"We are confident that the MENA region, including Saudi Arabia, is one of the premier places in the world for the vertical farming business today", says Max Chizhov, co-founder of iFarm, which recently relocated its headquarters to the Middle East and North Africa and is currently installing new customer farms in Riyadh and the Emirates.

Written by Konstantin Buzin for VerticalFarmDaily.com.

According to Max, several economic factors have converged in the Middle East to drive vertical farm adoption in the agriculture sector. Namely, increasing consumption of greens due to the trend towards healthy diets; a high proportion of imported food; inability to grow outdoors year-round due to climate conditions; low cost of electricity coupled with high retail prices for produce; and strong government support for innovative agrotechnologies. 

To gain insight into the main considerations for this industry, Konstantin has spoken to representatives from three key players of the Saudi Arabian vertical farming market: Mishkat AgTech, Mowreq Specialized Agriculture Company (Jana Farm), and Blue Fields Farms. They were also advised by experts from iFarm, the technology provider of Bather's Smart Farm in Riyadh.

GCC trend: investing in vertical farming
Najeeb Khan, Production Operation Manager of Mowreq, a Jeddah-based company that operates the Kingdom's first vertical aquaponic farm, points out, "There is clearly a trend in the GCC to invest in VF. You may have heard that AeroFarms has invested in a large production facility in Abu Dhabi. I think there are now 20 to 30 vertical farms in Dubai alone. Oman, Kuwait, and Qatar are all investing. It is a trend right now. I would say 10-15 years is the future of vertical farming. We are actively investing, hoping to create a kind of cluster of vertical farms and eventually have them in every major city in the country."

The Agricultural Development Fund of Saudi Arabia plans to distribute approximately SAR 825 million (c. $220 million) on high-tech greenhouses between 2021 and 2025. The fund will cover up to 70% of the capital expenditure of the projects and is providing a 2-year moratorium on profit demonstration for the financed businesses.

In his speech in 2020, the Deputy Director General for Credit of the Agricultural Development Fund, Mr. Badr Al-Malik, estimated the volume of vertical farm production in Saudi Arabia at 407,000 tons per year and claimed that the country's self-sufficiency in vertical farm production was 60%. He further estimated that this figure will at least double over the next few years.

Despite these optimistic forecasts and the success of projects such as ECO 1 (Bustanica) by Crop One or AgX by AeroFarms in neighboring countries, the number of farms actually operating in the region remains relatively small. With just a few in Saudi Arabia.

The biggest risk: ongoing operating costs
"And the main concern is not even the substantial initial investment required, which Mark Tester, a professor at King Abdullah University for Science and Technology (KAUST), estimates to be at least twice that for traditional high-tech greenhouses. What worries me most is the ongoing operating costs, particularly the high consumption of electricity," Max says. 

Air conditioning is a major contributor to power consumption in vertical farms of the region. Najeeb Khan, Production Operation Manager of Mowreq, explains, "About 60% of the energy is used just to maintain the climate, and only about 40% is used for lighting. This is the main challenge in vertical farming at the moment − how to reduce the cost of maintaining the temperature."

In other words, the clear advantage of a vertical farm over a traditional greenhouse − the ability to create a self-contained, controlled climate − becomes a disadvantage when you factor in the energy costs required to maintain that climate. Mohammed Junaid, Facilities Operations Manager at Mishkat, a Jeddah-based company that operates Naeem Farms, explains, "Outdoor temperatures can reach 55 degrees Celsius, making it virtually impossible to maintain even 24-25 degrees in a traditional greenhouse during such heat waves. But inside a vertical farm, it's relatively easy to maintain a constant temperature of 19 degrees. Yet, the cost is high."

"It takes 6-7 Saudi riyals of electricity to produce one kilogram of the finished product, in some cases up to 10 riyals, depending on the type of plant," says Najeeb Khan of Mowreq.

