Controlled environment agriculture (CEA) is becoming a global, diversified industry, according to a new census report from Agritecture Consulting and Autogrow.
Two-thirds of the 316 growers surveyed hail from outside the US, while 30% are located in parts of the developing world. On top of that, nearly half of all survey respondents who started farming operations in 2019 had no prior experience in agriculture.
The inaugural report represents what the partners describe as the most in-depth global survey of indoor & controlled environment agriculture. The Global CEA Census ran from June 4 to July 22, 2019, asking growers around the world a total of 45 questions. One respondent won a free trip to NYC AgTech Week in September as part of the Census promotion.
Despite the rapid growth of the indoor agriculture industry, hard data about the industry’s size “is notoriously difficult to come by,” wrote Agritecture in an email announcing the report, which pushed the leading CEA consultancy firm to partner with equipment company Autogrow to take matters into their own hands.
Respondents came from all parts of the globe with the largest percentage from the US, India, Belgium and South Africa.
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“I was expecting the India piece; I’ve been blogging on this industry for over 10 years and I’ve seen our Google Analytics data dramatically shift towards more India readers in recent years and it’s now our second biggest source of traffic,” Henry Gordon-Smith, founder of Agritecture Consulting, told AFN. “It makes sense; there’s a huge opportunity in India with pressure on the food system and a push into entrepreneurship as well as access to technology so we’ve seen more and more farms pop up there. As a result, our next episode of the Locally Grown podcast will be in New Delhi and we’re also launching online classes there.”
The report dives into additional demographic patterns, as well as growing methods; facility types; marketing strategies; challenges to growth; future outlook by farmers; and more. This is the first of a planned annual census.
Here are some additional key takeaways:
Young farmers are flocking to CEA but it’s mostly male
While perhaps unsurprising, the CEA industry has established a track record of attracting younger individuals to the farming industry, where overall the average age of a farm’s primary operator is growing, especially in the US. Thirty percent of CEA founders are between the ages of 21-30 while another 30% are between 31-40.
This is a significantly younger operator base compared to the US agriculture industry where the average of the farmer is over 55. A nuance to this statistic that must be taken into consideration is that the USDA census asks for the age of the principal operator, meaning the proverbial CEO of the farm business, not necessarily the ages of the day-to-day managers and laborers. The largest segment of CEA founders, 41%, reported having no prior experience in agriculture. A large majority of farmers in conventional farming operations come from farming families or have experience working in farming before starting their own operations.
CEA founders are disproportionately male, according to the study, with only 23% of founders being female. This represents a significant increase from 2014 when 95% of CEA founders were male, according to the report.
It’s not just leafy greens anymore
In addition to the globalization of CEA, the report also concluded that indoor ag growers are diversifying beyond the classic array of leafy greens that have defined the space in recent years. Although 65% of respondents grow leafy greens and microgreens, the number of diversified operations is increasing from 80% greens-only in 2014.
Up and coming crops include vine vegetables (25%), berries (17%), and root vegetables (12%). Ornamental plants, nursery starts, and cannabis also made it on the list.
Only 19% have received funding
When it comes to capital, just 19% of the respondents reported receiving funding, half of which came from corporate investors. This is a decline fro 2014 when 28% of companies received funding. Sixteen percent applied for funding and were unsuccessful while 65% have not pursued funding at this time.
Although the industry is growing, it’s still relatively young. About 65% of the responding companies report being at the pre-revenue stage, while 16% are still pre-profit. This could account for some of the lower funding levels in the industry. Investors clearly have an appetite for CEA startups with some massively funded companies scoring multi-million dollar rounds. Bowery Farming just announced a $50 million Series B add-on to combine with its $90 million Series B last year, AeroFarms raised a $100 million venture round in July, and Plenty scored a $200 million Series B in 2017. Germany’s Infarm raised $100 million in June, too.
Some of the ways that growers are tackling the funding challenge include scaling projects to fit existing financial availability, partnering with universities or research institutions, partnering with other businesses, and looking to private equity investment.
Tech adoption is slow but steady
Technology adoption seems to be pervasive among CEA operations, with artificial light being used in 72% of businesses. But more advanced and newer technologies have been slow to sew roots. Only 23% of respondents use sensors while 62% use sensors in conjunction with controllers. This leaves 15% of operations without any sensor-based technology. One of the barriers to additional sensor and data-based adoption in the industry is the lack of ability to sync data and tools from different companies. Data siloing has been an ongoing challenge in other data-based agtech tools including precision crop technologies.
Automation is the least adopted technology to date, with only 25% using automated practices for seeding, transplanting, and harvesting. Considering that labor is the primary input concern and a challenge overall, automation has a promising opportunity in the industry. Bowery’s CEO Irving Fain told AFN that while tech is expensive to build, it’s key to the company’s ability to scale and succeed.
“The technology adoption figures were quite low; most growers still stick to the basics and it’s a learning cure to get on board with new technology. Sometimes they don’t see the value or they don’t think they have the time, although we have seen new farmers coming from other hi-tech industries more comfortable adopting tech from the beginning,” said Gordon-Smith.
The three biggest challenges facing CEA are…
- Finding the right customer base
- Raising capital
- Maximizing efficiency when farming in small spaces.
Labor was listed as the highest operational cost as well as an overall top challenge noted by growers, including the skills and ability to work with new technology and the cost of retaining qualified labor. Scaling challenges are primarily linked to the low availability of land, particularly in densely populated urban areas close to consumers and restaurants. Additional operational costs included energy, cost of inputs (seed, nutrients, grow media), and rent.
Additional reporting by Louisa Burwood-Taylor