By Rod Nickel (Reuters) – Investors used to ignore Amin Jadavji’s speech to buy Elevate Farms’ vertical growing technology and grow lots of leafy vegetables indoors under artificial light. “They said, ‘This is great, but it sounds like a science experiment,'” said Jadavji, CEO of Toronto-based Elevate. Now, indoor farms are positioning themselves as one of the solutions to pandemic-induced disruptions in food collection, shipping and sales. “It has helped us change the narrative,” said Jadavji, whose company has a vertical farm in Ontario and is building others in New York and New Zealand. Advocates, including the U.S. Department of Agriculture (USDA), say urban agriculture increases food security at a time of rising inflation and limited global supplies. North American agricultural product production is concentrated in Mexico and the southwestern United States, including California, which is prone to wildfires and other adverse weather conditions. Climate change concerns are also accelerating investments, including from agribusiness giant Bayer AG (DE :), in multi-story vertical farms or greenhouses the size of 50 football fields. They enable small North American companies like BrightFarms, AppHarvest and Elevate to beef up indoor production and compete with established players AeroFarms and Plenty, backed by Amazon.com Inc (NASDAQ 🙂 founder Jeff Bezos. But critics question the environmental cost of the high energy requirements of indoor farms. Vertical farms grow leafy greens indoors in stacked layers or on foliage walls within warehouses or shipping containers. They rely on artificial light, temperature control, and cultivation systems with minimal soil involving water or fog, rather than the vast tracts of land in traditional agriculture. Greenhouses can take advantage of the sun’s rays and require less energy. Well established in Asia and Europe, greenhouses are expanding in North America, using greater automation. Investments in global indoor farms totaled $ 394 million in 2020, said AgFunder research director Louisa Burwood-Taylor. Average investment last year doubled in size as large companies such as BrightFarms and Plenty raised fresh capital, he said. A big acceleration in funding is looming, after pandemic food disruptions, such as infections among migrant workers harvesting North American agricultural products, raised concerns about supply disruptions, said Joe Crotty, director of corporate finance at the investment bank KPMG, which advises vertical farms. “The real increase is in the next three to five years,” Crotty said. Vegetables grown on vertical farms or greenhouses are still only a fraction of total production. U.S. sales of covered food crops, including tomatoes, cucumbers and lettuce, amounted to 790 million pounds in 2019, up 50% from 2014, according to the USDA. California’s outdoor head lettuce production was nearly four times higher, at 2.9 billion pounds. USDA is seeking members for a new urban agriculture advisory committee to encourage indoor and other emerging agricultural practices. PLANT BREEDING MOVES INSIDE Bayer (OTC :), one of the world’s largest seed developers, aims to provide the plant technology to expand vertical farming. In August, he partnered with Singaporean sovereign wealth fund Temasek to create Unfold, a California-based company, with $ 30 million in seed capital. Unfold says it is the first company to focus on engineering seeds for indoor lettuce, tomatoes, bell peppers, spinach and cucumbers, using Bayer germplasm, genetic material from a plant, said CEO John Purcell. Their advancements may include, for example, more compact plants and a greater focus on quality improvement, Purcell said. Unfold expects to make its first sales in early 2022, targeting existing farms and startups in Singapore and the UK. Greenhouses are also expanding, promoting higher yields than open field farming. AppHarvest, which grows tomatoes in a 60-acre greenhouse in Morehead, Kentucky, began construction on two more in the state last year. The company aims to operate 12 facilities by 2025. Its greenhouses are positioned to reach 70% of the US population in a day’s travel, giving them a transportation advantage over the Southwest produce industry, the CEO said Jonathan Webb. “We’re looking to jump-start the California and Mexico fruit and vegetable industry and bring it here,” Webb said. Projected global population growth will require a large increase in food production, a difficult proposition outdoors given frequent disasters and severe weather, he said. New York-based BrightFarms, which manages four greenhouses, places them near major cities in the United States, Chief Executive Steve Platt said. The company, whose clients include grocery stores Kroger (NYSE 🙂 and Walmart (NYSE :), plans to open its two largest farms this year, in North Carolina and Massachusetts. Platt expects that within a decade, half of all green leafy vegetables in the United States will come from indoor farms, up from less than 10% today. “It is a complete wave moving in this direction because the system we have today is not set up to feed people across the country,” he said. ‘CRAZY, CRAZY THINGS’ But Stan Cox, a researcher at the nonprofit The Land Institute, is skeptical about vertical farming. They rely on grocery store premiums to offset higher electricity costs for lighting and temperature control, he said. “The only reason we have agriculture is to harvest the sunlight that hits the ground every day,” he said. “We can get it for free.” Bruce Bugbee, professor of environmental plant physiology at Utah State University, has studied space agriculture for NASA. But he finds energy-intensive vertical farming on Earth implausible. “Venture capital does all kinds of crazy, crazy things and this is something else on the list.” Bugbee estimates that vertical farms use 10 times more energy to produce food than outdoor farms, even taking into account the fuel to transport conventional produce across the country from California. AeroFarms, operator of one of the world’s largest vertical farms, a former New Jersey steel mill, says comparing energy use to outdoor farming isn’t straightforward. Products shipped long distances have a higher spoilage rate, and many outdoor produce farms use irrigation water and pesticides, said CEO David Rosenberg. Vertical farms promote other environmental benefits. Elevate uses a closed-loop system to water the plants automatically, collect the moisture that the plants emit, and then water them again. Such a system requires 2% of the water used in an outdoor romaine operation, Jadavji said. The company does not use pesticides. “I think we are solving a problem,” he said.