Urban Farms as an Emerging Market in 2017

By Megan Barton and Louise Loop,

Grenoble Ecole de Management,

April 2017.

 

Nowadays, urban farming is an emerging market in the developed world which is evolving due to urbanisation. The question is whether urban farming has the ability to keep developing, or if it is just a short-term phenomenon. 

Defined as all activities involving growth and production of food within city boundaries[1], it encourages the utilisation of unused land to create an abundance of food through an economically sustainable system, while increasing diversity, awareness for health and educating the community[2]. The growing popularity of organic living is facilitated by advances in technology and innovation linked to smart living and appliances. The farms combine existing technologies to create a new offer for the market. Independently, these technologies bring a fraction of value to the market compared to when they are integrated collectively within an urban farm, hence the supposedly “new concept” of urban agriculture. The impact of this technology on the agricultural business as a whole, has both internal and external impacts, by modifying the value chain internally and outsourcing new suppliers, while also creating new distribution channels externally.

The question that we address in this article is the viability and potential for diversification of urban farms in the future, whether the technology has reached saturation point in the market and whether or not the adopters are willing to invest in a venture that may not provide a return for some time.

 

Since human life appeared on earth, farming has been essential to survive. To produce vital resources, people had to find the most efficient ways to produce food. Consequently, agriculture has evolved a lot, thanks to new technologies and a better knowledge of the processes.

History of Urban Farms

It is argued that urban farming began alongside rural farming 10 000 years ago3. The rise of “large-scale, chemical-dependent agriculture”  (Philpott, 2010) made nutrient recycling almost obsolete and fossil-fuels made it easier for long distance transportation3. Following World War II, food production became a “low-value”, marginal urban enterprise and cities began importing  (Philpott, 2010). Today, according to the Environmental Protection Agency, one-quarter of food in America is thrown out as waste, one-third of which is composted, leaving the rest to build up in landfills, where it becomes a predominant emitter of the greenhouse gas methane[3].  Arguably, if governments composted this waste, it could be distributed to urban farms. Cities cannot continue as solely consumers of food and producers of waste. The production of perishable vegetables on urban farms, composted by food waste, has the potential to bring fresh produce to markets, create jobs and reduce a city’s ecological footprint.

 

What are the benefits?

Benefits of urban farming include fresher and healthier food produced without the use of harmful chemicals and fertilisers, creating stronger local economies and development opportunities for urban middle and upper classes, encouraging social and economic cooperation[4]. The farms require direct contact with food producers, ensuring the consumer knows the source of food and facilitating buyer-seller loyalty.

Environmentally, the advantages of urban farms are numerous: they produce lower carbon emissions and put in place sustainable energy initiatives, known as vertical farming, to reduce greenhouse gases; they reduce transportation costs by encouraging consumption of local produce[5]. It is indeed estimated that the average American meal travels 1 500 miles before it reaches a consumers’ plate[6]. Finally, a reduction in resources used compared to rural farms is evident, using 98% less water and 70% less fertilisers, while producing higher yields.

 

What are the challenges?

Challenges presented to urban farmers include limited resources as cooperation is necessary due to both space and resources limitations, causing conflict and competitive behaviour between producers. Today, there exist joint initiatives between Governments and the “lnternet of Things” (IoT) industry, aimed at helping urban agriculture to prosper5.

Similarly, due to exponential population growth, there is a higher demand for food, since it is estimated that 80% of world’s population will reside in cities by 2050, hence majorly increasing food requirements5. This is accompanied with high production costs which are greater than conventional growing methods[7].  

Urban farmers face commercial challenges as a low-margin business since there are high operating costs associated7. Many producers sell their organic produce at premium prices. Producers use short circuits, selling locally and directly to their consumers, instead of selling via mass distribution (supermarkets)7.

 

To become a new way to produce food, urban farms require new technologies which have developed and improved in the last fifty years.

The technologies involved

Urban farms utilise innovative technology in order to maximise plant growth and create ideal growing conditions: hydroponics and smart soil, combined with specialised sensors, LED lighting and robotics. Technologies put in place ensure the plants are grown naturally[8].

Hydroponics uses a solution of mineral nutrients, enabling the plants to grow in nutrient-enriched water7. A variation of hydroponics is aquaponics, using fish waste as fertiliser, to replace soil7. Combining hydroponics and aquaponics means almost all fresh water can be recycled, avoiding the use of pesticides. Extreme urbanisation in developed cities such as Singapore, had led to attempts of reclaiming land from the sea. This lack of space induced the development of aeroponics, whereby plant roots are suspended in the air and a nutrient enriched mist ensures they are constantly moist[9].

Example of a Hydroponics used to grow salad[10].

