The benefits of flavour and freshness to consumers along with benefits to the environment of both low water use/unit of crop yield and with zero runoff of inputs for indoor-grown crops have been much touted. Now the industry is beginning to mature with an increase in the profitability of established indoor farms. Stakeholders in the indoor agriculture industry, 550 people from more than 300 organizations, gathered for the Indoor Ag.con conference, May 2-3, to explore trends and share solutions to commercial barriers in this rapidly growing sector of agriculture. Along with a rise in profitability, other economics trends for indoor farming explored by the conference included:
- Falling costs for technology, in particular, LED lighting
- Automation and artificial intelligence to improve operations, increase yields, and cut costs
- Plant genomics and attention to breeding varieties that best suit indoor cultivation, delivering value in better nutrition, better taste, and higher profits for indoor farms
- Access to capital (through products like those pioneered by Contain, Inc) focused on the indoor agriculture, as the industry becomes more mainstream, will enable larger more efficient farms.
These trends were highlighted by the conference organizers, the founders of NewBean Capital and more recently of Contain, a finance company focused exclusively on indoor agriculture, in an April blog posting and reported in greater depth in a white paper “Indoor Farm Economics” (provided to conference participants in hard copy and to be available for purchase in the near future).
The range of indoor crops both currently in production and those that are likely to come into production in the near to mid-term open up new opportunities to meet consumer demands for fresh local produce and to provide new products for health and well-being. Regional and national grocery chains, restaurants and foodservice operations in large corporations and healthcare facilities continue to be the major large-scale market opportunities for indoor agriculture. For the market, indoor farms currently produce:
- Leafy greens (the crops that launched the industry)
and crops under intense R&D for future commercial production include:
- Nutraceutical plants
- Pharmaceutical plants
Under the philosophy of “doing good while doing well”, two exciting visions are offered by indoor farmers. The first vision, one enabled by efficient production, lower costs, widespread access, and increased shelf-life from produce harvested close to where consumers make purchases in urban areas, is that of expanding access to fresh, tasty, nutritious fruits and vegetables from just the elite and “trendy” urban dwellers to the general population. Research is showing that indoor production cannot keep up with demand, validating this business opportunity. The second vision is that of growing new crops- those genetically modified or selected from genomic science and traditional breeding for plants that produce specific compounds including vaccines or naturally occurring nutraceutical compounds targeting specific diseases and/or health benefits.
While indoor agriculture has the potential to produce safer fresh produce with fewer harmful chemical inputs than traditional outdoor farms, indoor agriculture is not immune from the need to make safety a focus of continued effort and improvement. Established indoor growers are keenly aware of and caution against the risk of arrogance and avoidance. Not addressing food safety through company cultures, operations, and available technologies could result in a major outbreak of contaminated food. The cost in brand reputation and out of pocket costs from a major food contamination outbreak to a single indoor grower could destroy the entire young industry.
Several potential future impacts of indoor agriculture are worth following. First, the indoor agriculture industry is looking to contribute to the demand for technologies and operating models that will enable tracking and tracing of food from farm to consumers’ plates to build consumer trust and ensure pleasurable sensory experiences. Second, this small but growing industry holds positive environmental impact as an industry-wide value and is looking to the packaging industry to develop new renewable, sustainable packaging options. Third, indoor farms with their short distribution chains combined with data analytics and effective operations should reduce waste of perishable fresh produce driving toward production that approaches “just in time” production seen in other industries.
While challenges abound, indoor farmers and the entrepreneurs in this emerging agriculture sector appear ready and able to meet these challenges to grow and mature a mainstream industry.