Economics of Vertical Farming: Quantitative Decision Model and a Case Study for Different Markets in the USA

There are various problems associated with our conventional practice of farming. Agriculture is responsible for mass deforestation. The world is facing a water crisis, and farming is responsible for using 80% of its freshwater. Also, the prospect of global climate change is projecting a much riskier future for practices of conventional farming. One could argue that these alarming problems might someday be treated as more imminent as the population grows, less fertile land becomes available, and the effects of global climate change become more apparent. Vertical farming solves a lot of the mentioned issues associated with traditional farming by using considerably less water, requiring less land, and not relying on the environmental conditions whatsoever. However, vertical farming is also energy and labor intensive and can be quite expensive in some cases. This study works to quantitatively model and evaluate the economic prospect of vertical farming as a business venture in a competitive marketplace under different circumstances. A generalized quantitative framework to evaluate vertical farming with respect to traditional farming is developed. Then, the developed framework is employed for a case study to evaluate the merits of vertical farming in several locations around the US by measuring the relative profit and risk. The results quantify the value proposition of the practice in various conditions and help evaluate the current and future prospect the vertical farming industry.