Vertical Farming Market

[225 Pages Report] The vertical farming market is estimated to be USD 5.1 billion in 2023, and it is expected to reach USD 15.3 billion by 2028, growing at a CAGR of 24.7% from 2023 to 2028. Various factors are fueling the growth of the vertical farming market. One of the key drivers is the decreasing availability of land for agriculture, which is happening due to urbanization, deforestation, and climate change. This trend poses a challenge to traditional farming methods, but vertical farming offers a solution by utilizing space more efficiently to produce food.

Vertical Farming Market Forecast to 2028

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Market Dynamics:

Driver: Reduced environmental impact from agriculture by the adoption of vertical farming

Vertical farming plays a vital role in reducing the environmental impact of agriculture. It reduces the water required to produce the same or higher number of crops. It also removes the chemicals and pesticides used to grow crops and diminishes the need for transportation. The entire process of vertical farming is carried out organically. It significantly eliminates the use of chemicals and provides natural solutions, such as using fish to produce nutrient-rich waste for plants in the aquaponics growth mechanism of vertical farming. Also, as vertical farming is carried out in a controlled environment, they are immune to dangerous pests, eliminating pesticide use. As methods of pest control such as burning fields, grass, or waste are omitted, vertical farming assures healthy, quality produce for its consumers. This, in turn, is expected to create growth opportunities for the players in the vertical farming market.

Restraint: Lack of technically skilled workforce and limited crop types

Vertical farming often involves use of technical solutions, such as cameras, sensors, automated systems, artificial intelligence, hydroponic, aquaponics, and aeroponic systems. To operate these advanced systems, a knowledgeable and skillful workforce is essential. The lack of a skilled workforce has affected different sectors globally, and vertical farming is no exception. Also, most farmers venture into this market with systems that are inefficient in terms of design and are costly. To sustain and remain competitive in the market, vertical farms need to be updated on different aspects of farming. Moreover, unlike conventional farming, growers can grow a limited range of crops in vertical farming, but these crops are economically and commercially viable today. Indoor farming is the future of farming but will not account for all growing operations; for instance, leafy greens are best grown in vertical farming, but tomatoes, cucumbers, and peppers are best grown in greenhouses.

Opportunity:  Potential market opportunities in Asia Pacific and the Middle East

According to the Ministry of Agriculture, Forest, & Fisheries (MAFF), people in APAC consume about 75% of the vegetables produced globally. In APAC, most plant factories are in Japan, China, Hong Kong, and Singapore. Factors such as continuous growth in urban population, rising disposable income, and increasing middle-class population are expected to drive the demand for food and agricultural commodities and resources between 2023 and 2028. With the advantage of producing more in less area, vertical farming is being increasingly adopted in different countries in APAC. The Middle East is another market with high growth potential for vertical farming. The climate in Middle Eastern countries is hot for almost eight months a year, leaving a significantly less favorable period for crop production. This leads to the limited availability of local produce at high prices. However, countries such as the UAE and Israel are expected to hold high growth opportunities for the market.

Challenge: Higher energy consumption leads to high operational costs

Energy consumption and operating costs present significant restraints on the vertical farming market, impacting its scalability and economic viability. One area of concern is the energy-intensive nature of vertical farming, particularly the reliance on artificial lighting systems. Traditional lighting technologies, such as high-pressure sodium (HPS) lamps, consume substantial energy. A study by the University of California, Davis, found that HPS lighting alone accounted for 50% to 70% of the total energy consumption in a vertical farm. Furthermore, per the 2021 Global CEA Census Report, vertical farms demonstrate a considerably higher average energy consumption of 38.8 kWh per kilogram of produce. In contrast, traditional greenhouses have an average energy consumption of 5.4 kWh per kilogram.

Vertical Farming Market Ecosystem

Lighting technology to dominate the overall hardware segment of the vertical farming market between 2023 and 2028

The adoption of LED lighting in vertical farms has significantly increased due to its numerous advantages catering to indoor agricultural environments’ specific needs. LED lights enable precise control over the light spectrum and intensity, allowing farmers to customize the lighting conditions to suit the requirements of different plants, resulting in optimal growth and higher yields. Furthermore, LED lights are highly energy-efficient, consuming considerably less electricity than traditional lighting sources. Their extended lifespan also reduces maintenance expenses. Additionally, LED lights emit less heat, minimizing the risk of heat-related damage to plants and creating a more favorable working environment for farmers. The versatility and benefits of LED lighting have made it a favored choice among vertical farm operators, playing a crucial role in the success and expansion of this innovative farming method.

