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Indoor farming: earning green from leafy greens


California produces more than a third of the vegetables and three-quarters of the fruits grown in the US. The state also happens to be prone to droughts and wildfires. As extreme weather events increase in frequency everywhere, investors believe indoor farming can offer an answer.

Last year was a record funding year for the sector. Over $1.7bn was raised in venture capital across 99 deals, according to PitchBook. That tops the $1.2bn harvested in 2020 and is more than twice the amount recorded in 2019.

Most recently Gotham Greens, a New York-based greenhouse grower of salad greens and herbs, raised $310mn.

Lex charts showing indoor farming venture capital activity – Deal value ($bn), Number of deals Global food-miles emissions – % of total

In the US, indoor farming companies divide largely into two groups: vertical farms and greenhouse farms. Both seek to decentralise the industry. Instead of trucking food from distant states or countries to supermarket shelves, indoor farmers want to grow it near cities where the consumers are, limiting food miles and carbon emissions.

Cut out transport and produce can be bred more for flavour rather than longer storage, while reducing food waste. Growing hydroponically — without soil — indoors reduces the need for pesticides. This process uses very little water, with no reliance on seasons.

In vertical farming, crops are grown indoors in stacked layers. This makes them dependent on artificial lighting and a controlled climate environment. Critics have questioned whether their high power requirements negate the carbon footprint advantage of fewer food miles.

Here greenhouses, well-established in Europe, have the advantage. They have lower energy needs since they use the sun. At Gotham Greens, co-founder Viraj Puri says energy is less than 10 per cent of its cost base.

Even so, high tech greenhouses and vertical farms are pricey to build. For now they can only grow a limited array of crops — mainly leafy greens and herbs.

To sustain investor appetite, companies will need to show they can sell enough salad to be viable. Appharvest, a high-tech greenhouse venture with a large facility in Kentucky, went public in February 2021 via a special acquisition company merger. Its shares have since fallen 95 per cent. AeroFarms called off a Spac deal last October that would have valued it at $1.2bn.

Indoor farming will not replace outdoor farming soon (try growing corn or soyabeans indoors). But it should not be an either/or trade-off. Anything which helps diversify our food supply risks is a good thing.

The Lex team is interested in hearing more from readers. Do you think indoor farms will improve food security or carbon footprints? Please tell us what you think in the comments section below

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