Vertical farming is proving itself technically, but the economics need to catch up
“Over the last five years, the operations of vertical farms have matured, and the technology has advanced to a point where the unit economics begin to make sense. AmplifiedAg aims to support the industry’s evolution through this as a facilitator of infrastructure,” says Don Taylor, CEO of AmplifiedAg.
AmplifiedAg offers vertical farms a full suite of solutions that includes farm management software, smart hardware, fully enabled farms (including vertical propagation and vertical growing, along with teaching and laboratory formats), and additional business and farming consultation services.
In recent years, AmplifiedAg has solidified numerous partnerships and has conducted in-depth research comparing container farming to indoor/warehouse and greenhouse agriculture. But first, Don took the time to delve into the economics of vertical farming and what the industry needs to achieve for long-term success.
As Don explains, the vertical farming industry is at an inflection point where it needs to begin operating efficiently at scale and proving the unit economics of its operations and production. Whereas the industry has mostly been funded by venture capital and private equity, its growth and maturation require other financial institutions to participate, such as banks.
While an open-field farmer can obtain a loan to purchase a tractor or agricultural machinery, these loan programs do not currently extend to vertical farming operators as the industry is still nascent, and many question its profitability. So, how can vertical farming get itself to a point where financial institutions are willing to take the risk?
Amplified’s Propagation and NFT Production container farms
Scalability – the key to market growth and maturation
One option is securing long-term offtake agreements rather than the short-term, often volatile agreements that plague the industry today. With long-term offtake agreements in hand, lenders have an indication of a farm’s profitability. That said, securing long-term offtake agreements requires vertical farms to demonstrate their ability to continuously supply large volumes of produce. In other words, the farms need to demonstrate their scalability. This, according to Don, is an area that can trip up vertical farms.
“Scaling up production really drives costs if it is not done in an efficient manner. Our experience at AmplifiedAg is twofold. From an engineering and operational point of view, we believe that building a scalable solution means putting farm production as close to a food distribution point or urban hub as possible and being able to grow that production capacity over time rather than building new facilities every time you need to increase your capacity to meet demand,” says Don.
As Don explains, AmplifiedAg has received a lot of attention in recent years from vertical farms thanks to its modular, scalable, and flexible software solution, control systems, and container farms. Altogether, these elements enable turnkey deployment and farm expansion. Beyond simple control of the production processes, AmplifiedAg also helps growers to map out the financials, develop their business models and provide assistance in everything ranging from food safety to logistics.
“At first, we thought that large-scale facilities were going to be the ultimate model to enable the CEA food supply, but after years of executing a variety of scaled formats, we are now focusing on hybrid solutions. A hyper-local farmer can really operate at a better economic model with a smaller facility and lower overhead. That being said, we’ve also experienced and enabled successful enterprise models when scaling production from six to eighteen to thirty containers,” says Don.
Technical rendering of the NFT container
Container farms as an easily scalable option
Scalability and modularity are two words often used in the vertical farming industry, yet growing systems are not all equally scalable, and each presents its challenge. As Don sees it, a major advantage of container farming over warehouse and greenhouse farming is that container farming is modularity in its purest form, allowing growers to increase capacity at their own pace while increasing resilience through redundancy and division of production into multiple modules, the latter limiting the transmission of pests and diseases across the facility.
And with AmplifiedAg’s software and control system all running in the Cloud with a SaaS architecture, growers are sure to have access to the most advanced features allowing them to operate the farm with ease and model potential expansion scenarios.
In Don’s recent ‘Why Containers’ blog post , he also shared his view on the construction of container farms, providing enhanced sustainability qualities from its reduced capital to engineering and reduced carbon emissions from utilizing existing container structures and not relying on new steel production.
Focused on versatile, approachable solutions
“In order to increase access to food, we have to increase access to the technology that grows food,” concludes Don. “As a farm technology provider that has the operational experience of managing an enterprise vertical farm, AmplifiedAg is focused on enabling farmers from our proven production capabilities, and with farms and technology that is approachable and versatile in its implementation for a variety of farmers, growers, and industries.”
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Don Taylor, CEO