your outlook for 2020:

Horticultural perspectives from North America, Russia, India, Australia

After a year full of hard work, the holidays are upon us - a perfect time to take a trip around the world. So get on board our HortiDaily cruise ship, kick back and enjoy a nice cocktail (eggnog, anyone?) as we visit professionals around the world to see how they're doing. First stop: the United States.

US: Dynamic market with plenty of opportunities for CEA
For Joe Swartz with AmHydro, the past year has been quite productive. Apart from large projects in India and Singapore, they have also designed and built another hydroponic system for Gotham Greens in Denver, and launched additional hydroponic farms across the US and Canada.

According to Joe, the US market is a very dynamic market that is full of opportunities. "As markets all across the US seek to source more local, sustainable, and pesticide free products, demand for CEA (Controlled Environment Agriculture) crops continues to rise. However, many challenges exist - including the tremendous financial investment and media coverage of CEA technologies that are not showing good performance (i.e. indoor vertical farms and shipping container farms)."

Robert Colangelo, Founding Farmer of Green Sense Farms, also points to the unique position of the US market, where local cultivation is paramount. "Produce cultivation and distribution is unique in the US market, compared to areas like Europe or Japan where produce travels short distances. The US covers a large geographic area and 90 percent of the lettuce and greens are grown in large acre field farms in two areas of the country - Salinas Valley, CA and Yuma, AZ. Produce travels 3-5 days to get to the Midwest and East Coast. This distribution model has created an opportunity for greenhouses and vertical farms to disrupt the market, by building local small-scale production facilities closer to the consumer."

This has opened a window of opportunity for indoor farming, but it does have to be done properly, Robert says: "For a vertical farm to be profitable it must be efficiently constructed to grow high quality crop, consistently, year-round, and it must have a good business model. Technology now allows us to build efficient vertical farms and greenhouses, the trick is coming up with the right business model." A JV with Spanish greenhouse manufacturer and builder RUFEPA allows Green Sense Farms to build combined vertical farms and greenhouse projects to grow a wider range of crops indoors.

Along with all the opportunities, Robert also sees a number of current and upcoming challenges:

  • Labor shortage: "There’s a shortage of semi-skilled laborers to conduct tasks at field farms, greenhouses, and vertical farms. This is in part due to the Trump administration's immigration policies and the fact that these are low pay, hard labor jobs that many Americans do not want to do. With labor in short supply it will drive innovation in automation and AI. The challenge is balancing OPEX and CAPEX to find the proper mix between automation and manual labor."
  • Trade war: "The trade war has created tariffs that hurt farmers exporting commodity crops to China. It has also put a tariff on imports manufactured in China. Indoor farms have been impacted by tariffs and the increasing cost of LED lights manufactured in China, that are exported to the US."
  • Climate change: "As the climate continues to change, water and soil will become limiting factors in agriculture. This creates an opportunity to optimize plant growth by combining farming technologies that conserve soil and water. The challenge is to listen to the plant, use science and be agnostic to which growing technology works best. Field farms, greenhouses and vertical farms can grow plants from seed to maturity. But some growing technologies are better at certain stages of growth - a vertical farm can be great for propagation where a plant is tender and vulnerable, requiring a highly controlled environment, a greenhouse can be cost effective to grow transplants to maturity, and a field farm is great for commodity crops and growing plants to seed. Each growing technology is a tool and we have to get better at using all the tools in the shed."
  • Energy: "Designing farms to use less energy and finding cost effective renewable energy sources to control climate, power LED lights and to move water. This will reduce operating costs and make farming more sustainable."
  • Cannabis and the supply chain: "The rapid growth of the cannabis market is putting pressure on the supply chain creating shortage of materials / equipment, labor and raising operating costs. This will create an opportunity to innovate and come up with more cost-effective technologies to do more with less."

Canada: 'Wild Wild West'
Let's cross the border and head up north, into Canada. For Nadine Stielow of Thiel's Greenhouses, 2019 has been a year of sweeping change. "Learning a new hydroponic production method while maintaining the status quo in ornamental production created many new learning opportunities for management and our entire team", she shares. "Right from staffing to traffic flow (for better biosecurity) to our IPM methods within our facility, had to be scrutinized and updated for greater efficiency. We were growing in all ways, both literally and figuratively."

Nadine showing off the Swiss chard, about three months into the first crop runs

Early in the year they completed the expansion project with the final build and start-up of the new DWC hydroponic facility. "Although our spring ornamental side remains consistent in terms of the retail and wholesale buyers, the overall dollars per invoice was down slightly for us and likely within our immediate area. Consumers were being cautious due to a slow down in our Alberta economy and it reflects in discretionary spending on products like spring flowers. However, purchases of veggie starter plants was up with consumers taking a greater interest in growing their own food and the full experience of gardening", Nadine adds. "The hydroponic fresh greens brought new faces to our retail facilities and the general trend was everyone wanting fresh local food."

