As agricultural technology advances, so does innovative vertical farming. Multi-million dollar vertical farms are popping up around the world and backed by substantial investment from billionaires.
But what if you don’t have access to millions of dollars to start your vertical farm?
The vertical costs of agriculture vary due to a variety of factors. When starting your own farm, you should have an idea of what it takes to spend money on it so that you can budget accordingly.
In vertical farming, crops are grown rather than developed, allowing farmers to grow more plants per square meter than traditional cultivation methods.
This article explains the factors that influence the vertical costs of agriculture.
System
The type of system you want to install for your farm requires your own equipment and materials. For example, aeroponic systems spraying plant roots with the nutrient solution do not require equipment such as aquaponic systems using live fish as fertilizer and vice versa.
Also, the level of technology used by your system has its own cost. Vertical farms that rely on artificial light for plant photosynthesis should take into account the efficiency of light sources, other features such as full-spectrum light or timers, and the number of lights needed.
Another technology consideration is whether you want Controlled Environment Agriculture (CEA) technology. With CEA technology, farmers can control aspects of the growing environment such as temperature and humidity. This allows the environment to be tailored to the optimal growing conditions of the plants.
However, the regulatory equipment required for CEA increases your vertical farming costs.
Start-up costs
The facility you choose for your business will largely determine your start-up costs. Larger operations require more of everything, and more money is needed for that. Not to mention the cost of the facility itself.
If you plan to start a small farm in a space you already own and pay for, eg B. an extra bedroom, a garage, or a storage container, the amenity will not cost too much.
Apart from the facility, the equipment will make up a large part of the vertical farming costs. Equipment includes lighting, CEA technology, pH tools, shelves, and any other equipment you may need for your specific system. For example, farmers on hydroponics will likely need water pumps and pipes.
Also, consider the quantity and quality of your devices. The more you need, the more expensive it will be. Besides, high-tech devices have a higher price.
Make sure you have a budget for the materials you will need to actually start planting. This includes growing media, nutrient solutions, and seeds. In aquaponics, consider the cost of fish and their food.
You may also need a permit to operate your farm, which may require you to pay a fee. Before you start, make sure you know the local zoning laws.
Operating Costs
Vertical farms spend a lot of money on energy, especially when artificial light is the only light source for the plants.
Small vertical farms spend an average of $ 3.45 per square foot on energy, while large vertical farms spend an average of $ 8.02 per square foot. Small farms are amenities that are less than 10,000 square feet, while large farms are anything bigger.
Energy costs also depend on the efficiency of the light bulbs.
Lamps with a higher efficiency produce more light with lower power consumption and cost less in the long run. However, they are usually offered at a higher upfront price.
Labor Is Another Recurring Vertical Agricultural Cost.
Even small farms need workers to get them going. The big question is whether you do it all yourself or hire someone else to do it. The salary and benefits you give your employees, as well as the number of employees you have, affect the amount you pay for the work.
Indoor vertical farms typically spend 56% of their operating budget on labor, about $ 20.78 per square foot. You also need to consider the cost of materials such as growing media, seeds, and nutrient solutions, which typically make up 11% of a vertical farm’s budget.
Regardless of your goals, don’t forget to plan the budget based on your system and start-up costs.
How To Start A Vertical Farming Business
Vertical farming is a technique where crops are grown in rows and columns that take up less space. This idea piques the interest of people who want to start a business in a small space. The fundamental opportunity lies in the hands of the entrepreneurs who founded the company. Vertical farming can be used in any location if work is done well indoors. This can be explained by learning the importance of site usage. To start this business on a large scale, you need architects, LEDs, and suitable software. In this researched article, we are going to discuss how to start a vertical farm business and what methods are available that you can use on that farm.
- Architects – Vertical farming is only possible if there is a planned interior, which in turn is needed for irrigation purposes. And that requires architects who specialize in garden interiors. Another option for anyone working in vertical farming is to work as an architect for vertical farming.
- LED – LED is a component used for vertical farming plant growth when the method is not related to hydroponics. Hence, people who run the LED lighting business have an opportunity in the vertical farming field.
