"The government bet on the wrong horse, and that's called indoor farming. This doesn't just apply to Singapore, but it's happening in Europe and the US," says James Lin, CEO of V+ Agritech, a hybrid farm supplier when responding to the recent market turmoil in the Singapore market. What's happening? Was it all smoke and mirrors?
"It's true that we've seen some holds, closures, and downscaling in the vertical farming sector here in Singapore. However, it's difficult to gauge the specific intentions or circumstances behind these developments without detailed insights. At Urban Farming Partners, we remain steadfast in our vision and mission, firmly believing that indoor farming represents the future of agriculture," Grace Lim, Founder and CEO of GroGrace responds to the market speculations. GroGrace has partnered with Urban Farming Partners Singapore in 2022 to set up an indoor farm using DWC to grow leafy greens that are served to the domestic market.
"It's clear that also Singapore can't hide from the challenges the market has been seeing in the past year. The OpEx of the first-generation farms is way too high, making them go bankrupt or stop production," says Laura van de Kreeke of Growy, the company that acquired &ever's former farm in Singapore. Eyeing the future, Laura is expecting more farms to fall and sees the first-generation farms serving the market.
"The news caused quite a bit of stir in the industry as many players are giving low comment responses when reached out to. For some, the idea of innovation was bigger than the focus on commercial viability. That's why they failed by overcapitalizing in the region," says Lionel Wong, founder of Upgrown Farming, a CEA consulting agency based in Singapore. "A majority of people are cynical as they don't want to believe the current situation.
For the industry, there are a lot of pain points to learn from, Lionel finds. "The larger issue is the role these companies play, as they're often both the farmer and the solution provider. However, that's a grey area about what to monetize, which creates a dysfunction. In new markets like Singapore, there's no clear separation between suppliers and growers.
'In the end, it's just lettuce'
As James explains, the benefits are not weighing up with the costs as it's "just leafy vegetables and not Wagyu beef, for instance." To avoid any confusion, the V+ CEO highlights that he's a big supporter of local production, as long as it makes economic sense. "Imports have dominated the Singapore market. Back in 2022, Singapore imported 96% of leafy vegetables, whereas that's grown to 97% to date." Indicating the shrinkage of local production, James sees that Operating Expenses are sky-high at the moment, with energy costs of $0.30 per kw/h. Imported leafy greens carry an average price tag of $2 per kilo whereas, indoor-farmed products are sold in 200-gram packages between $3-4. "Who would pay double or triple that price for salad?"
Commenting on the pricing, Xander van de Zande, CEO of DanDutch comments, "With a large presence of produce from Japan in retail, there's definitely something wrong with the business models of vertical farms. The cultivation of Movable Gutter Systems is still going strong domestically."
James Lin and Nelson Tan of V+ AgriTech pictured at their pilot facility in Singapore
Highly subsidized imported goods
Why are imported products so much cheaper than locally produced products? Isn't that a bit against the government-set goal of 30% by 2030? James explains that foreign companies highly subsidize the products that the country is importing from. "Singapore is a bit of an odd bowl, though, as we're not subsidizing our own farms. Everything is expensive here, so how can these local producers even compete with the imported produce? The problem is not how to grow it, but how to sell it off, as products will become way too expensive. Some indoor producers are unable to sell a large chunk of their produce and basically have to give it away. Adopting hybrid models, that use vertical growing towers and a covered setup, will drive cost down massively and we believe that's the way forward."
Full of opportunities
Despite the various opinions players have about demand, or not at all, Laura is hopeful. "Prices in Singapore are fine and the market demand is still here making it a beautiful area to serve. However, you need to have your costs under control, in particular the energy use." Confirming that Growy is the right fit for the Singapore landscape, the company will slowly reach full production of its 7500m2 farm "which is a very financially viable business case," Laura comments. Having that said, Growy aims to build a second farm in Singapore given the high market potential and the continuous support of EDB, SFA, the government and universities.
Ard and Laura van de Kreeke with Growy
What can be done to resolve these hurdles?
Despite the current struggles, Grace is hopeful for the future. "We have substantial support from the Singapore government, which is crucial for our success. As we continue to demonstrate the viability and benefits of our farming model, we anticipate receiving even more support."
Another point of view comes from James, sharing his thoughts on the nationalization of all farming just like the public transport network. "First privately owned, prices for using public transport went through the roof which created a lot of complaints and riots from society. Long story short, the government delisted the company and now owns all train networks. Moving from a commercial model, it is now a public good and accessible to all, which could work for indoor farming as well. If the government sees food as a public need, they could own all farms, pay the farmers and be their own off-takers of the produce and set fixed prices to ensure local food production."
Grace Lim of GroGrace
Can farmers tap into renewables to lower OpEx? "No amount of solar can save you. You can subsidize your farm, but it's not going to be enough as LEDs will form 60% of the energy costs. LEDs work elsewhere, but not in Singapore." James only sees solar play a bigger role when the solar panel technology has improved, as it currently only captures 20-30% of the light. Grace agrees with James, as "advancements in renewable energy will further solidify the case for indoor farming, particularly for leafy greens."
On top of improving the solar generation network, Grace finds there is a need for public education on the importance of supporting locally grown produce. "Singapore has a strong track record of successful national campaigns, such as the National Courtesy Campaign and the Singapore Kindness Movement. A similar nationwide campaign to promote the support of local produce could be highly effective. It should aim to reach all demographics, from young children in schools to the elderly, and from affluent communities to neighborhood residents."
For more information:
GroGrace / Urban Farming Partners
Grace Lim, CEO
www.urbanfarmingpartners.com
Growy
Laura van de Kreeke, Farmer
www.growy.nl
V+ Agritech
James Yin, CEO
[email protected]
https://vplusagritech.com