Why Vertical Farms WORLDWIDE Are FAILING!

Summary

Vertical farming, once hailed as a sustainable solution for feeding a growing population with less water and land, is facing a crisis with numerous startups going bankrupt. Despite the high yields and reduced water usage, the industry struggles with high labor and capital costs, making it uncompetitive against traditional farming. The script explores the reasons behind the failure of this technology and its potential future in regions with abundant renewable energy.

Takeaways

• 💡 Vertical farming was once seen as a revolutionary solution to feeding a growing global population with less water and land.
• 📉 Despite the optimism, numerous vertical farming startups have filed for bankruptcy, including those in the US, Europe, and the Middle East.
• 💰 Over $2 billion were invested in vertical farms in 2022, but by 2023, venture capital investment plummeted to just $275 million, indicating a significant loss of confidence in the industry.
• 🌱 The concept of vertical farming involves growing crops in stacked layers within a controlled environment, using hydroponics or aeroponics, and LED lighting to replace sunlight.
• 🌿 Vertical farms promise benefits such as higher crop yields, reduced water use, year-round production, and minimized pesticide use due to controlled environments.
• 🚀 Some vertical farming companies, like Infarm and Bowery Farms, achieved 'unicorn' status, with valuations exceeding $1 billion, sparking excitement in the industry.
• 📉 The high costs of labor, equipment, and energy for LED lighting have made profitability a challenge for vertical farms, even with higher yields.
• 🌍 The industry's reliance on the proximity to customers and sustainability did not translate into lower costs that could compete with traditional farming in regions with abundant sunlight and lower labor costs.
• 🛠 The high initial investment and ongoing maintenance costs for vertical farms, including specialized equipment and sensors, have contributed to financial strain.
• 🌞 Vertical farms face the challenge of competing with traditional farming that utilizes free sunlight, which raises questions about the economic viability of artificial lighting.
• 🌱 While many companies are struggling, the vertical farming industry as a whole is still growing, albeit at a slower pace, with a compound annual growth rate of about 25%.

Q & A

What was the initial promise of vertical farming?

Vertical farming was initially seen as a solution to feed an ever-increasing world population with less water and by using less land through vertical stacking of crops.

Why did vertical farms start to fail in 2024?

Vertical farms began to fail due to various challenges including high operational costs, the need for skilled labor, and the high initial investment in equipment and technology.

How much investment was there in vertical farms in 2022?

Over $2 billion was invested in vertical farms in 2022.

What was the market value of the vertical farming industry by 2023?

The vertical farming market was worth over 5 billion by 2023.

What are the key benefits of vertical farming that were widely publicized?

The key benefits included better crop yields, reduction in water use by up to 90% or more, year-round production, land use reduction, minimized use of pesticides, and the potential for high automation.

Which company was the first unicorn vertical farming startup?

Infarm, a German company founded in 2013, was the first unicorn vertical farming startup.

Why did venture capital investment in vertical farming drop significantly in 2023?

The drop in investment was due to the realization that vertical farming was not as profitable as initially thought, with high costs and operational challenges becoming apparent.

What are the main operational costs in vertical farming?

The main operational costs in vertical farming include labor, capital expenses for equipment and technology, and electricity for running LED lights and other systems.

How does the cost of producing a pound of lettuce in a vertical farm compare to traditional farming?

Producing a pound of lettuce in a vertical farm costs six times more than in a traditional open field farm.

What is the current state of the vertical farming industry despite the bankruptcies?

Despite the bankruptcies, the vertical farming industry is still growing with a compound annual growth rate of about 25%, and companies are relocating to areas with abundant renewable energy.

What is the potential future for vertical farming if costs are reduced and automation is improved?

If costs are reduced and automation is improved, vertical farming could become more competitive and viable, especially in areas with limited land or unfavorable growing conditions.

Outlines

00:00

🌱 The Rise and Fall of Vertical Farming

The script discusses the concept of vertical farming as a solution to feeding a growing global population with less water and land. It highlights the initial enthusiasm and investment in vertical farming, with over $2 billion invested in 2022 and the market value exceeding $5 billion. The narrative then shifts to the reality of 2024, where many vertical farms are failing and going bankrupt. The video aims to explore the reasons behind this downturn, mentioning the initial success stories like Infarm and Bowery Farms, and the benefits of vertical farming such as higher crop yields, reduced water usage, and year-round production. The script also touches on the issue of news bias and the use of Ground News as a tool for unbiased research.