- Software – The growth and quality of the crops being grown are monitored intermittently by special automated software programs as the business is running with massive investments. These software programs are used on the agricultural site by special software experts. Because of this work in vertical farming, the software can also be included in the possibilities of vertical farming.
Basic Requirements For Starting A Vertical Farming Business
Vertical farming is basically defined as farming in a vertical shape rather than the typical horizontal shape. The basic requirements of vertical farming differ according to the size of the business.
In this form of agriculture, the size of the agricultural area does not have to be taken into account. Even a small area on the patio would be enough.
Large companies or investments use high-tech machinery and factors to start vertical farming, while small investments require fewer goods to start.
First, discuss the need for small businesses, even at home. To start vertical farming at home, you will need a wall or a vertical level to start planting. These vertical levels can be equipped with tubs or small containers.
These containers are filled with sand, gravel, or even liquid. People who need much greater cost savings can use water bottles as containers. The most important point is a healthy, nutrient-rich plant or its fruits and vegetables.
This technique emphasizes less or no land use. Because of ground clearance, this method would make farming at home a lot easier.
Subsequently, agriculture is practiced at higher levels. This requires the use of high-tech machines and equipment. Here in this huge business, entrepreneurs are empowered to invest more in setup. The set-up costs are high due to the installation of high-quality pipes and tanks.
A large company cannot do all the work by one person, so work considerations should be considered when planning a large company. The number of employees is directly proportional to the size of the company. As mentioned earlier, the monitoring work is done by software, so an automated environment is required for large vertical farms.
Summary of requirements for vertical farming at home
- A significant area or patio to install small structures
- Containers or bottles for planting
- Correct watering methods
- The good light source for growth
- Periodic evaluation to ensure the standard growth rate
Summary of the requirements for vertical farming at an industrial level
- A large area
- Software program for growth tracking
- Staff to maintain the whole setup
- Architects to make the layout as profitable as possible
- Materials for building the vertical farm
- Air conditioning systems in the industry
- Narrow LED lights to stimulate growth
The above lists form the basis for vertical farming in the respective farm sizes. These requirements change depending on someone’s interest in a different type of establishment.
The Favorable Season For Vertical Farming
Vertical farming is not initially limited to a particular season. Whether it is a sunny day or a windy day, vertical farming is not bothered by large companies. This technique is used to breed plant species and the season changes accordingly.
Plants suitable for vertical farming
- Green salade
- Spinach
- Basil
- Tomatoes
- Chili Peppers
- Herbs
Apart from the crops mentioned above, several other crops can be grown in vertical farming. This is just a showcase from the rest. This is not intended to limit readership within the listed products.
Vertical Agricultural Processes
The processes for starting a vertical farm vary widely depending on the methods used. Anyone thinking of a commercial vertical farming business needs knowledge of the different farming methods. First, to discuss the meaning of each in simple terms.
Indoor vertical cultivation methods
- Aeroponics farming using mist sprayed on the roots
- Hydroponics with nutrient-rich liquids
- Aquaponics farming with the use of fish
Aeroponics agricultural method
Aeroponics is a method of spraying nutrient-rich water on the roots of partially mature plants.
This method starts with the fact that several partially grown plants can be hung over any medium (depending on what suits the entrepreneur’s financial background).
The mist sprayed on the roots of the plant replaces pure water and the whole process is carried out in a moisture-laden environment.
The sprayed nutrient acts directly on the roots of the plants and helps to store the vitamins and minerals to the maximum.
The roots are sprayed regularly to keep them dry.
The most important thing to consider is that this method of hanging the plantlets free from soil or other media allows the roots to survive in oxygen-rich environments.
Hydroponic culture method
This method is considered the easiest when we think about the steps involved. Just a few steps make up the whole process without complex functions.
The plants removed for agriculture are incorporated into any medium, but not into the soil. The choice of medium depends on the available space for agriculture and the layout or construction of the superstructure.
The medium can be anything, such as coir fiber, coir peat, sand, gravel, etc. The basic goal is to choose any medium that can replace the soil.
Once the medium has been selected, a plan must be made to decide the method by which nutrient water will reach the roots.