Hydroponics technique is likely to be the most preferred vertical farming method among commercial growers during the forecast period

Hydroponics is a soil-less plant cultivation method that relies on water and nutrients, offering a highly efficient approach to growing food. It requires less space and water than conventional farming methods, making it a compelling choice. Furthermore, hydroponics enables year-round food production unaffected by weather conditions. Commercial growers find hydroponics particularly attractive due to its numerous benefits for vertical farming. Firstly, it ensures efficiency by reducing water usage and space requirements. Secondly, it grants growers more significant control over the growing environment within the hydroponic system. Thirdly, hydroponics consistently yields high-quality produce. Lastly, it promotes sustainability, providing a more environmentally friendly alternative to traditional farming practices. These advantages have positioned hydroponics as the preferred method for commercial growers engaging in vertical farming.

Building-based vertical farms likely to dominate the overall market between 2023 and 2028

For several compelling reasons, building-based vertical farm structures have emerged as dominant players in the overall vertical farming market. Firstly, their versatility allows them to be established in any location, irrespective of challenging climatic or weather conditions. This makes them particularly suitable for countries or regions facing difficulties in traditional farming due to factors like deserts or urban landscapes. Secondly, the efficiency of building-based vertical farms is notable, as they can maximize the utilization of resources such as water, space, and energy. By utilizing vertical stacking, these farms can produce a higher yield within a smaller area

US to dominate vertical farming market in North America as the country has the largest number of vertical farms in the region

The United States has emerged as the leading nation in North America, with the highest number of vertical farms, primarily due to its substantial population and the increasing demand for locally grown produce. With over 330 million people, the US provides a significant market for fresh agricultural products, driving the need for vertical farming solutions. Additionally, the country benefits from abundant capital resources, supported by a robust economy and a large pool of venture capital. This financial backing has facilitated the development and expansion of vertical farming companies. Moreover, the US enjoys a favorable regulatory environment that streamlines the establishment and operation of vertical farms, making it easier for companies to enter the market. Prominent examples of successful vertical farming companies in the US include AeroFarms, Bowery Farming, and Gotham Greens, operating farms in various cities across the country.

Vertical Farming Market by Region

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Key Market Players

Vertical Farming companies include Signify (Netherlands), Freight Farms (US), AeroFarms (US), Sky Greens (Singapore), Spread (Japan), Plenty  (US), Valoya (Finland), Osram  (Germany), Everlight Electronics (Taiwan), and Heliospectra AB (Sweden).

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Scope of the Report

Vertical Farming Market Highlights

This vertical farming market research report categorizes based on growth mechanism, structure, crop type, offerings and region.

Recent Developments

• In May 2023, AeroFarms revealed the expansion of its partnership with Amazon Fresh.
• In February 2023, ams OSRAM collaborated with Revolution Microelectronics, a US-based controlled agriculture environment designer.
• In February 2023, Realty Income, a commercial real estate investment trust, partnered with Plenty Unlimited Inc. The collaboration involves an investment of up to USD 1 billion to construct farming space that will be leased to Plenty Unlimited.
• In September 2022, Freight Farms collaborated with The University of Arizona Biosphere 2.
• In May 2022, Signify Holding, the global leader in lighting, successfully finalized the acquisition of Fluence from ams OSRAM.
• In May 2022, ams OSRAM introduced the OSLON Optimal family of LEDs, featuring the latest 1mm2 chip designed specifically for horticulture lighting applications.
• In August 2021, AeroFarms partnered with Nokia Bell Labs to combine their expertise and expand their joint capabilities in networking, autonomous systems, and integrated machine vision and machine learning technologies to identify and track plant interactions at the most advanced levels.
• In August 2021, AeroFarms announced that it would expand to the Middle West region as part of a project with the World Wildlife Fund (WWF) and St. Louis Controlled Environment Agriculture Coalition (STLCEA) to demonstrate innovative strategies to minimize the environmental footprint of indoor vertical farming.
• In July 2021, Heliospectra AB, a world leader in intelligent lighting technology for vertical farming, announced a new seller partnership with MineARC Systems, a global leader in manufacturing and supplying controlled environments. The company will represent Heliospectra’s market-leading LED lighting and lighting control solutions in the Australian market.
• In June 2021, Osram expanded its horticulture portfolio by launching Osconiq S 5050. It addresses a key problem of used white LEDs resulting in lower energy costs and more efficient lighting for indoor farmers.

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