05:02

📉 The Downturn in Vertical Farming Investments

This paragraph delves into the financial aspect of vertical farming, revealing a significant drop in venture capital investment from $2.1 billion in 2022 to just $275 million in 2023. It outlines the consequences of this decline, with major players in the industry such as Fifth Season, Upward Farms, AeroFarms, and others filing for bankruptcy. The script explains the high operational costs of vertical farming, including the need for high-tech equipment, skilled labor, and the challenges of pest control in a closed environment. It also points out the limited crop variety that vertical farms can produce, primarily leafy greens, questioning their ability to contribute significantly to global food supply.

10:06

💡 The Economics of Vertical Farming and its Challenges

The final paragraph focuses on the economic challenges of vertical farming, comparing the costs of producing lettuce in vertical farms versus traditional open-field farms. It details the high labor and capital expenses associated with vertical farming, including the costs of equipment, sensors, and maintenance. The script reveals that despite the high productivity of vertical farms, the costs of production are significantly higher than traditional farming, making it difficult for vertical farms to compete in the market. It concludes by suggesting that vertical farming may still have potential in regions with abundant renewable energy and where traditional farming is less feasible, and hints at the possibility of the industry's growth if costs can be reduced through further automation and economies of scale.

Keywords

💡Vertical Farms

Vertical farms refer to agricultural operations that grow crops vertically in stacked layers, often within a controlled environment. This concept is central to the video's theme, which explores the rise and challenges of vertical farming as a solution to feeding a growing population with less land and water. The script discusses the bankruptcy of several vertical farm startups, indicating the difficulties in implementing this technology on a large scale.

💡Bankruptcy

Bankruptcy, as mentioned in the script, is a legal status where a company is unable to repay its outstanding debts. The video highlights multiple vertical farming companies that have filed for Chapter 11 bankruptcy, illustrating the financial struggles within the vertical farming industry despite its promising concept.

💡Sustainability

Sustainability in the context of the video relates to farming practices that can be maintained over the long term without depleting resources or causing environmental harm. Vertical farming was initially seen as a sustainable solution due to its potential for reduced water use and year-round production, but the script reveals that the high costs and operational challenges have complicated this vision.

💡Venture Capital

Venture capital is funding provided by investors to startups with high growth potential. The script describes how venture capital firms invested heavily in vertical farming startups, expecting them to become the next big thing in agriculture. However, the subsequent drop in investment signifies a loss of confidence in the industry's viability.

💡Water Use Reduction

The script emphasizes that vertical farms can significantly reduce water usage by up to 90% or more compared to traditional farming methods. This is achieved through controlled environments and hydroponic or aeroponic systems, which deliver nutrients directly to plant roots, illustrating the environmental benefits that vertical farming aims to provide.

💡Land Use Reduction

Land use reduction is a key benefit of vertical farming, as it allows for the production of crops using a fraction of the land compared to traditional farming. The script mentions this as an advantage, especially for urban areas, where space is limited, and the potential to grow food closer to consumers reduces the need for transportation and associated emissions.

💡Automation

Automation in vertical farming refers to the use of technology to control and monitor the growing environment without manual labor. The script suggests that vertical farms have the potential to be highly automated, which could increase efficiency and reduce labor costs, but also implies that the current level of automation may not be sufficient to make the farms profitable.

💡LED Lighting

LED lighting is crucial in vertical farming as it replaces natural sunlight with artificial light that can be precisely controlled to optimize plant growth. The script explains that vertical farms use special blue and red LEDs to provide the light spectrum that plants need, but also points out the high energy costs associated with this technology.

💡Crop Yields

Crop yields refer to the amount of produce that can be harvested from a given area. The video script highlights that vertical farms can have multiple times higher output than regular farms, demonstrating the potential productivity gains of vertical farming. However, it also questions the profitability of such high yields when considering the costs involved.

💡Labor Costs

Labor costs are a significant expense in vertical farming, as the script indicates that they contribute almost half of the overall cost. This is due to the need for skilled workers with knowledge of plant science, engineering, and controlled environment agriculture, which is more expensive than traditional farming labor.