Hydroponics and aeroponics differ only in how nutrient-rich water is exposed at the roots. Simply put, instead of spraying it on the roots, the nutrient-enriched water is made available at the end of the roots by letting the plant hang on it.
And for this, the composition of the water should be clearly controlled if necessary. It is very important to check the water quality as the roots are always hanging in it. Any mistake in the nutrient content can affect growth.
Aquaponics agricultural method
The last method is aquaponics. Although this method falls under the techniques of aquaponics, it is not primarily used by many. It suffers from the drawback of double maintenance.
Plants are introduced into any porous medium above an adult fish body of water.
Fish excrete their waste in the form of ammonia and nitrate, which serve as nutrients for the roots.
The plant absorbs the nutrients, ie the waste products, and thus purifies the water.
Harvest
Harvest takes place as soon as the plant has reached full growth or maturity.
In the indoor farm, the plant parts are chopped with all available cutting devices.
In commercial farming, special machines are used to cut them and speed up the work because the worked area is huge.
Business Opportunity
Then comes the sales portion of the plants produced. More than the growth process, the sales process is important, because it means the end of the whole game – that’s the profits made.
One can easily sell the harvested plants in the available market or use them for their own purposes if it is an in-house, smaller, space-covered agriculture.
On the other hand, when it comes to sales, commercial farming doesn’t function like home farming. A perfect study is required to find the areas where post-production cost savings are possible.
Packaging and transportation should be made clear with the least investment.
Profits must be calculated with a reasonable margin that allows the entrepreneur to provide money for further production.
After examining both the situation of the company and market demand, an appropriate pricing methodology should be used.
Use the following methods to sell your product
- Start your own branded production unit.
- Delivery to other sellers without emphasizing the brand.
- Sell online on Amazon, eBay.
- Working with supermarkets or companies.
- Supply from the city’s central market.
- Profit margin in vertical farming activities
The profits made depend entirely on production costs and a sensible pricing policy. Two major costs to consider are fixed and variable.
Fixed costs are the amount spent on fixed assets such as construction, infrastructure, layout costs, and machines installed.
Variable costs are the money that is broken down into labor costs, raw materials, other costs, transport, and packaging.
Increase profits
The profit can be made slightly higher than normal by taking on several things such as:
- Use of aeroponics for less water consumption.
- Control systems to regulate the temperature of the standard growth.
- Highly profitable layout without the waste of just a square foot.
- Good maintenance to prevent work from being interrupted by repairs.
- Combination of aeroponics and hydroponics for more productivity.
- Multiple units in one pack to slightly reduce packaging costs.
Elimination of high-quality containers, as these perishable goods do not require long-term residence in the used containers.
Plans For Profit In This Business
As mentioned earlier, the profits made are entirely in the hands of smart planning. For example, a 1,000 square foot person can begin vertical farming by placing the media horizontally on top of each other. He constantly increases the number of rows on top of each other. This increases maintenance costs by installing more machines for harvesting purposes. So in this case it is either a loss or a bad profit.
Another case is that a 500 square foot person would wisely layout the layout by stacking four rows on top of each other and reducing the footprint, maximizing that for the growing area. The tools used here are not complex and the production is also high.
Demand
Market demand for the product is one factor to consider when setting the price. A product with less demand at a very high price will not pave the way for a profitable business.
Big profits can be made if the product is rare for that particular area. For example, mint leaves are rare in places like America, Canada, and a few other countries. Therefore, growing these products can make the price high because it is needy there.
The Last Phase Of The Cycle
Plants harvested after the sale must also be left on the farm. Planting for the first time, plants are bought that are not invested enough. However, for the next routine, the source for planting must be the company itself. For one model, salads are types that grow even after being cut. The rest of the unsold plants should be used for the next plant set.
Nutrients must be reconstituted for different types of plants.
The installation must undergo a verification process before starting the next routine.
If necessary, the setup can be changed if the desired product is not achieved.
Are vertical start-up costs expensive for agriculture?
It doesn’t hide the fact that the initial capital required to design and build a vertical farm is significant. However, the long-term potential for future growth and the profits that will come from running this developing market make it an attractive proposition for those who have the resources to invest.
