Big data to transform agriculture

Although most of us do not worry about where our next meal will come from, about 800 million undernourished people in the world today do not have that luxury. Today, a start-up in Newark, NJ, is developing a technique that with intensive use of data, might be one of the biggest contributors to solving the food challenge the world will face over the next century.

Aerofarms was founded in 2004 and has become one of the leading companies addressing the global food crisis. An environmental champion, the firm has fundamentally transformed the agriculture business by disintermediating the supply chain and enabling local farming at commercial scale all year round. Aerofarms developed its own patented technology which completely changed the concept of agriculture. With state-of-the-art, cleantech technology using aeroponics and LEDs, Aerofarms produces green leafs through indoor vertical farming, utilizing a totally controlled growing environment without sun or soil and minimizing harmful transportation miles. This technique allows the firm to produce high quality vegetables without depending on season or weather. At the same time, it reduces water usage by 95%, does not use any type of pesticides, and has a faster crop cycle and higher yields compared to traditional agriculture. It achieves 22 crop turns per years compared to three and yields 500% higher than traditional agriculture.

At the core of its model, Aerofarm relies on a sophisticated technology and expertise, which involves exposing the plants to a very specific spectrum of light. It also regulates both the intensity and frequency of it. It constantly optimizes for the amount of oxygen, carbon dioxide, temperature, pH and relative humidity. Through all this optimizing, it creates the perfect growing environment for the plant, being able not only to achieve efficiency in growing parameters but also optimize taste and texture. The model is summarized in looking at parameters permanently and optimizing each one of them to reach perfection.

Big data in agriculture is not new, especially precision technology. It has been providing farmers for years with both historical and up-to-date information about their crops, allowing them to measure soil quality, rainfall accumulation, fertilizer and pesticide inputs, crop yields, and harvests through satellite and GPS tracking systems. A 2014 study in the United States found that big data reduces the costs of inputs such as seeds and fertilizer by 15 percent and increases crop yields by 13 percent. Monsanto predicts data analysis could increase global crop production by $20 billion per year. Since the United States is the second largest producer of cereals and livestock in the world, accounting for 16 and 14 percent, respectively, these technological solutions could be an example for other countries to emulate.

Still, Aerofarms data analysis has entrenched to an extreme at the core of its business model. To do so, the firm operations rely in data scientists and engineers instead of agronomists. In a single growing cycle, the firm collects more than 10,000 data points, being this information the fundamental variable that has allowed for the improvement necessary to achieve the yields and quality that are driving down costs and closing the gap that is preventing the massification of the model. This data, allows to constantly optimizing according to colors, texture and taste.

Today, after all its progress and achievements, the model still has major drawbacks to overcome. First, it is very capital-intensive to start a vertical farm. To be competitive with a $10/lb retail price and 15% margins taken by grocers, Aerofarms needs to make it to the shelf below $8.5/lb. Thus, for 2 million pounds of arugula, Aerofarms has to be able to deliver it for less than $17 million. Nowadays, the facility with which the firm is able to produce such production has labor costs of $3.5 million per year, while water, transportation and rent sum up to $2.5 million. Additionally, energy costs can run very high (around $8 million), delivering a profit of $3.2 million. With a capital investment of $39 million to setup the technology, breakeven is still far away (12 years).

Aerofarms competitiveness has been increased dramatically since its inception, and the ability to leverage technology and optimize through data has proven very successful but there is a long way to go. If it keeps on doing it, it will revolutionize agriculture and will help to address a problem that has stated to be one of the most serious that the world could face over the next century.




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Student comments on Big data to transform agriculture

  1. Very interesting space and company. I’m curious how much of their advantage comes in the form of well-engineered growing environments vs. data analysis expertise. If it is the former, I can see them running into the scale issues and long breakeven timelines you outline in your post. If it’s the latter, I could see them tweaking their model to help other growers optimize using data (through revenue sharing, etc.). I guess both are heavily interrelated, especially since they probably need to use very specific sensor technologies.

  2. Interesting post Charles Poblets! Although the idea and technology Aerofarms has developed sounds amazing, I agree with you that the economics are not attractive today. Do you have an idea on how are they working on it?
    Another difficulty for Aerofarms is to get customers to accept the product, and buy it for a premium. The fact that Aerofarms can “play” with the flavor and texture of the leaves, may discourage some customers to buy them. If you tell me you can make an “indoor” lettuce that tastes better that a common lettuce, my first impression is that this product is “fake”.

    1. great post Mr. Poblets. I agree with the issues mentioned by GA, I would also be a little bit concerned about how the customer would perceive this “lab veggies”. I definitely believe its a great idea, but I would love to know how these people are thinking about customer perception. Do customer really know what the product is about?
      How difficult is to grow other vegetables? apples? quinces?

  3. It seems like the company can also use big data to understand what influences certain characteristics/outcomes of a plant. For example, the company can create the secret formula to naturally create the most crunch and the best tasting spinach by understanding what inputs and stress points significantly impact the plant. Furthermore, the rest of the agriculture industry is so behind on data collection this could be a huge advantage for AeroFarms. I am very interested in seeing how consumers respond to the technology. There’s no doubt that there will be large benefits for society as long as people accept it.

  4. Cool post. As GA mentioned, I’m wondering what they are doing to reduce costs. I also just went to a session yesterday on GMO foods, which sparked another question regarding this company. To what extend are consumers comfortable with their food coming from non-traditional farms? I’m sure those at the bottom of the pyramid would just want food period, but higher income consumers will likely push back. Given the costs to set these farms up, I would imagine them being popular in the developed world before they enter the emerging world, no?

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