Is indoor farming complete madness?

For the entire history of the human race, we’ve been eating pretty much the same way. Plants capture sunlight – and we either eat them directly, or consume animals that feed on them.

Of course, things have changed at various times. We’ve developed some clever stuff – such as farming, artificial fertilisers, and industrial food manufacture. But, when you strip it back to energy flows, the process has always been the same – since the very dawn of humanity.

But now, we’re breaking the link between sun and food

Indoor farming is now A Thing – and that typically means farming under artificial light. This approach has a precedent – although not one you might immediately think of. For many years, Britain has been partly dependent on indoor farming to grow its cannabis. Importing drugs by speedboat, Miami Vice style, is risky (albeit glamorous). A practical alternative is renting a house, and bypassing the electricity meter to grow rooms full of dope. You don’t get to pose in a powerboat, but it’s a comparatively low-key criminal operation – helping to keep its perpetrators out of jail. Chuck in a couple cheap workers to mind the joint, and you’ve got yourself a very nice little earner – although not one that Exponential Investor officially recommends…

Meanwhile, back in the world of food, things are changing rapidly. It’s not unusual to give plants a bit of a boost with some artificial light. For example, tomatoes are often helped along by grow lamps – previously high-pressure sodium, but now usually LEDs. Recently, however, we’ve seen an accelerating trend towards indoor farming with 100% artificial light. For example: Growing Underground is producing food in London’s disused tube tunnels. Similarly, a huge amount of venture capital money is starting to find its way into comparable US startups, such as Plenty. (We’ll reveal a few more, tomorrow.)

For clarity, indoor farming consists of two interrelated concepts. The first is “vertical farming”. This basically means growing food on shelves and racks, often without soil (hydroponics). This idea has a century-old history, and was first scaled up at least as far back as the early 1950s. However, the really radical shift is not the move indoors, but the move away from using sunlight. That obviously necessitates “feeding” plants with artificial light. That’s the focus of our articles today, and tomorrow.

What’s behind the move to indoor farming?

Indoor farming has some distinct advantages. The environment is highly controlled – optimising growing conditions, and limiting the spread of diseases. Of course, you could do that with a greenhouse, but this doesn’t match indoor farming’s “secret weapon”: proximity. If you can grow salad in a disused tube tunnel, you can have it on a London plate mere minutes after picking – as opposed to days, in a conventional supply chain. The benefits in terms of freshness, flavour, and nutritional value are significant. Furthermore, there’s a huge reduction in transport costs and the consequential energy demands – and we’ll explore this in more depth tomorrow.

Other economic changes are also significant. Various input costs are reduced, and yields are stabilised. To explain this, we’ll return to the issue of environmental control. The nature of indoor farming is that the growing environment makes plants much less vulnerable to being eaten by creepy-crawlies than is the case in an open field. You can generally make a reasonable effort to prevent infestation in the first place – and, if you are unlucky enough to have pests and diseases enter an indoor farm, you can use isolation and decontamination techniques to remove them. This means that the entire process lends itself very well to organic farming. I find the idea of organic farming that’s based entirely on artificial energy to be a rather bizarre concept – but that’s presently the way the rules work.

So, is indoor farming just an insane environmental nightmare?

Actually, using energy in this way might not be as bad as you think. Let’s look at the broader economic situation for indoor farming. We manage to waste around a third of our food, between the farm and our mouths. Anything we can do to reduce that is a blessing.

We don’t typically find indoor farms being used to produce bulk energy crops. They can’t grow things like potatoes or apples. Instead, they’re used to creating a supply chain for fresh salads, and the like. These highly perishable foods are particularly prone to wastage. As such, they make a disproportionate contribution to food waste. Accordingly, improvements in the supply chain inherent to indoor farming mean that highly perishable crops have much lower risk of spoilage and waste, due to being grown indoors.

Although the growing energy comes from fossil fuels, having a simpler supply chain really matters. Shorter haul distances, and a lower refrigeration requirement, have a non-negligible environmental benefit.

From an economic point of view, better quality, a shorter supply chain, lower chemicals cost and more manageable farming processes all help keep costs down. But of course, energy is the elephant in the room – and we’ll return to that tomorrow, when we look in more depth at how indoor farming could change the world of food. Plus, we’ll be revealing some of the hottest firms in this space.

What do you think? Please let us know your views – andrew@southbankresearch.com.

Best,

Andrew Lockley
Exponential Investor 

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