2023 vertical farms: the best

Agriculture represents a fundamental part of human civilization, often overlooked and undervalued. It is the main source of livelihood for a constantly increasing world population, but it is also one of the major responsible for the loss of biodiversity, pollution and climate change. Consequently, we are faced with a heated debate on the need to adopt methods for sustainable agriculture, since the traditional paradigm of industrial agriculture must evolve. It is particularly urgent considering that the area of farmland in the world is shrinking by 23 hectares every minute, while the population of the entire planet is growing at a rate of 5.5 million inhabitants per month.

Alternative solutions such as permaculture, agroforestry, organic agriculture and regenerative practices represent an option to solve this challenge, as is the application of advanced technologies such as the use of robots in agriculture. However, there could be another innovative solution: what if technology could lead to agriculture without bare sky and soil? So important is the need to invest in a new era of agriculture, capable of respecting the environment, safeguarding biodiversity and providing sufficient food for a constantly growing world population

2023 vertical farms: the best

In recent years, vertical agriculture has crossed the boundaries of science fiction and has established itself as a real reality. Thanks to decades of scientific experiments, hobby tests and niche cases in indoor agriculture, the idea of implementing this technology on a large scale has become increasingly feasible. In 2020, the Financial Times wondered if vertical agriculture represented a concrete hope or a simple passing trend, due to the rise of numerous ambitious startups with
innovative projects and substantial funding.

The objective of this technology is to make agriculture more efficient, less polluting, less dependent on energy and, in general, more environmentally sustainable. The vertical agricultural market reached 5.6 billion dollars in 2022 and is expected to reach 35 billion dollars by 2032. Despite this, the conventional agriculture sector still represents the reference market, with an estimated value of 12.2 trillion dollars. This context opens up ample space for the growth of vertical agriculture, which is configured as an important area of development and innovation in the agricultural sector

After a period of great media attention, vertical agriculture is now in the consolidation phase. The energy and banking crisis and the reduction of investments in technology have led many companies to close or downsize their operations. However, vertical agriculture continues to represent an important opportunity thanks to the reduction of the costs of automation through sensors, automatic LEDs and similar technologies. However, it is a form of capital-intensive activity, whose business model planned for an always abundant and economic capital has led many companies to have bad surprises when the business and credit cycle has been transformed

Some weaknesses have also emerged, such as the lack of expert operators: half of the vertical agricultural operators in 2022 did not have complete agricultural training and opted for brilliant technologies compared to caution and experience. Too much attention to advertising has led many to expect unrealistic results, while cost control has led to the construction of structures that are too expensive compared to their
actual cost reduction.

However, vertical agriculture should not be considered a dead idea or unable to work in practice. Like all new revolutionary technologies, it will have to start somewhere and improve gradually. Realistic expectations will replace the idea of replacing the entire agricultural industry in a few years, while helping to establish better business models

The future of vertical agriculture is far from uncertain, with many businesses thriving despite the recent recession. The key to success will be to avoid arrogance and to consider technology as a means, not an end. Vertical farms that follow these tips could be promising from an investment point of view. In any case, vertical agriculture represents an important part of the future of agriculture and must be subject to a more careful analysis.

The best of 2023

Here are the best vertical agricultural stocks broken down by market capitalization at the time of writing this article. The selection was made following a subjective assessment of the technology and financial situation of the related companies

GrowGeneration Corp. (GRWG)
GrowGeneration is the largest retailer of hydroponic products in the United States, which caters to both home cultivation and large commercial facilities. The company also has a large and recognized center of educational resources for hydroponic cultivation

AppHarvest, Inc. (APPH)
The Appalachian company manages some of the largest high-tech indoor farms in the world, reducing the demand for water by 90% and the need for land by 30 times. It focuses on grape crops (tomatoes, cucumbers, peppers) and green leafy vegetables (lettuces, spinach and other salads). It has a distribution agreement with Mastronardi, which allows it to reach most grocery chains such as Costco, Walmart, Target, Kroger, Aldi, etc…

Village Farms International, Inc. (VFF)
A sector beyond berries and salad that relies heavily on indoor agriculture is the cultivation of cannabis. Village Farms is a veteran company in environmentally controlled agriculture (CEA), which includes vertical agriculture and commercial greenhouses. The company manages a total of 545 acres of CEA facilities. It entered the cannabis market in early Canada in 2017 and in the United States in 2018 and is able to provide 1/3 of the expected total Canadian market.

Hydrofarm Holdings Group, Inc. (HYFM)
Hydrofarm is the leading manufacturer of hydroponic cultivation systems. The company sells through a wide range of retailers and distribution channels, including online and offline, B2B and B2C (including GrowGeneration already mentioned above). The company is counting on cannabis to continue to grow in the long term.

Each company mentioned above has strengths and weaknesses that need to be carefully evaluated. However, for investors looking for a ‘pick and shovel’ stock in the CEA market, with more exposure to purchases of consumables than manufacturers led by capex, Hydrofarm seems to be an interesting choice. In any case, it is important to maintain a stable cash balance and a solid balance sheet and to pay attention to the overall liquidity situation of companies

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