Controlled environment agriculture’s promise to mitigate climate risk by bringing some food production indoors was particularly well suited for the migration toward sustainability in private markets that was in progress before the pandemic and pushed forward by the willed optimism that marked its immediate aftermath.
A late November regulatory filing revealed that Bowery Farming – a New York-headquartered vertical farming company that had raised $300 million in its mid-2021 round populated by Temasek, Fidelity Management & Research Company, GV and others – had raised only $85 million towards its more modest $220 million Series D goal.
The challenges slowing fundraising for specific companies within a CEA market that developed gradually over the past decade with waves of private capital vary among its greenhouse and vertical-farming components. The business models, energy costs and resilience against economic conditions of the sector are all being re-examined.
The year’s negative headlines obscured some signs of how the CEA market is likely to develop moving forward.
Soon after Cibus Capital acquired a controlling stake in Dutch greenhouse business Duijvestijn Tomaten in July, a source familiar with the firm’s strategy told Agri Investor the deal described it as a “blueprint” for The Flavour Farm, a Cibus platform focused on European greenhouses that will build and acquire assets near infrastructure to offset energy needs.
The source highlighted how part of what made Duijvestijn Tomaten an attractive investment was that its greenhouses are powered through a geothermal energy system and also make use of repurposed CO2 from a nearby Dutch Shell refinery. They added that although the increasing drive for self-sufficiency means standalone facilities in markets like the UK and Europe can continue to perform well, a clear advantage remains for indoor food production near existing waste and energy infrastructure.
The potential for controlled environment agricultural production facilities that function as part of larger comprehensive industrial sites also helps create a place for ag within an increasingly active debate surrounding public-private partnerships to support infrastructure that increases resilience to climate change.
Controlled environment ag is one of the industries targeted for support from the US through industrial policy mechanisms such as AIM for Climate, but other nations are leading the way in finding ways to integrate indoor food production into large-scale economic planning.
In the United Arab Emirates, for example, AeroFarms has used subsidized electricity to operate AeroFarms AgX, a 65,000 square foot facility it calls the world’s largest indoor vertical farm of its kind, which opened on an industrial site close to several power plants in February.
Among many CEA projects being developed in Singapore is a facility operated by Dutch indoor growing company Growy, designed to support year-round production from within an existing logistics center.
The scale and ambition displayed in these state-supported projects is likely to continue, leading the way for a CEA market that retains appeal for LPs looking for opportunities to earn returns while bolstering resilience against climate change.
The year ahead will likely see some degree of consolidation, as the managers, start-ups and individuals who have brought the market to where it is to shepherd appropriate forms of capital towards CEA – and get the sector back on track after a year when some could be forgiven for worrying the wheels were falling off.