Vertical Farming in Saudi Arabia: Industry Overview

Vertical Farming in Saudi Arabia: Industry Overview

Rapid growth of urban populations, climate change, and a growing demand for local produce are all working to increase adoption of vertical farming across the world.

The Vertical Farming Global Market Report from 2022 predicts that the global vertical farming market will grow from $ 4.21 billion in 2021 to $ 11.58 billion in 2026 at a CAGR of 23.15%.

The unique traits of different regions greatly influence the adoption of vertical farming technologies in the agricultural sector. For example, Japan and Singapore were the first pioneers in vertical farming, with land and labor limitations in these countries driving innovative farming solutions. The United States, the UK and Germany also started to prioritize sustainable food production and renewable energy, reflecting their commitment to environmentalism and a growing demand for premium foods. Meanwhile, the market in Denmark is primarily motivated by the demand for locally-sourced, organic foods that are difficult to cultivate outdoors.

The countries of the Gulf Cooperation Council (GCC) region, on the other hand, have only recently started to embrace vertical farming.

In this article, we will cover vertical farming in Saudi Arabia, the largest food consumer and producer in the region.

Drivers for vertical farming in Saudi Arabia

MENA countries import up to 90% of their food, with Saudi Arabia as the largest importer. At the same time, the Kingdom’s self-sufficiency ratio is not yet high enough to meet all its needs. Home-grown production of produce is growing rapidly in Saudi Arabia, however, increasing to over 36% in 2019, according to the 2021 Alpen Capital GCC Food Industry report.

The need to become more self-sufficient in food production and processing, as well as to diversify imports, seems to be one of the main drivers for the investment in AgTech in Saudi Arabia. The Agricultural Development Fund of Saudi Arabia intends to invest around $ 220 million (SAR 825 million) into high-tech greenhouses between 2021 and 2025. The fund will finance up to 70% of the capital expenses for these projects. It will also offer a two-year moratorium on profit demonstration for the supported businesses.

Another crucial driver for vertical farming is the constraint in water supplies. Growers are being urged to adopt hydroponics, a technology that requires 90% less water than conventional farming methods.

"Over 26 billion cubic meters of water is consumed by the agricultural sector", stressed Dr Abdulrahman Al Ibrahim, the advisor to HRH Minister of Energy in Saudi Arabia. "We need to rationalize water use through modern agricultural technologies, while maintaining or even boosting agricultural production," he added.

The government supports farmers who would like to integrate soilless farming systems, including hydroponics, to their production cycle.

There is also a need to address the challenge of limited farmland in the Kingdom. In the last 60 years Saudi Arabia has transformed 24,000 square kilometers of desert into fertile land.

This "desert farming" in Saudi Arabia is challenged by the limited water resources in the country. Even though center-pivot irrigation systems allow farmers to manage water more efficiently, water availability still remains an issue.
Irrigation system for desert farming in Saudi Arabia

A center-pivot irrigation system for agriculture in Saudi Arabia.

Source: Shutterstock.

The Saudi Arabian National Research and Development Center for Sustainable Agriculture (Estidamah) supports a Vertical Farming Program. It has been identified as one of its top priorities for investigation alongside soilless cultivation, plant nutrition and pest management.

The Center is planning to partner with global leaders in AgTech to run experimental farms using CEA technologies. Their goal is to create a "new agricultural model, perfectly suitable for local farmers in the Kingdom''.

A focus on food security and sustainable food economics in Saudi Arabia represent a key driver for vertical farming.
The Ministry of Environment, Water and Agriculture of the Kingdom (MEWA) allocated $ 26.5 million (SAR 100 million) towards the development of vertical farming technologies in 2021 alone.

Investment in vertical farming in Saudi Arabia

The agriculture sector in Saudi Arabia is only starting to embrace vertical farming technologies in Saudi Arabia. This is one of the reasons why there are only a few indoor vertical farms actually operating in the country.

One prominent project is the Bather Smart Farm built with iFarm Leafy Greens technology to produce lettuce and microgreens. The farm was launched in October 2022. With a cultivation area spanning over 2,000 square meters, the farm has an estimated production capacity of 16 tons per month. The domestically grown lettuce and microgreens will be available for sale within the country.
iFarm Veggies indoor farm
Bather Smart Farm in Saudi Arabia.
Source: iFarm.
The flexible economic environment, abundant cash reserves, low costs, and stable energy production provide a secure macroeconomic situation for indoor farming in Saudi Arabia. That is why it has become an attractive destination for many companies investing in vertical farming.

Saudi Arabia is also learning lessons from other countries' experience in vertical farming and AgTech. In January 2023, a Saudi-Japanese Virtual Forum for Agricultural Technology was held. Both countries' public and private sectors discussed collaboration and investment opportunities.

During the Forum, the Deputy Minister for Agriculture, engineer Ahmed Al-Ayada emphasized once again that food security concerns and agricultural investments are among the primary focuses for the Kingdom.

Challenges and opportunities for vertical farming in Saudi Arabia

Vertical farming in Saudi Arabia faces similar challenges to those encountered in other regions. First and foremost, high electricity consumption increases daily operational expenses.

Nonetheless, the energy costs in MENA countries are relatively low compared to Western or Northern Europe.

"Energy costs in Saudi Arabia are as impressively low as $ 0.04 per kWh. Сombined with high retail prices for fresh greens, it presents one of the best payback costs for setting up a vertical farming business in the world."

Max Chizhov
Co-founder of iFarm
The economics of vertical farming in Saudi Arabia are also impacted by technical aspects of climate control systems and air conditioning.

When choosing between a greenhouse and a vertical farm, the decision is often determined by the trade-off between spending more on water in greenhouses, or spending more on electricity for vertical farms.
Vertical farming Leafy Greens iFarm
iFarm Leafy Greens technology.
Source: iFarm.
The limited variety of crops that can be grown in vertical farms is also a common challenge in the industry. The most economically feasible business model for such farms, from a commercial perspective, is cultivating leafy greens and herbs, ideally for a premium market.

The 2021 Alpen Capital GCC Food Industry report highlights the increasing demand for high-quality fresh produce in Saudi Arabia. The two main factors are the growing awareness of healthy eating habits and the well-being of the population.

In addition, factors such as expanding premium tourism sectors and a wealthy expat population also contribute to this trend.

According to the Estidamah Center, "there is a growing demand in the market for high-quality agricultural products that are free from pesticides and available throughout the year. As luxury rates increase, so does the number of high-end customers who can afford to purchase these premium products."

By reducing the expenses associated with long logistics chains, there are significant benefits to be gained. For leafy greens, for example, freshness is vital to their taste. High-end restaurants and luxury hotels recognize the value of fresh produce and are willing to pay extra for it.
Vertical farming technology iFarm

iFarm rack with greenery.

Source: iFarm.

Vertical farming technology offers a significant advantage over greenhouses or conventional growing, especially in the Middle East and North Africa. Regions with limited water and agricultural lands benefit most from savings in water usage while providing high-quality crops grown locally.
Additionally, operational costs can be reduced by optimizing technologies and implementing highly controlled automated solutions such as iFarm StackGrow. This fully-automated farm management system is designed for commercial cultivation of crops on vertical farms.
iFarm StackGrow reduces labor costs by over 30% and average energy use by over 33%.

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