Controlled Environment Agriculture (CEA), especially related to cannabis cultivation, is one of the world’s most dynamic and competitive industries. Due to its rapid growth, sophisticated cannabis operators are actively looking for opportunities to standardize, optimize, and increase margins without sacrificing quality. With this in mind, many cultivators are transitioning antiquated single-level facilities into highly efficient vertical farms, with multi-level systems that are utilized from nursery to drying and then storage of the finished product.

These trends go far beyond North America and cannabis cultivation. Vertical farming continues to grow globally and is utilized across several industries and high-value crops. We are seeing a continuation of these trends and with a year full of advancements, improvements, and installations. In this article, we’ll review several advantages of vertical farming and uncover the top trends to watch.

Why Choose Vertical Farming?

Vertical farming involves stacking multiple grow levels on top of one another. In this way, a cultivation operation can double or triple the number of plants grown because they are leveraging the footprint of traditional single-level growing methods. While vertical farming typically requires more investment upfront, it quickly pays for itself with boosts to yield and profitability per square foot.

Top 4 Vertical Farming Trends

Although commercial cannabis is a nascent industry, trends are starting to emerge. They may not come as a surprise but without a full understanding of what they are and why they matter, players in the industry may be significantly affected.

Here are the four emerging trends to watch:

1. The rapid expansion of the vertical farming market
2. Increased access to institutional financing and banking services
3. Rapid advancement in agricultural technology and systems
4. Increased competition and pricing pressure

This is a simple roadmap of the terrain ahead, but now it’s time to take a closer look at each trend and what cultivation operators need to be aware of.

Rapid Expansion of the Vertical Farming Market

To get an idea of how quickly the cannabis industry will adopt vertical farming, it’s important to look at the growth projections for commercial farming of food in vertical farming systems. The vertical farming industry is projected to grow at a compound annual growth rate (CAGR) of 20.2% from 2020 to 2025. In that time, it’s projected to reach a market cap of $7.3 Billion in 2025, roughly 2.5x the 2020 market cap of $2.9 Billion. ^[1]

Vertical farming’s relative growth is a sign of the rapid advancement, investment, and optimization cannabis growers are making to achieve higher yields, and better quality while lowering costs per square foot. With waves of funding and technological upgrades surfacing,  legacy growers are compelled to make a choice between embracing innovation or staying their course. Innovation can be costly, but without change, cultivators may lag in output, quality, and consistency.

Another factor driving the rapid expansion of the vertical growing market is the ongoing expansion of the legal cannabis market in America. In the November 2020 election, voters in Arizona, Montana, New Jersey, and South Dakota voted to legalize recreational cannabis, continuing the nation’s spread of legalization. Since then, state legislatures in New York, New Mexico, and Virginia have approved bills to legalize cannabis for recreational use.

Now, in fact, there are more states that have legalized (either medical or recreational) than states that have not.  Paramount to this success was the ‘essential’ designation of the cannabis industry, which allowed it to continue operating through lockdowns. Over the past year and a half, many cannabis businesses incorporated delivery options, making it an industry norm. As new concepts have been adopted, it has shown how cannabis use trends can shape the industry’s future.

According to Forbes, “Almost half of the cannabis consumers aged 21 and up have replaced or reduced their alcohol consumption with marijuana since the beginning of the coronavirus pandemic, according to the results of a Harris Poll released [December 2020].”

The rise of cannabis use and acceptance is a key indicator that the cannabis industry has an eager customer base that will continue to expand. And as a result of these market trends, vertical farming operations are growing in confidence and ROI.

Watch our vertical farming cultivation tools overview below:

Increased Access to Institutional Financing and Banking Services

A point of contention for cannabis business owners has been their inability to access the same financial services as businesses in other industries. Being forced to carry cash on hand, there has been minimal action to move away from the industry’s past. However, in April 2021 cannabis businesses gained legal access to banking and financing services. Tapping into the banking ecosystem will now have a massive impact on legal cannabis business owners by providing legitimacy and opportunity for the industry to flourish.

Most importantly, this banking access opens the floodgates for investors to pour into the industry. For example, a cannabis company looking for capital to increase capacity could seek a standard bridge loan vs. taking a hard money loan, which comes with increased risk and high-interest rates. Access to the vast pools of institutional capital makes business expansion more feasible and worthwhile for entrepreneurs than alternatives like offering several private investment rounds or taking a high-interest loan.