She points to the opportunity that exists in the food production sector with increasing demand of locally grown and chemical pesticide free products. "With the exponential growth in global population there is also expanding opportunity in food production in the future and we see this even at our local level. Consumers are searching for sustainable food supply from trusted sources."

While there is an opportunity here, there's also the challenge of finding immediate sales and immediate market opportunities at a local level. "Global awareness and excitement over the fresh healthy food trend is very real but it needs to translate to the individual grower’s area. In our case we are very niche and compete with large brands, hence our challenge is to be cutting edge unique. Sell to the critical and discerning buyer that wants a distinct product."

Checking out the crops during a visit from Signify

Zooming in on Canada specifically, due to the size of the country and varying economies from province to province it's difficult to comment on Canadian markets as whole. "Even within Alberta we saw unique variances from the south and central areas reporting OK sales to lower sales over all the varying facility sizes", Nadine says. "And our more northern growers reported better than average sales."

The legalization of cannabis over the whole country at once also has made for many changes within the industry, with facilities changing their production to entire new crops. "With many greenhouses converting to cannabis production there will be increased opportunity to fill the void in both flower and food production", Nadine believes.

All in all, it’s been an interesting year in Alberta with government and policy changes that directly affect agriculture and as a business owner, navigating the changes to ensure profitability. "I’ve heard this term many times from many industry colleagues and have used it myself: that right now, with our industry navigating change and new opportunities it's been coined the ‘Wild Wild West’, new and different and full of quick response change. It’s an exciting time to be in the greenhouse business!"

Russia: Slowdown in market growth, potential for organic vegetables
The Russian greenhouse market has seen major growth in recent years, but that is expected to slow down in the near future, according to Inna Golfand, partner of NEO Center. "A key event for the Russian greenhouses was a reduction in the level of state support, which served as an important growth driver for this industry in previous years. Market players think this would cause freezing of a number of new projects and general slowdown in market growth. In addition, market conditions are tightening for producers, competition is growing, the degree of cucumbers market saturation is already close to 100%."

Angelica Zarutskaya of Russian greenhouse complex Botanica, which grew by 27 hectares this year, agrees. "We expect a high level of  competition between the greenhouse growers in cucumbers", she says, adding that tomato growers are also looking to branch out into different tomato types. "For example: beef tomatoes are less and less coming to the shelves of supermarkets, medium size tomatoes are more replacing them."

In response to these developments, producers are forced to look for alternative product mixes, shifting focus to tomatoes and new products for the market, like eggplant, salads, and berries. The VAT rate increase in 2019 also led to growth of energy tariffs and, as a result, growth of production costs. "At the same time, the possibilities for price correction are limited by the intensifying competition and harsh working conditions with retail chains", Inna says.

"In the coming years, we expect an increase in investor interest in the implementation of greenhouse projects in the northern regions of the country and in the Far East, where there is still an acute shortage of vegetables and there is the possibility of obtaining state support and soft loans", Inna continues. "However, market growth will slow down. Existing greenhouses will be forced to increase their operational efficiency in order to maintain an acceptable level of profitability. In addition, increase in activity in the direction of city farming is likely. A number of small projects of vertical greenhouses are being implemented throughout Russia, already."

Another big opportunity from 2020 onward will be organic produce. Next year, the law on organic products comes into force. "The implementation of its provisions may contribute to the formation of a separate market for organic vegetables", Inna expects.

Botanica is gearing up for the future with a new greenhouse complex, designed for growing tomatoes using light crop technologies. "Up to 20 thousand tons of tomatoes are planned to be harvested here annually", Angelica says. And it doesn't stop there. In 2021, they plan to build another greenhouse on 27 hectares. "As a result, the total territory of the enterprise will be 95 hectares or almost one square kilometer. Such areas allow you to grow up to 70 thousand tons of vegetables per year."

India: The waking giant
Traditionally, India has been focused on the open field when it comes to agriculture. Recently, however, growers in the country have been discovering the benefits of indoor cultivation, offering huge potential for investors and horticultural companies in the South Asian country.

"The Indian market is unique in many ways", says Srishti Mandaar, co-founder of Red Otter Farms in Uttarakhand. "Considering that nearly 58% of India’s population subsists on farming, the farmer income from agriculture is very low. While agricultural production of tomatoes, oilseeds, lettuce etc., makes India a world leader in total output, the yields per acre are amongst some of the lowest in the world."

In the last decade, much has been done in terms of technology advancements, but Srishti calls it a drop in the ocean at present. "The farmers themselves are incapable of making large investments due to small land-holdings (average land-holdings are less than 2 acres) and therefore low incomes. Agricultural research leading organisations such as ICAR are seeking solutions to these problems themselves.

"In this scenario, a small number of ‘progressive farmers’ are leading the change. Using controlled environments, hydroponics, permaculture and aquaponics, they are changing the paradigms of agriculture. And so the juxtaposition of old, traditional formats is continuing at the same time as new age farming is. Given the scale of the agricultural sector, it is interesting."

