The vertical farming market was valued at USD 3.1 billion in 2021, and it is expected to register a CAGR of 25.0% from 2021 to 2026 to reach USD 9.7 billion. Major drivers for the growth of the market are high yield and numerous other benefits associated with vertical farming over conventional farming, advancements in light-emitting diode (LED) technology, year-round crop production irrespective of weather conditions, and requirement of minimum resources. Moreover, positive impacts of adopting vertical farming on the environment, potential market opportunities in APAC and the Middle East, and cannabis cultivation through vertical farming are expected to create growth opportunities for the market.
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The hydroponics growth mechanism is used widely by commercial growers. This mechanism is easier to set up, costs less than other mechanisms, and has a higher return on investments (ROI). Comparing the investment required to set up a hydroponics and aeroponics facility of the same size, aeroponic requires a high initial investment. Hydroponic mechanism recycles the maximum amount of water with minimal wastage making it the most water-efficient method of farming. The control over the amount of nutrients to be delivered to plants can be done effectively, enabling control over the growth process and influencing factors such as the speed of growth and size of the plants. In the hydroponic mechanism, in case of a power outage, the plants can survive for a long time since the growing medium continues to supply water and nutrients, unlike aeroponics, where the plants can die in just a few hours due to malfunctioning or failure of mist spraying nozzles.
The vertical farming market is largely dominated by the building-based vertical farms segment as leading companies in the market are involved in this type of farming. Building-based vertical farms generate better per square foot revenue than shipping container-based vertical farms, as building-based vertical farms incur lesser capital as well as operating expenses (for same area). A shipping container-based vertical farm is ideal for serving a small base of consumer, nevertheless, can be ineffective and costly to serve a larger consumer base. However, the market for shipping container-based vertical farms is likely to register a higher CAGR as it is a ready-to-use (plug and play model) solution that can help to cater to the rising demand for fresh and high-quality produce. Shipping container-based vertical farms are flexible, easy to operate, and portable. The rising demand for fresh produce is expected to create notable growth opportunities for this segment in the next few years.
Lettuce is extensively cultivated in vertical farming. It is quick and easy to grow, have a fluctuating demand throughout the year, and available in a wide variety, which allows farmers to switch products without changing to a whole new crop. The demand for nutritive and organic vegetables has increased at a significant rate in the last few years due to the growing health consciousness among consumers. Consumers are increasingly focusing on healthy aging and are adopting several measures to prevent diet-related diseases. Organic food products not only satisfy hunger but are also considered as essential sources of nutrients. They prevent nutrition-related diseases and improve physical and mental well-being.
In the vertical farming market, the hardware remains to be the dominant segment in terms of market share throughout the forecast period. Vertical farming is a form of controlled environment agriculture practice carried out indoor with the artificial environment created to assist the growth of crops. The sunlight, required for the process of photosynthesis, is replaced with artificial lights in vertical farming. Hydroponics, one of the technologies of vertical farming is the process of growing crops without soil, where a continuous supply of water with necessary nutrients is provided to the roots of crops. Likewise, to create a suitable environment for growth, climate control systems are installed, and to track and monitor the growth of crops sensors are installed. Companies manufacturing these hardware components ensure the development of products highly suitable for the growth of crops indoors. As the productivity of vertical farms highly depends upon the efficiency of the hardware system installed, they play a vital role in the vertical farming market. The services segment is expected to register significant growth during the forecast period due to the increasing adoption of robotics and automation to minimize labor costs, boost production efficiency, and reduce overhead costs associated with various operations in vertical farming.
APAC is the fastest-growing market for vertical farming. In APAC, the companies involved in vertical farming are investing and expanding their operations in other countries. For instance, in November 2019, Sustenir (Singapore), an agri-tech company, launched a 30,000 square foot hydroponic vertical farming facility in Tuen Mun, Hong Kong. Hong Kong is a densely populated country with limited availability of land for farming. The produce from conventional farming is not enough to serve the local demand, and hence the country highly relies on imported produce. Similar is the case with other countries such as Singapore. In order to decrease the dependency on imported food and reduce the food waste in the transportation process, growing a significant amount of food locally in limited space is the solution offered by vertical farming, resulting in the expansion of farms by companies in this region.
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Companies from other regions, too, are investing in APAC countries to establish vertical farms. For instance, in 2018, Plenty (US), a vertical farming company, announced its plan of building 300 vertical farms across China. Vertical farms in the region are also backed by advanced technologies such as LED technology that assists the crops cultivated with photosynthesis by providing the right intensity of light. Everlight Electronics (Taiwan) is a manufacturer of LEDs for vertical farming. Vertical farms have also entered into partnerships with agriculture technology providers to enhance the productivity of their farms. Asahi Techno (Japan) uses Illumitexâ€™s (US) LED solutions to enhance the growth process of the crops. Such investments and partnerships are expected to catalyze the growth of the vertical farming market in the region.