💡Capital Expenses

Capital expenses in the context of vertical farming include the high initial investment in equipment, sensors, and systems necessary for the operation of the farms. The script points out that these expenses, along with maintenance costs, contribute to the high cost of production in vertical farms, making it difficult to compete with traditional agriculture.

Highlights

Vertical farms, once seen as a solution for feeding a growing population with less water and land, are facing bankruptcy.

Over $2 billion was invested in vertical farms in 2022, with the market valued at over $5 billion by 2023.

Vertical farming has been popular since the mid-1990s, with a significant increase in well-funded companies from 100 in 2012 to over 2,000 in the US alone by 2023.

Infarm and Bowery farming were the first two vertical farming startups to achieve unicorn status, with valuations over $1 billion.

Vertical farms promise better crop yields, reduced water use by up to 90%, year-round production, and minimized land use.

Vertical farms control the environment to reduce pesticide use and can be highly automated.

Ground News is a tool used for unbiased research, providing coverage details, bias distribution, and publication factuality.

Investment in vertical farming dropped by almost 90% from 2022 to 2023, leading to a market collapse.

Major vertical farming companies like Fifth Season, Upward Farms, and AeroFarms faced bankruptcy, signaling industry-wide issues.

The high cost of labor and capital expenses, including equipment and maintenance, make vertical farming less profitable than traditional farming.

Vertical farms are more prone to pest and disease due to closed-loop systems, which can turn their controlled environment into a risk.

The limited variety of crops, mostly leafy greens, from vertical farms questions their ability to contribute significantly to global food supply.

The cost of producing a pound of lettuce in a vertical farm is significantly higher than in traditional open-field farming.

Vertical farming's high labor and capital costs, along with depreciation of assets, make it hard to compete with traditional farming.

Despite setbacks, the vertical farming industry is still growing with a compound annual growth rate of about 25%.

Relocation to hot and arid climates with access to renewable energy, like in the Middle East, offers potential for vertical farming's future.

The success of vertical farming may depend on further automation and reduced costs through economies of scale.

Transcripts

vertical Farms were supposed to be the answer  another vertical Farm files for bankruptcy  

vertical Farm startup files for chapter 11  bankruptcy bankrupt a way of feeding a ever  

increasing world population and do it all with  less water and by stacking vertically grow more  

produce on less acreage it all sounds like a  brilliant idea and yet fast forward to 2024  

and vertical Farm after vertical Farm is failing  and going bankrupt so what happened this sounds  

s like such a good idea on paper but clearly  something's not working so we need to get to  

the bottom of what exactly is going on cuz  this one surprised me and there's actually  

a little bit more to the story than I realized so  stick around till the end I'm Ricky and this tuid

adventure this video is sponsored by ground news  over $2 billion were invested in vertical farms  

in 2022 with hundreds of startups and vertical  Farms promising to make farming possible in large  

Urban hubs by 2023 the vertical farming Market was  already worth over 5 billion seemingly with every  

Venture Capital firm around the world with fear  of missing out looking to invest in the next big  

vertical farming unicorn this story actually goes  back further than you might think vertical Farms  

have been popular since the mid 1990s in 20120  there were only about 100 well-funded vertical  

farming companies but fast forward to 2023 and  there were over 2,000 of them in the us alone  

and many more in Europe Asia and the Middle East  some of these companies were on a rocket SHP ride  

to reaching unicorn status which is basically  a private company startup that's worth over a  

billion dollars for example the German company  infarm founded in 2013 was the first unicorn  

vertical farming startup raising over $600 million  and reaching a valuation of over 1 billion in  

2021 bowy farming was the second unicorn worth  around $2.3 billion in 2021 there was real buzz  

in the air and the excitement was palpable people  actually thought that Silicon Valley might have  

finally solved the farming sustainability problem  the benefits of vertical farming were widely  

publicized better crop yields for example where  vertical Farms could produce multiple times higher  

output than regular Farms or even Greenhouse  farming another big key point was the reduction  

in water use up to 90% or more and this is really  really important because depending on where you're  

trying to build this Farm water might become  increasingly scarce and of course there was year-  

round production where it didn't really matter  what season it was or what the weather was like  

outside you could grow your crops all the time  another big thing was land use reduction using  

up just a fraction of the land and by building  upward you could have similar outputs on much less

land this really mattered because this allowed  you to grow food in more densely populated urban  

areas as opposed to from Halfway Around the World  it also actually minimize the use of pesticides  

because you can control the environment and it  was indoors you wouldn't have as much bugs and  

bacteria to contend with and finally vertical  Farms have the potential at least to be highly  

automated by the way have you ever wondered how  we do our research for our videos just put up on  