One example of this development was seen in April, when AmHydro opened India's biggest hydroponic farm in Bangalore, Farms2050. The 45,000+ square foot controlled environment agricultural (CEA) facility provides local growers with the ability to produce large volumes of nutritious, high quality crops.

Crops growing in the Farms 2050 greenhouse in Bangalore

Tony Bundock of Australian company Genesis Horticultural Solutions also sees a lot of opportunity for growth in India, where they've been working to support Priva based installations. "Priva are certainly moving into India in a progressive way. The Oceania Account Manager – Marcus van Heijst has been involved in discussions to establish another dealer in the area.

"On my level, the challenge with India is getting growers to adopt the technology and for many of the farmers they are a long way off getting involved in substrate growing with Priva irrigation control. However, there are a couple of new large facilities being established in Hyderabad, and I may well be involved in the end user training for irrigation and Cravo roof control using Priva. An exciting time to be involved in the industry!"

Such training programs will help growers like Red Otter Farms find new team members. "India currently doesn’t have the thought-leadership in this arena", Srishti says. "Our Founder and Managing Director, Anubhav Das, is currently building a training program to develop people in this industry in India."

Srishti Mandaar and Anubhav Das, founders of Red Otter Farms

That's the supply side of things, but there's also demand to consider. "There are huge gaps between the consumer classes – the upper end of which is characterized by a well traveled, knowledgeable set of people who are as aware as people in any metro city of the world – and they demand a wide variety of produce catering to their varied tastes. On the other hand, you have the set of people who are very ingrained in their traditional, local food profiles – and they demand produce to their tastes", Srishti notes.

To meet this demand, Red Otter Farms have grown their integrated aquaponics facility to a nearly 40,000 square feet footprint, allowing them to significantly increase their client outreach from January 2020. "While expanding our distribution systems is going to be a challenge, we believe that it is a happy challenge", Srishti says. "Beyond that, we are now entering the growth phase in our company. We will be finishing the building out of our proprietary farm management system in the first quarter and thereafter looking to scale our production facilities. For the expansion, we have already started our due diligence on partnerships. As we plan to build facilities that can cater to every sector of clientele, we are assessing partnerships for greenhouse builders, automation suppliers and given our single-minded focus on aquaponics – we are even working on developing our own supply chains for equipment. So while building these partnerships will be challenging, we are hopeful of finding solutions that are right for us."

Australia: Berry growers eager to adopt high tech
Now, let's cross the Indian Ocean into the Southern Hemisphere, where we find Tony Bundock of Genesis Horticultural Solutions in his natural habitat, saying he's seen a really productive year. "We have grown our market share in the training arena, and also been awarded some government funded training and research initiatives. Our involvement with providing growers with onsite end user Priva training continues to gain momentum, and this has been further enhanced by Priva’s commitment to support our training programs."

According to Tony, the Australian market continues to develop and expand in terms of hydroponic growing, especially in the berry sector. "Australia is one of the most dynamic in terms of adopting technology to further production methods, and this is most prevalent in the berry sector who have taken up hydroponic growing methods and the utilisation of computer based irrigation strategies."

A major challenge he sees in the coming year is maintaining the ability to be responsive and accessible to an expanding customer base. "As our business has grown, we still aim to be able to respond almost immediately to customer requests and needs, and we are adopting new technologies to enable us to continue to provide a first rate training service. This also will be leading us to providing a dedicated online training platform for Priva end users that will be focussing on training on strategy settings." In 2020, Tony is excited about the potential of expanding their operations across the wider horticultural global community. "We will be attending Greentech again in 2020 – always a great event!"

Svalbard: Extreme environment welcomes global investments
Our last port of call is Svalbard, a Norwegian outpost in the Arctic circle. The archipelago is 100% dependent on imports, and they also ship back all of their waste to the mainland, says Benjamin Vidmar of Polar Permaculture. "We have 180 days of 24 hours of darkness and 180 days of 24 hours of light. It is an extreme environment and quite challenging to do agriculture here. The Spitsbergen treaty makes it special to do business here and everyone is welcome. To be able to grow here means that we can export our systems and ideas to other locations around the world."

Benjamin Vidmar. Picture credit: Daniel Byström

Despite the challenging circumstances, the year has been very productive for Polar Permaculture. "We have confirmed our tours for 2020, and are presently working with a big company to scale up production", Benjamin says. "We are positive and are making a profit finally".

For the coming year, Benjamin says they're in need of a permanent location and investment capital to implement their feasibility study. "We're looking forward to the possibility of working with Store Norske and the Lokalstyre to get a permanent location and to get the investment we need to build a large scale operation. We have letters from all hotels, restaurants and the grocery store to buy from us, so we are very close to cracking this nut."

And that brings our journey around the world to an end. We hope you enjoyed the trip, and watch your step as you walk down the gangway into 2020. We wish you happy holidays and a productive new year!

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