Recent assaults on the stocks of several publicly owned players in Controlled Environment Agriculture (CEA) have raised questions as to whether such signs of growing pains represent a mere hiccup tied to transitory, outside factors or to something more fundamental.
“The positive vision of farming along more sustainable lines,” read a Jan. 22 dispatch from investment platform Seeking Alpha, “has met a cold reality and an uncaring stock market.”
Exhibit A is AppHarvest, the ambitious, indoor farming project based in Morehead, Kentucky. Two years ago, Site Selection was among the many national media outlets pursuing stories about a venture hailed elsewhere as “the future of farming.” In an interview with Site Selection shortly after the first shipment of AppHarvest tomatoes went out, founder James Webb, a Kentucky native, was full of pride.
“I was on the forklift that loaded the semi-truck with the first boxes,” Webb told us. “You can’t keep me away from the live action. It was very gratifying to finally see the product going out the back door.”
Two years later, the cold realities that confront App Harvest include an investor revolt, acknowledged cash flow problems, expansion plans on hold, and even suggestions that AppHarvest tomatoes just don’t measure up, having failed in many cases to meet the USDA Grade
No. 1 quality demanded by retail customers of Mastronardi Produce, the AppHarvest distributor.
The dreary flow of news aside, Webb and AppHarvest continue to soldier on. In January, AppHarvest achieved a milestone when it launched commercial shipments from a 60-acre indoor facility in Richmond, Kentucky, “the first time ever,” the company said, “that all facilities in the AppHarvest network are shipping” to Mastronardi customers.
Still, Growth Seems Inevitable
Whatever growing pains some CEA producers happen to be enduring right now, there remains widespread agreement that fundamentals will overtake them. Quoted in a recent report by the University of Georgia Cooperative Extension’s College of Agricultural and Environmental Sciences, UGA Horticulture Prof. Marc van Iersel suggested that a mass move toward indoor farming is all but baked in.
“One of the reasons a shift is happening,” he was quoted as saying, “is that 90% of all leafy greens produced in the U.S. are produced in California and Arizona. That area is in megadrought and there is no end in sight.” Indoor, he said, offers “predictable, year-long production.”
AppHarvest opened its fourth location in Richmond, Kentucky.
Photo courtesy of AppHarvest
Quoted in a Jan. 25 article posted to greenhousegrower.com, a CEO whose investment firm has gotten in on indoor farming suggested a similar geographical tilt. Food retailers, said Dave Chen, founder and CEO of Equilibrium Capital, have become “increasingly concerned about the resilience of their fresh produce supply chain because of the volatility of what they were starting to see, because so much produce comes from California.”
Equilibrium is a reported investor in Little Leaf Farms, an indoor lettuce grower based in Devens, Massachusetts. Billing itself as the country’s No. 1 brand of “packaged lettuce sustainably grown through controlled environment agriculture,” Little Leaf announced in June that it had raised $300 million in new capital, with equity financing led by The Rise Fund, which invests in mission-driven companies identified as having positive environmental impacts. Bank of America is providing debt funding, another signal that big investors remain bullish on CEA.
“By investing in companies like Little Leaf,” said Bank of America Senior Relationship Manager Randy Mitchell, “we’re helping to scale more low-carbon solutions.”
In July, Little Leaf opened its first out-of-state facility, a 10-acre hydroponic farm in McAdoo, Pennsylvania, off Interstate 81 south of Scranton. With construction having launched on a second such greenhouse, Little Leaf envisions having 100 acres of greens growing under glass at the site by 2026.
In a further reflection of how legacy muscle is asserting itself to support CEA, technology giant Siemens at the start of the year announced a collaboration with 80 Acres Farms, an indoor grower of salads, herbs, tomatoes, cucumbers and microgreens based near Cincinnati. In a release, Siemens said it will work with Infinite Acres — a strategic partnership among 80 Acres, the Netherlands-based tech company Priva and UK-based online retailer Ocado — to support “the industrialization and scaling” of a platform that Siemens says encompasses crop management software and algorithms, environmental controls, robotics and automation.
“In this moment of change and disruption,” said Siemens USA President Barbara Humpton, “what I see at 80 Acres Farms represents both the purpose and the power of the industrial technologies now readily available to us: the capability to invent anywhere, then to scale our world-changing solutions everywhere.”
With vertical farming facilities in southwestern Ohio and a newly opened grow operation in Florence, Kentucky, 80 Acres Farms last summer announced its first location outside the Midwest, a $120 million indoor farm that’s to bring 150 new jobs to Covington, Georgia, east of Atlanta.
Local Bounti’s Big Plans
While many such CEA enterprises seem inclined to growing first locally, then regionally, Montana-based Local Bounti is going with a nationwide buildout, seeking to supply a network of retailers within no more than a 400-mile radius, shorter than the traditional produce supply chain that can extend 1,000 miles and beyond.
“Local Bounti’s strategy is to be ‘local’ in more places.”
— Brian Cook, President, Local Bounti
Headquartered 45 minutes south of Missoula on U.S. Hwy. 93a, Local Bounti built the first IPO-funded greenhouses west of the Mississippi River, beginning in 2018. Through greenfield development and acquisitions — the company says its proprietary “Stack & Flow” technology can “bolt on” to existing greenhouses — Local Bounti is soon to close a coast-to-coast loop with a new and already expanding location in Byron, Georgia (along I-75 near Warner Robins, south of Macon) and new indoor facilities planned for two locations in Texas.
Site Selection wanted to know why the far-flung buildout. Local Bounti president Brian Cook responded via email in late February:
“Local Bounti’s strategy is to be ‘local’ in more places. Resoundingly, retailers around the country told us that local was preferred by their customers. To deliver on that demand, we couldn’t build a bunch of facilities in one state, deliver across the U.S., and call ourselves local.
“We are all in on the local strategy — it’s in the name of the company — and developed our high-yield, low-cost modular technology to be built closer to the consumer.
“Transporting agriculture across large distances puts a strain on resources and reduces the quality of the product that people have access to buy,” Cook continues. “We know that locally grown produce lasts longer, reducing food waste and in consequence making the food more affordable and available. In many instances, traditional greens are traveling over 1,200 miles compared to Local Bounti’s 400-mile distribution radius. Local Bounti greens travel 80% less food miles than traditionally grown greens.”
Like AppHarvest, Local Bounti is facing challenges, the chief indicator being that its stock has lost 75% of its value over the past six months. Reached by email, a Local Bounti spokesman declined to comment on what that might reflect.