Google right wrong our news is broken because  our political views determine which version of  

the story you hear which is crazy and why my  team and I research all of our stories using  

ground news check this out this is what I found  when researching a recent video on Boeing and  

the 737 Max using ground news you can quickly see  who's covering this story which way they lean and  

see how there's uneven coverage and a blind  spot for left leaning Publications with this  

particular story you'll see amazing metrics  too like coverage details bias distribution  

publication factuality and ownership it's  like having superpowers to cut through the  

news headlines and if you really want to see the  power of ground news try pulling up some various  

presidential headlines right now so if you want  to get to the truth behind the headlines use my  

link ground. news/ Tobit and you'll get 30%  off their unlimited access Vantage plan for  

just about $5 a month huge thanks to ground news  and you now back to the show that was the promise  

but the reality unfortunately is starting to  sink in in 2023 impatient investors started  

dropping out of the market and we'll get to why  they did in a minute venture capital investment  

fell from 2.1 billion in the first 3 qus of 2022  to just 275 million in the same period in 2023  

a drop of almost 90% but why does that matter  I mean in most Industries yes less investment  

means things will take longer there's less growth  but it doesn't mean that companies will just come  

crashing down however that's precisely what's  happening with the vertical farming industry  

fifth season a robo farming company was among the  first to go Belly Up in late 2022 here's how the  

former VP at fth season Chris ceni explains what  happened to the company we had Tech investors in  

Silicon Valley and they had expectations of how  fast things were going to come out everybody was  

pulling back so the funding was not readily  available also the burn in vertical farming  

is very high but that was only the beginning all  major players were failing in March 2023 upward  

Farms which had raised almost $150 million and had  broken ground on a new 250,000 ft vertical Farm in  

Pennsylvania in 2022 announced it would seize all  vertical farming operations also New Jersey's Aero  

Farms kuy's app Harvest and planted Detroit all  filed for bankruptcy in farm the German unicorn  

also closed operations in Denmark the UK France  the Netherlands Germany completely exiting the  

European market Kera the company with the most  vertical farms around the world also filed for  

chapter 11 bankruptcy in April and one of the  biggest of all Bowery Farms took a heavy blow  

to its valuation while they didn't file for  bankruptcy the company that was valued at 2.3  

billion in 2021 was written down to just under  350 Million by the end of 2023 and had to do two  

massive layoffs to stay afloat that really sucks  this is a technology that I was really rooting  

for but to better understand why this is happening  we should probably learn a little bit more about  

vertical farming imagine growing plants in a  sealed skyscraper or building instead of a field  

that's the essence of vertical farming in vertical  farming crops grow vertically and stack trays or  

containers maximizing the use of surface area  plants don't need soil they get their nutrients  

from a special water solution delivered directly  to the roots by Hydroponics or aeroponic but the  

key is lighting we replace regular sunlight with  special LED lights that mimic the natural light  

spectrum plants need to grow lighting in vertical  Farms takes advantage of a certain principle that  

plants don't actually use all the light from the  sun it's only special wavelengths so vertical  

Farms use special LEDs that produce light in two  colors that plants love blue LEDs provide blue  

light that help plants grow while red LEDs promote  flowering and fruiting by adjusting the amount of  

red and blue light farmers can optimize plant  growth depending on the crop that's that's why  

whenever you see a picture of a vertical Farm they  always look sort of purple combination of both  

finally vertical Farms also closely Monitor and  control temperature humidity and air circulation  

to create the perfect environment for each crop  regardless of season or what's happening outside  

after looking at the technology and comparing  it to normal agriculture I noticed several clear  

cons you need a lot more high-tech equipment and  sensors which are just more expensive up front it  

seems of silly to buy high-tech LEDs in red and  blue to mimic sunlight when we could just use the  