Smart soil is a “fluffy, soil-like nano-tech growth medium that balances oxygen, water and nutrient levels”8 (Click & Grow, 2016). This special soil has been inspired by NASA technology in order to simulate the perfect growing environment. The soil adapts to the plant’s life cycle, releasing vital nutrients depending on the stage of the cycle. It aids in balancing soil pH and ensuring there is sufficient oxygen throughout, nourishing the plants. Specialised sensors are utilised in order to monitor light requirements, water and nutrients.

LED lighting is used to address high electricity consumption, by using energy-efficient and automated systems to reduce costs[11]. LED lights are controlled in order to specify the number of rays that are applied to plants, how the light is distributed and the precise spectrum to maximise growth[12].

Smartphone Apps are intended to assist in the accessibility of these farms11. It is predicted that once companies begin to exploit robotics, robots will seed and harvest food while efficient software systems will control all aspects of production (from growing conditions to sales).

LED Lighting on an Urban Farm.

 

Application of Foster’s Curve

Foster’s Curve takes the form of an “S-shape”, which is incremental with the progression of innovation and technology. The initial stage at the bottom is newly launched technology while those found at the top are readily established and cheaper[13].

Foster’s S curve

 

Technology progression is not the only reason for the development of urban farming, environmental and societal factors have also had an influence.

Why are they emerging today?

Urban farms have emerged today due to urbanisation, which has accelerated dramatically since the industrial revolution, as people continue to migrate towards cities in search of employment[14]. Overpopulated cities, suburban expansion and a higher demand for food, means rural farms supplying cities are under pressure. For this reason, vendors began to search abroad for cheap substitutes, causing concern surrounding the source of food[15].  Today people are more willing to change their customs according to environmental and economic indicators. Urban farms are designed to ensure food is moved directly from the producer to the user with minimal actors involved. The farms adapt well to innovation and the changing demands of its consumers as there is no “correct method” to sell[16].

The farms are becoming more popular today as people realise the potential rewards they can reap. Firstly, urban farms are more productive than a regular farm, producing larger quantities; more sustainable as investment is earned back within one year; more accessible since no fertilisers or chemicals are required; small-space friendly as they are designed for people living in large cities; and they produce fresh produce all-year round since environmental factors are minimised so they can be harvested at any time. Finally, urban farming is simple, as minimal gardening skills are necessary to succeed[17].

 

What markets are addressed?

Urban farms tend to the market needs of developed countries, where resources, both monetary and physical, are readily available[18]. For this reason, many of these farms are found in large cities such as Singapore, New York, London and Los Angeles. The reason behind urban farms vary depending on the region in which they are located. Climate change, soil quality and population growth are critical factors for the establishment of an urban farm. A farm in Dubai will not be established for the same reason as in Tokyo[19]. Therefore, urban farms are adapted to the requirements of the community as a whole.

 

Application of Schumpeter’s theory

According to Schumpeter’s economic theory, technology can have a positive impact on an economic cycle by either creating a new offer or increasing productivity within the original process[20]. Contrary to popular belief that technology eliminates the work force, in this case, has created a new market. Urban farms have created a new offer with the same goals as traditional farming – producing and extracting the highest quantity of food possible.

 

What is the future with the agro-food business?

Urban farms are directly linked with the agro-food business, the business of agricultural production. It includes all the processes within the production and the distribution, along the food value chain. It is the most developed sector in France, representing around 7% of the French GDP in 2014[21]. The agribusiness plays an important role  worldwide. Indeed, due to the growing population and the need for more resources, investments in the agribusiness and its research seem important, if not essential.

Emerging urban farms are one of the solutions that might be considered. Urban farms address the needs of this key sector. The agro-food business could financially support the development of urban farms or could potentially eliminate them, the same way in which petrol companies have contained the diffusion of electrical cars.

 

Who are the actors involved?

Since urban agriculture is characterised by “bottom-up” initiatives, public policy is minimal. Thus, it is difficult to classify the diversity of actors involved. The actors are all those who perform an action between production, consumption, promotion, management to financing various initiatives[22]. According to Roger’s adoption curve, these actors are called the early adopters of urban farming. Indeed, this way of producing food is recent, with little involvement – it is estimated that 700 million people all around the world are somehow involved with urban farming,  participating and encouraging others to become involved[23].

It is important to note that cooperation is essential for these initiatives. Urban farming requires access to land, water and all the resources necessary for production[24]. Therefore,  the early adopters can vary from working class to the rich who seek a good return on their investments.

 

The effects on Western societies reach far and wide for future development. Indeed, urban farming affects the daily life of city inhabitants’ involved with the process. The question is, in what way does it affect them?