Efforts to give cannabis business owners access to banking services started in 2019. The Senate vote was scheduled to happen in 2020, but the bill was held up due to COVID-19 reprioritizing government initiatives. In April 2021, the United States House of Representatives passed the SAFE Banking Act, which indemnifies banks from federal prosecution for working with legitimate cannabis companies. This Senate vote on legalizing cannabis industry banking was the culmination of a two-year-long effort and will benefit the industry tremendously.

Access to market-rate financing and other agricultural lending programs will propel the vertical farming industry’s growth by reducing the burden of the upfront capital required to get into vertical farming. All the equipment that we’ve outlined previously requires investment by the company, it’s investors, or sometimes more simply, through a bridge loan. Now that there is an open door to the same opportunities and programs for financial services, the industry will see an increase in new legitimate cannabis businesses making competition even more aggressive.

Advancement in Agricultural Technology and Systems

Most farmers learn right away that it’s essential to learn, master, and trust equipment. Leaps in technology have defined advancements in the history of agriculture, and vertical cannabis farming is no different. With the previously discussed industry growth attracting more investment and more competition, growers who can get a leg up through the use of technology can create a sustainable amount of market share.

Software for monitoring and managing growing conditions and equipment is an area where substantial innovation is happening. Although manual data collection and tracking are on the decline, there are many cultivators that are still using notebooks, spreadsheets, and whiteboards.

Software companies are deploying vertical farming technology and automation into cultivation facilities automating many of these tasks. These solutions are creating an environment where data-driven decision-making and crop steering are optimizing the chemo-type expression, overall yields of biomass, and active ingredients. Many of these systems and software packages enable operators to adjust growing conditions, feeding, and equipment functionality remotely. Over the past year alone, the need for these continued advancements in data collection, data analysis, and other innovations has not just been a trend but has been noted as an essential tool for success.

In addition to technological advancements, product innovation has also been on the rise. Enhancements in racking systems, such as the  TRAK-FREE™ Carriage System are setting the tone for what’s to come. Utilizing a single guide rail along the back row eliminates the need for multiple tracks providing clearer walkways. Most recently, product innovations like the ELEVATE™ Platform System are also having an influence on the industry. This robust yet lightweight, modular deck allows cultivators to access the upper levels of multi-tiered vertical grow racks quickly, efficiently, and most importantly – safely. Systems like these are prioritizing safety and streamline operations for growing environments. The results of these trending innovations are proving to reduce the material and labor cost of installation and ultimately creating a better environment for products and industry workers. 

Increased Competition and Price Pressure

The vertical farming industry’s projected growth will be a double-edged sword for cannabis and commercial cultivators. On the one hand, vertical farming can provide a platform that allows growers to increase overall capacity, revenue, and margins. On the other hand, vertical farming will increase efficiency and productivity, which will likely drive prices down and increase competition. The potential for huge profits breeds competition. This means that with the rapid expansion of the vertical farming market, the first-mover advantage for cultivators is dwindling. Consumers demand high-quality products at cost-effective prices. Implementing the right systems today provides a competitive advantage to meet consumer demand.

To capitalize on these vertical grow trends, individual growers need to ensure their vertical farming operation runs at peak performance. Labor is the highest cost for a cannabis farming operation. With greater competition, optimizing labor processes is becoming a main priority. Utilizing labor-saving equipment like mobile carts and racks can reduce costs while increasing production volume and quality. Every touchpoint with a plant is a contamination risk and expense, so minimizing the interactions will increase the quality of terpenes and trichomes.

As competition grows, optimization of a grow facility and its operations are vital in order to stand out in the industry. 

Conclusion 

So far, 2021 has been another breakout year for vertical farming within the cannabis industry. Fueled by these four trends, operators that embrace vertical farming, implement proven technology, and optimize through data-driven feedback will have a competitive advantage over operators unwilling or unable to implement

If you’re interested in turning your grow operation vertical and installing the best multi-level growing equipment on the market, contact Pipp Horticulture today. We will provide a vertical growing solution tailored to your facility that maximizes production and capacity.