Sun for free and operating a vertical Farm also  requires much more skilled workers with knowledge  

of plant science engineering and controlled  environment agriculture not only are these  

skills harder to find but they also need much  higher labor cost compared to hiring some field  

hands to work a farm and after a bit of digging I  also discovered that vertical Farms are much more  

prone to certain risk like Pest and disease since  both the water and the air are circulated in a  

closed loop system so the very benefit that they  were trying to go for controlling the environment  

can very quickly turn on you as well also have you  noticed that practically all the stuff that comes  

out of a vertical Farm is lettuce basil and other  leafy greens how on Earth are we going to feed the  

world with nothing but green salad where are the  fruits and vegetables at well that has to do with  

vertical Farm's biggest Achilles [Music] he let's  use vertical farming's most beloved and popular  

crop as an example lettuce this table shows an  average yield of lettuce in different types of  

farms you can see that the vertical Farms have  much higher productivity than traditional farming  

a small container vertical Farm can yield 14 lb of  lettuce per square foot as much as 33 times more  

than the industrial open field farming and over  20 times more than a high hopon a greenhouse this  

doesn't just work with lettuce it happens with  most other crops you can grow in a vertical farm  

so yes vertical Farms are way more productive than  normal Farms per square acre but that doesn't make  

them profitable there's more to the equation than  just growing more lettuce per acre of land what if  

you have no shortage of land then that doesn't  really matter right it comes down to the price  

of a head of lettuce no one's paying more for the  same Lettuce grown in a vertical farm and this is  

where it gets complicated because vertical Farms  have costs that traditional Farms don't how about  

electricity running all those LED lights in robot  24/7 so that's going to eat into your profit well  

here's what I found for a full year of vertical  farming notice that contrary to what I initially  

thought electricity doesn't make up most of the  cost it's less than 10% of the total cost of a  

head of lettuce the highest cost comes from labor  which as I mentioned before is more expensive than  

a normal Farm in this case contributes almost half  of the overall cost the second highest expense is  

capital expenses this comes from high initial  investment in everything from equipment sensors  

heat pumps AC heating cooling and the like and  then there's the maintenance of all that equipment  

and that works out to a cost of $526 per pound of  lettuce or about $4 per head and that's the price  

at the farm imagine what you might end up paying  at the supermarket take a minute to think about  

how much you paid for your last head of lettuce  let me know in the comments below this will depend  

on where you live obviously I'm guessing it's  less than 525 how about in a traditional open  

Field farm here's what the cost would look like  the numbers speak for themselves producing a pound  

of lettuce on a field cost six times less than  a vertical Farm yes you can argue that there are  

higher shipping cost because Farms are further  away from the people that need them but these  

Supply chains are super optim and add very little  to the actual end price of lettuce vertical Farm's  

problem isn't that we're using LEDs instead of  free sunlight it's that labor and capital costs  

are way too high in farms you don't even have  to worry about how much your land losing value  

will cost you every year because it doesn't lose  value it's Farmland in a vertical Farm not only  

do you have to spend hundreds sometimes millions  of dollars to set up a vertical Farm but that farm  

loses value over time as your assets and Equipment  depreciate and if you're wondering what is a head  

of lettuce or a pound of lettuce cost here in  the US about $260 and that's to the consumer  

which means that the wholesale price that the  farmers are selling it at is 63 to126 per pound  

and that's why these Farms just cannot compete  especially if where they're established have high  

labor cost easy access to normal Farm produce and  high electricity prices which describes a lot of  

the European markets that this was targeted for  ultimately the entire industry was predicated on  

a bet that vertical Farms established right near  customers with higher levels of sustainability  

and better Water Management which is all true  could produce a product that was cheaper than  

a developing Nation with copious amounts of  sunshine and Rain normally and the cost of  

shipping it and that gamble just didn't pay off  but there is a Silver Lining most large vertical  

farming companies are relocating in hot and Aid  climates where there's a lot of renewable energy  

like in the Middle East this is what's making  huge construction projects like Saudi Arabia's  

line possible how else do you feed millions of  people in a linear City also while many companies  

are going under the vertical farming industry at  large is actually still growing with a compound  

annual growth rate of about 25% if we figure  out how to further automate these Farms and  

the hardware and prices go down as economies of  scale are reached could we actually see this work  

and the answer is kind of maybe ultimately this  is still a wager between humans and Engineering  

versus mother nature and the Sun and where you  fall kind of depends upon your outlook but if  

you thought this was interesting you're not  going to believe this video got to watch next