhouse in Morehead, Kentucky, broke ground on two more in the state last year. The company aims to operate 12 facilities by 2025. Its greenhouses are positioned to reach 70% of the U.S. population within a day's drive, giving them a transportation edge over the southwest produce industry, said Chief Executive Jonathan Webb.