So far, leading investors such as Jeff Bezos (Amazon) and Eric Schmidt (Google) have invested heavily in this rapidly evolving technology – and several global private equity firms have joined them.
Although vertical start-up costs for agriculture are high, the long-term benefits are increasingly recognized and appreciated by everyone in the food supply chain, including retailers. Fortunately, advances in technology and innovation are constantly helping to reduce capital costs and ongoing overheads.
In the long run, this will make indoor vertical farming an attractive investment for any existing grower looking for a successful strategy to increase the volume of their high-quality product.
Currently, the vertical costs of agriculture are probably three to five times that of conventional free-range farming.
Level 1
Up to 500 square feet – costs between £ 1,000 and £ 1,200 per square meter: a vertical farm that relies on manual labor rather than technology for irrigation and harvesting.
Level 2
500m2 to 2,000m2 – Costs between £ 1,200 and £ 1,750 per m2 (depending on technology): A warehouse-style vertical farm that requires manual labor to sow and harvest. Irrigation and cultivation are automated to produce a ready-to-use product.
Level 3
2,000 m2 to 10,000 m2 or more – costs between £ 1,500 and £ 2,000 per m2 (depending on technology level): a fully automated vertical farm (with more stacks) that uses the latest technology to automatically seed, feed, and harvest the product. Minimal labor is required and all products are clean and ready to eat.
In this category, the need for automation to reduce operational costs and manage logistics becomes critical. As a result, the investment for automation corresponds to the processing capacity to be supplied. You don’t buy an expensive car and only use it for 20 minutes a day, so in this level 3, there is always a compromise between Capex and Opex and the ROI.
* NOTE: All vertical farming costs above are for indicative purposes only. The exact price of a project depends on several factors, including size, location, available power source, and final design. For larger projects, costs can fall due to economies of scale.
Why is vertical farming booming?
It is estimated that global food production in industrialized countries will need to increase by about 70 percent by 2050 to keep up with current consumption trends. In the UK, almost half of the food we consume is imported. Almost 75 percent of our available agricultural land is already in use.
If the UK does not adopt new farming techniques, it could be extremely difficult to reach the 70% increase without destroying the green belt land and converting it into new farmland.
Combine increased climate variability with rising land prices – and an aging and shrinking rural workforce – and it is easy to see why new methods of food production attract significant resources for research, development, and investment.
Growers at risk for high-quality crops due to adverse and unpredictable weather conditions (rain, light, wind, etc.) are also beginning to see that switching to vertical farming can remove the uncertainty inherent in nature.
For this reason, vertical farming is seen as an ideal solution for countries in the Middle East (which need to combat excessive heat) and the Nordic region (which suffer from a lack of light), which provide constant and controlled growing conditions all year round.
What Profits Can a Vertical Farm Make?
After realizing that global food production must increase to improve domestic food security, vertical farming is attracting great interest from individual investors and private equity firms, who are now ready to take a long-term perspective.
Some of the industry’s leading economists have predicted that the margins that can be achieved on fresh produce can pay off on an initial investment in seven years. In the past, this type of investment would not have been well received as returns are often achieved outside of the traditional 5-year holding period.
However, some larger funds have recognized the potential return and have extended this period to 10 to 15 years due to the available long-term return.
What’s next for indoor farming?
Clearly, the decision whether or not to switch to vertical farming depends on many different factors – including location, product type, personnel, potential profit levels, and access to investment capital.
While new hydroponic growing techniques will never completely replace all traditional methods, the fact that they are now used as supplements is a huge advance for agribusiness.
Of course, to make vertical farming an economically viable crop cultivation method, it is important to strictly control water and energy costs while minimizing carbon production.
With the right air conditioning system and energy center, it is possible to capture excess light and electricity so that it can be reused, reducing the cost of growing hydroponics and significantly increasing financial profitability.
As global demand for food continues to grow, we do not doubt that this controlled environmental farming represents a unique opportunity as it can produce higher quality food that is sustainable and profitable.
Conclusion
Vertical farming will serve as a tool to change the whole view of the concept of farming. To make this a success, new technological innovations are coming onto the market to support the entrepreneurs and make them more profitable. Investors can no doubt invest in these companies because of their incredible success over the years.
