Up Up and Away! The Economics of Vertical Farming Chirantan Banerjee, Lucie Adenäuer and Stephan Rickert

Content Global situation Design of the Vertical Farm Facts and Figures c.banerjee@ilr.uni-bonn.de Global situation Design of the Vertical Farm Facts and Figures SWOT Analysis Market Analysis Outlook

Global situation: where do we stand? c.banerjee@ilr.uni-bonn.de We need local food production technologies 38% of all land is used for agriculture 11% arable 1 billion still undernourished thereof 42% in India and China In rich countries, people spend 10% of their income on food, this is 50% in case of poor countries FOOD IS NOT BEING PRODUCED WHERE REQUIRED AND SUPPLY CHAIN IS NOT WORKING We need technology to adapt to consumer choice Striking difference between rich and poor consumer needs Increasing demand for especially protein rich diets Rich consumers want choice of organic food, Poor want cheap and nutritious food Transition economies are witnessing increased demand for mineral, vitamin and protein rich diets In 1985, the Chinese ate 20 kg meat a year, in 2000 this became 40 kg, in 2030 it will be 80 kg per head THIS IS EXPECTED OF ALL COUNTRIES ON THE DEVELOPMENT BANDWAGON

Population Trends Few words on production need c.banerjee@ilr.uni-bonn.de Few words on production need 9 billion to feed by 2050 100% more food required More protein, vitamin and mineral rich food at lower and stable costs Source: Population Division of the Department of Economic and Social Aairs of the United Nations Secretariat. World Urbanization Prospects: The 2007 Revision.

How do we reach the missing 70% ? Possible Solutions c.banerjee@ilr.uni-bonn.de We need to produce 100% more food! 2% increase of agricultural land expected until 2040 20% more food Another 10% is expected from increased cropping intensity Problem of land use for fuel How do we reach the missing 70% ? 13% more land will be converted for agricultural use in developing countries by 2040 The dilemma of land use for food or fuel looms even larger Will the rest 70% come through technology induced increases in productivity? ADVANCES IN GENETICS, NUTRITION, DISEASE AND PEST CONTROL AND LIVESTOCK MANAGEMENT ENABLED A PHENOMENAL GROWTH IN THE PAST THE NEXT BIG QUESTION IS: IS VERTICAL FARMING THE NEXT CHAPTER OF A LONG DUE GREEN REVOLUTION? IS IT TECHNOLOGICALLY AND ECONOMICALLY PRAGMATIC ENOUGH TO EVEN BE A CANDIDATE THEREOF? From 1948-2008 US has managed to increase corn yield from 39-153 bushels Meat production by 88% Eggs and poultry by 411% TFP by 158 % While resource use increased by only 3.6%

Design of Vertical Farms c.banerjee@ilr.uni-bonn.de Vertical farming is a system of commercial farming Plants are artificially stacked vertically above each other Plants, animals, fungi and other life forms are cultivated for food, fuel Through Controlled Environment Agriculture

Design of Vertical Farms 37 Floors, 167.5 m high 0.25 ha footprint, 0.16 ha built-up area Equivalent to 9.27 ha with 68 ha due to multiple harvest Building cost 111.5 mill € with 90 mill € of equipments Needs 80 mill litres of water 10,000 l nutrient solution Sequesters 868 tons of CO2 per year and more…

Design of Vertical Farms 37 Floors, 167.5 m high 0.25 ha footprint, 0.16 ha built-up area Equivalent to 9.27 ha with 68 ha due to multiple harvest Building cost 111.5 mill € with 90 mill € of equipments Needs 80 mill litres of water 10,000 l nutrient solution Sequesters 868 tons of CO2 per year and more…

Design of Vertical Farms 37 Floors, 167.5 m high 0.25 ha footprint, 0.16 ha built-up area Equivalent to 9.27 ha with 68 ha due to multiple harvest Building cost 111.5 mill € with 90 mill € of equipments Needs 80 mill litres of water 10,000 l nutrient solution Sequesters 868 tons of CO2 per year and more…

Design of Vertical Farms 37 Floors, 167.5 m high 0.25 ha footprint, 0.16 ha built-up area Equivalent to 9.27 ha with 68 ha due to multiple harvest Building cost 111.5 mill € with 90 mill € of equipments Needs 80 mill litres of water 10,000 l nutrient solution Sequesters 868 tons of CO2 per year and more…

Design of Vertical Farms 37 Floors, 167.5 m high 0.25 ha footprint, 0.16 ha built-up area Equivalent to 9.27 ha with 68 ha due to multiple harvest Building cost 111.5 mill € with 90 mill € of equipments Needs 80 mill litres of water 10,000 l nutrient solution Sequesters 868 tons of CO2 per year and more…

Design of Vertical Farms 37 Floors, 167.5 m high 0.25 ha footprint, 0.16 ha built-up area Equivalent to 9.27 ha with 68 ha due to multiple harvest Building cost 111.5 mill € with 90 mill € of equipments Needs 80 mill litres of water 10,000 l nutrient solution Sequesters 868 tons of CO2 per year and more…

Facts and Figures Requires 3.5 GWh power for 5.3 mill € c.banerjee@ilr.uni-bonn.de Requires 3.5 GWh power for 5.3 mill € Seeds worth € 44,000

Facts and Figures c.banerjee@ilr.uni-bonn.de

Facts and Figures Probability distribution of costs per kg biomass c.banerjee@ilr.uni-bonn.de Cost Scenarios Building Parameters with Salvage Value without Salvage Value Production Parameters Mechanised Manual Production technology Aeroponics Elevated CO2 Normal Fixed Cost Margin High 30% Medium 20% Low 10% Variable Cost Margin Probability distribution of costs per kg biomass Produces 3,573 tons fruits and vegetables and 137 ton Tilapia fillet Which costs between € 3.17 and € 6.32 + 2,443 ton manure and 3 mill litre bio-gas Cost of producing edible biomass is around 3.17 €/kg Worst case: 6.32 €/kg

SWOT Analysis INTERNAL ANALYSIS STRENGTHS WEAKNESSES c.banerjee@ilr.uni-bonn.de INTERNAL ANALYSIS STRENGTHS WEAKNESSES Industrialisation of Agriculture Space Independence from External Threats Light Energy generation Water Environment Energy Balance EXTERNAL ANALYSIS OPPORTUNITIES THREATS Consumer preference Sceptisism Climate change & Environmental concerns Existing patents Race for food soveriegnty Limited market Renewable Energy Price and subsidies

Market Potential Criteria: Population above 5 million c.banerjee@ilr.uni-bonn.de Criteria: Population above 5 million Per Capita income above $ 20,000 p.a. Short Term Market Potential Long Term Market Potential Market: 21 megacities 7 desert nations 6 Taiga nations N = 47

Outlook More Ideas? Economic research is required to ascertain: c.banerjee@ilr.uni-bonn.de Economic research is required to ascertain: The energy balance The cost of production Linear programming of optimal cultivation strategy for cost minimisation The cost benefit analysis Consumer studies A comprehensive market analysis with identification of potential candidates More Ideas?

Chirantan Banerjee, Lucie Adenäuer and Stephan Rickert Thank You! http://www.ilr.uni-bonn.de/pu/publication/Publikationen/vertical_farming.pdf Chirantan Banerjee, Lucie Adenäuer and Stephan Rickert Institute for Food and Resource Economics, University of Bonn, Germany c.banerjee@ilr.uni-bonn.de