"Energy costs in Saudi Arabia are as impressively low as $0.04 per kWh. Сombined with high retail prices for fresh greens and energy-saving techniques we implemented in our technology, it presents one of the best payback costs in the world," says Max Chizhov from iFarm.

"The choice between a greenhouse and a vertical farm often comes down to this dilemma: spend more on water, as is the case with greenhouses and evaporative cooling systems, or spend more on electricity, as is the case with VF," explains Mohammed Chaudhry of BlueFields. "It's worth noting that many large-scale farms around the world are now closing due to exorbitant utility bills driven by regional or global tensions. These are the true test of a technology's resilience. In that sense, we have it a bit easier in the Kingdom, especially for those who have established their production in industrial cities and technology zones," he concludes.

Limited crop range
The second reason for delaying the introduction of the technology is that vertical farming is also limited in the range of crops that can be grown. While the technology exists to grow cucumbers, tomatoes, and peppers, the commercial viability of such production has yet to be proven. Today, growing leafy greens and herbs proves to be the most economically viable model.

"The cost per kilo of our produce may not be able to compete with conventional or greenhouse farms, but we can offer unparalleled freshness and quality," explains Mohammad Chaudhry of BlueFields Farms. "This is why we are targeting the premium market, packaging our produce in small 100-200-gram portions, and emphasizing the benefits of our product through marketing."

Industry pioneers continue to push forward despite the high costs and limited range of produce that can be grown in vertical farms. So, what are the perceived benefits that Mr. Chaudhry is referring to?

"Our customers tell us their desired quantities, and we promptly fulfill their requests. They can rest assured that the greens they receive are freshly cut and have not been previously frozen," Mr. Junaid of Naeem Farms highlights. 

Eliminating long and costly cold-chain logistics costs brings a significant benefit. Since leafy greens do not travel well and freshness is crucial, a freshly harvested leaf tastes far better than the one that has made a week-long journey to the table. As a result, high-end restaurants and luxury hotels are willing to pay a premium for the freshest produce possible.

"The true value of vertical farms is often misunderstood. The meticulous cleanliness and purity of the produce, the guaranteed absence of pests and microorganisms due to the precise climate and nutritional control, the transparent history of each plant − everything must be articulated in order to understand why the produce is more expensive than conventional alternatives," Najeeb Khan of Mowreq explains. Vertical farms are particularly attractive to wholesalers in the hospitality industry because they do not require further processing of the produce, which delivers production and labor cost savings.

As with any cutting-edge technology, vertical farms can take a lot of time and money to be implemented, and may initially have a limited scope of application. However, as the technology proves its effectiveness, it begins to gain traction and recognition for its benefits, such as significant savings in water usage and hygienic purity of the final product.

How to go forward?
"Now that we see the potential profitability and sustainability in certain applications, the challenge is to optimize the technology and use the unique conditions of the region as a testbed for further development."

Ample land, and relatively low construction and electricity costs have attracted the industry to the country. Moreover, with the support from the Ministry of Environment, Water and Agriculture (MEWA), the National Research and Development Center for Sustainable Agriculture (Estidamah), and the Agricultural Development Fund, offering to cover up to 70% of CAPEX, the first facilities can be constructed. This is further encouraged by the government's focus on food security and a sustainable economy. Once the number of these facilities reaches a dozen in the next year or two, data will become available to see which technology solutions have proven most productive and profitable.

Mohammad Chaudhry of BlueFields Farms predicts that many of vertical farmers will be relocating to the Middle East, because the region offers a flexible environment with abundant cash, low costs, and stable oil production that secures macroeconomic conditions. This will make their business viable and drive them to explore their technology deeper and continue their operations.

Operational costs can be reduced by eliminating manual labor and implementing high-level automation solutions offered by technology providers, such as iFarm, Sananbio, Swegreen, Infarm, and Kalera. Moreover, new seed varieties specifically for vertical farming and improved formulations through big data can increase yields and revenues. Additionally, emerging technologies such as indoor sunlight delivery systems or artificial photosynthesis can further contribute to cost-cutting.