Vertical Farming Costs: Calculate the Costs to Run a Farm

Vertical Farming Costs: Calculate the Costs to Run a Farm

The advantages of indoor food production are becoming more evident, particularly in urban settings where it reduces water consumption and provides a steady supply of fresh local produce. For farmers, this shift to vertical farming can reduce their reliance on traditional methods and increase crop quality.

In this article iFarm will guide you through:
  • Start-up costs
  • Operating costs including energy consumption and labor
  • Production costs
  • Potential profits of vertical farming
  • The costs associated with automation in vertical farming

Vertical farming setup costs

When starting a vertical farm, it is important to consider two of the most important startup costs: the facility where the farm is going to be located and the equipment.

Securing a facility is a big financial factor. Many farming companies reuse shipping containers, warehouses and even abandoned ports to make efficient use of urban space and lower the cost of facilities for vertical farming.
Cost of a vertical farm with racks construction
Source: iFarm.
However, not all entrepreneurs opt for large-scale commercial operations, preferring to set up a small indoor farm for their production cycle. For example, the French microfluidic cosmetics company Capsum went for a 10-square-meter mini lab to grow pesticide-free microgreens and flowers for their new cosmetic formulas.

When it comes to working out the expense of constructing a vertical farm, it is crucial to consider your business objectives, the location, the condition of the building, and a variety of other elements.

Although the building costs can not be generalized, we can still calculate other setup costs: design, equipment and installation.

How much does it cost to set up a vertical farm?

The price tag for outfitting an area with iFarm vertical farm rack technology, including setup and activation, is around $ 1,000 per square meter (the exact cost depends on the overall size of the farm, as well as on other factors such as building conditions or if any auxiliary equipment is needed).

For a growing area of 1.000 square meters (500 square meters of floor space; 4.5 meters in height), the total capital expenditures (CapEx) would be roughly $ 1 million (including equipment and installation, but excluding the cost of building construction or renovation, logistics and customs fees).

To gain insight into which components are included in calculating the setup costs of an indoor vertical farm, consult the table below:
Cost of a vertical farm with racks construction
Source: iFarm.

Calculating startup costs for your vertical farm

With the iFarm Cost Calculator, you can test your ideas and get a better understanding of the CapEx in your region and possible payback period.

With this tool, you get:
  • An estimate of the growing area
  • Required power
  • Average daily electricity and water consumption
  • Total investment amount
  • Estimated monthly expenses

From farm technology and installation to quality assurance, the cost calculator helps you create a preliminary business model for your venture.

Get a free custom calculation for your future vertical farm

Vertical farming operating costs

Farming produce at a large scale is financially and technically demanding. The most expensive part of a vertical farming business are the operating costs.

So, how much does vertical farming cost? Let’s have a closer look at the biggest operating expenses: energy and labor costs.

Energy costs in vertical farming

The rack construction of an indoor vertical farm makes energy the highest operational expense. The LED lights installed on each shelf of a farm can account for half to two-thirds of the energy bill.

Since outdoor air does not circulate in vertical farms, they have to be constantly climate-controlled and the humidity must be regulated. Thus, air conditioning and dehumidification take up the remaining third.

The energy needed for farm management operations such as fertigation, control, and automation is much lower than the amount used for climate control and lighting, and usually makes up less than 10% of the bill.
Cost of a vertical farm with racks construction
Source: iFarm.
To calculate electricity costs in vertical farming, let’s take as an example a rack farm that produces lettuce and herbs with iFarm Leafy Greens technology in equal proportion. It is 500 square meters in room size and 4.5 meters high, with a total cultivation area of 1,000 square meters.

Average daily electricity consumption on such a farm would be 1.705 kW. Your total monthly electricity bill will reach $ 8,600 if your farm is located in Norway; $ 3,500 — in Saudi Arabia, but only around $ 2,000 if you operate in Qatar. These calculations are the reason that choosing the location of a farm is a major factor to consider when examining the expenditures on energy associated with running a vertical farming business.

Other elements that can affect the price of electricity include the efficiency of the LED bulbs used, the amount of light needed for each crop, and whether there are any potential subsidies offered by the government or electricity companies in your country. Find out more about how to lower energy costs and electricity consumption in vertical farming here.

Cutting down on electricity and energy bills can be done by opting for automated vertical farming systems as opposed to traditional rack construction. For example, the iFarm StackGrow vertical farm has mobile trays designed to minimize energy costs.
A comparison between a 500-square-meter farm made with non-automatic rack construction and StackGrow reveals that the latter will be 30% more affordable in terms of electricity costs.

Labor costs on a vertical farm

One big challenge for farm entrepreneurs is the cost of hiring highly qualified staff, which can represent up to 60% of all operational expenditures.

The degree of automation is the main factor determining how many employees a farm will require. Higher levels of automation increase CapEx, but they also significantly reduce operating expenditures (OpEx) in the long term.

To calculate labor costs, let’s take as an example a mostly-manual large vertical farm built with iFarm Leafy Greens technology with 1.000 square meters of cultivation area located in Saudi Arabia.

On such a farm, the employees perform multiple tasks such as:

  • Preparing planting containers
  • Sowing seeds
  • Cleaning facilities
  • Packaging

The expenditure of employing professional farm operators for this farm in Saudi Arabia on a monthly basis will add up to $ 13,000, based on an average farm worker’s salary (including taxes) of $ 1,300. In European countries, it may be twice as high.

On the other hand, the vertical farm with the same growing space of 1.000 square meters that is mostly automated is 30% less expensive in terms of labor costs, regardless of the region.
According to the latest 2021 Global CEA Census Report, advanced IT-driven solutions for automation are used by only 28.4% of vertical farming companies, and nearly half of those surveyed said they were going to implement such technologies in the next 12 months.
Demand for automation is growing alongside technological development. However, automation is not a universal key to fast growth and profit. For small farms and countries with inexpensive labor, semi-automated rack systems are a much more practical solution.
Cost of a vertical farm with racks construction
Source: iFarm.
In case of large farms and regions with expensive labor costs or a limited number of workers, fully automated vertical farming is the optimal choice.

iFarm provides such automation with its innovative StackGrow technology. With these systems, sowing seeds, watering, rearrangement of pallets in the main growing compartment, cutting and packaging of the crop all take place without human labor.

iFarm will help you to decide which farming system is the best for your business

Costs of production in vertical farming and financial performance

It is essential to use personalized computations to figure out the CapEx, OpEx, return on investment and payback periods in order to consider all of the possible variables. But to provide an example, let’s look at a vertical farm business powered by iFarm Leafy Greens technologies in the United Arab Emirates.

The 500-square-meter facility stands at 4.5 meters tall, giving it an overall cultivation area of 1.000 square meters. If the farm produces lettuce and herbs, its monthly yield is estimated to be 3.400kg.

With the price of produce at approximately $ 17 per kg, the farm’s total revenue is $ 57,800. The expenses for labor, resources, utilities, rent, and other operational costs come to approximately $ 32,600 each month.

This gives the farm an EBITDA of $ 25,200 monthly, and after just 3.6 years, the farmer is expected to fully recoup their investment in the iFarm farming technology and equipment. The average payback time for an iFarm vertical farming startup is 4−6 years.

It is important to note that the calculations given are approximate, since they do not account for expenses such as the building itself, renovations, shipping and import duties. It is also crucial to do proper market research before starting a vertical farm.

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farming business

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