Nowadays, urban farms tend to the greater needs of modern society and can be built for a number of reasons: education, social integration, training or re-entry programs. They serve as a means to improve access to food within a community, while the savings made on food transportation makes it financially viable and more environmentally reliable[25]. They assist the development of worldwide farming through investing, buying land, and encouraging community development, creating a network of urban farms adaptable to all cities. In this way, competition is closely linked with cooperation as ideas and  concept are interlinked. Urban farms are an exception to the globalised system whereby there is no win-win – in this case, all actors benefit from each other.

 

What are the positive impacts of urban farms?

Urban farms have a positive impact on society, while maximising limited resources available to them. An example of an innovative urban farm is “Square Roots”[26]. The company has redesigned traditional shipping containers to house farms, using 8 gallons of recycled water per day, to feed the plants. Production volumes at Square Roots are high, producing between 40 and 50 pounds of fresh produce weekly. Due climate controlled containers, produce can be grown all-year round.

An example of a container at Square Roots.

Various initiatives focus on the community as a whole. For example, ConnectHort Initiative, in Barcelona, Spain, is directed at those who are retired, in order to maintain social interaction and ensure the availability of outdoor activities. Food is produced for self-consumption, thus empowering self-taught initiatives and encouraging social integration. Fostering a sense of well-being and cooperation is important, hosting children from local schools weekly[27].

An example of children playing at the ConnectHort Initiative[28].

 

A threat to urban farms exists though…

The threat posed to urban farms is the fact that they are bottom-up initiatives, they are informal and therefore non-institutionalised. Since the land they operate on could potentially be redeveloped or re-claimed, they tend not to have long-term goals unless they are institutionalised in society, which would make them protected by public policy27.

 

Application of urban farms to smart appliances

The example of Square Roots illustrates how urban farming is related to smart appliances[29]. Nowadays, household appliances are responsible for approximately two thirds of all energy consumed. Industrial appliances are also major energy users.

In the next decade, scientists and engineers will try to develop domestic and industrial appliances which will be intelligent, networked and smart devices. In this way, they will create complete energy consuming, producing and managing systems. Collectively, these systems will be related to each other, and thus able to communicate among themselves in order to regulate and control the whole system. This interoperability is a key factor in creating an IoT ecosystem[30].

In the case of urban farms, smart appliances will include heating, ventilation, irrigation, air conditioning systems and storage systems. In order to ensure these systems will be technically and commercially viable and widely adopted, a combination of different appliances from different vendors has to be possible. The whole system has to be able to communicate with service platforms from different energy service providers in order to limit and manage energy use.

 

Examples proving the expansion of urban farms

Urban farms have sprung up worldwide in various shapes and sizes. For example, in the UK, GrowUp Box is a shipping container where Tilapia fish are farmed. Above, greens are cultivated in vertical columns and water from the Tilapia tanks circulates through the columns, where the fish waste provides nourishment to about 400 plants. These fish and greens are sold to restaurants[31] [32].

An example of a GrowUp Box.

Another example includes the Pasona Group, Tokyo, Japan where tomatoes dangle from the ceiling, herbs grow in meeting rooms and a rice paddy are found in the lobby32.

Finally, in Singapore, Sky Greens is a “plant skyscraper”. It holds up to 32 trays of various green vegetables on a tall, narrow, rotating structure32.

Urban farms have also penetrated the French market. For example, “La Ferme Urbaine Lyonnaise”, is a pilot site for the growth of plants, fruits and vegetables in the Villeurbanne, France[33].

 

To conclude, urban farms have a positive impact on society and in the communities within which they are established. They change city inhabitants’ way of living and their way of considering food production and processes. It is a sustainable way of encouraging environmentally-friendly progress and innovation, while promoting fair-trade. As outlined above, urban farms are closely linked with smart appliances, facilitating the technological evolution.

However, according to the British Food Journal, a study of 370 self-identified urban farmers in the US found two-thirds were failing to make a living, although only one-third indicated they operate as non-profit. In addition, the greenhouses focus on leafy greens with a maturity of 30 days rather than dense crops, such as corn and potatoes which take much longer[34]. This calls into question whether urban farming is just a fad.

Although, if we look at the evolution of technological appliances, the cost at launch is significantly higher than when they are widespread. There is possibility that the seed capital required to start an urban farm will be reduced, and the horizon to break-even will be reduced. Therefore, urban farms are an emerging market, within developed countries; it is not profitable enough yet to become sustainable in developing countries due to the lack of technology, access to vital resources, knowledge and seed capital[35].

 

N.B. We found numerous sources online, providing us with thorough, in-depth information surrounding the evolution of urban farms, the technologies involved and many real-life examples. Since these sources are extremely thorough, offering opinions and advice from those considered experts in the industry, we did not feel the need to directly contact an expert. All information we used was from company websites, blogs, journal articles providing examples and reports.

 

Licensed by Creative Commons


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