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Yes, It May Be Time for Skyscraper Farms

18 October 2012 in Trading Ideas

It’s a bird, it’s a plane – it’s…corn and lima beans growing in a 12-story building?

For advocates of “vertical farming,” this is the future of agriculture, and as a Wall Street Journal article published last Monday described, the practice is pretty much what it sounds like: Instead of transporting food from farms into cities, you grow it in urban greenhouses that stretch upward.

In small steps, the idea is already beginning to happen. The superbly named Plantagon, a 12-story triangular growhouse, is being built in Sweden, and a former meatpacking plant in Chicago is growing vegetables that float on rafts and consume waste from nearby fish tanks.

For vertical farming advocates, the benefits of widespread implementation will be immediate. You won’t need as many delivery trucks using fuel (and creating exhaust), while city residents get easier access to fresh, healthy food.

Down the road, indoor farming fans say the practice could cut pesticide and herbicide use, which pollutes the environment in agricultural runoff. Preserving more natural ecosystems like forests could help slow climate change, and the more food that’s grown indoors, the less susceptible the country is to environmental crises like the recent drought that devastated this year’s corn crop.

The drought affecting the Midwest, of course, is having a huge impact on the prices of commodities and food. According to a recent Los Angeles Times story, analysts expect overall food costs to rise 5% to 20% by the end of the year. The Rising Food Prices motif is up 0.1% in the past month, and 10.1% in the past three months, compared with the S&P 500’s decline of 0.1% and rise of 6.5%, respectively, in the same timeframe.

And while the initial cost to build vertical greenhouses is expensive, advocates say planned revenue streams will help make up for that – as will reduced energy costs due to “green” usage of waste.

However, those who question what vertical farming can ultimately accomplish aren’t sold that the practice makes economic sense. They say conventional farms exist for a reason: They’re the simplest and most efficient places to grow food. Doing that indoors, with artificial lights and other special equipment, would cancel out any benefit to being close to consumers.

But vertical farmers call this an unfair comparison, pointing to subsidies like traditional farming gets in the form of crop insurance, which reduces the risk from unpredictable weather. If the costs for standard farms continue to rise, they say, farming in the sky will continue to look better by comparison.

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