The Business Case for Urban Agriculture

By Matt Baker

Five years ago, the world of commercial urban agriculture was nearly barren in Chicago. Not for a lack of need; large populations in the city live in food deserts without access to fresh food and the food that is available is mostly shipped over thousands of miles, racking up huge carbon debts.

But much has changed over the last few years. Chicago amended the Zoning Ordinance in 2011 to include more urban agriculture, drawing a distinction between urban farms and community gardens. The ordinance also sorted different uses into three categories—indoor, outdoor and rooftop—and allowed them in commercially oriented districts. The stormwater management ordinance was later amended, which has huge impacts on agricultural operations, and regulations around composting were relaxed.

WebLast year, the City of Chicago conducted a study, Chicago Sustainable Industries, intended to reinforce and expand the city’s manufacturing base. It was a broad study looking at all aspects of manufacturing, but one surprising result was the role of food production, which is the second largest manufacturing subsector, accounting for 12% of total output.

Agriculture is a small, but growing, part of that. The goal of that study was to find ways to foster entrepreneurship and create jobs. Urban agriculture is one way to go about that. “We’re examining how this all plays into our land use strategies within the industrial corridors and what we can do in terms of economic development,” said Brad Roback, Economic Development Coordinator for the City of Chicago.

In order for that to happen, urban agriculture needs to scale up. If it isn’t commercially viable, it’s just filling a niche and won’t have the economic, environmental or social impacts that are possible by bringing agriculture to the people who consume it. There are a number of operations going on right here in Chicago—using different techniques—that show commercial-scale urban agriculture is not only possible, but profitable.

Some Chicago legislation has had an unexpected impact on urban agriculture. Green roofs are now required on certain new buildings, but they don’t always perform as they should. “What has happened over time is a lot of green roofs have very low biodiversity,” said Molly Meyer, Co-founder of The Roof Crop. “Green roofs—sedum, farmable or otherwise—are required in Chicago. But they’re not performing as they should be. So if we can provide free maintenance service for people, then we can have this living infrastructure that does perform.”

The Roof Crop will install, maintain and harvest vegetables from a proprietary growing medium developed by their sister organization, Omni Ecosystems. The building owner pays to install the system, but leases it back to the Roof Crop, benefitting from greater energy reductions and stormwater retentions.

It’s a pretty straight forward business model, but at the base is a technological marvel. Omni’s growing media is incredibly light and a very effective substrate for edible plants of all types. At their West Loop headquarters, peach trees are growing in only eight inches of the medium, with some plant varieties only requiring three inches of material.

“We expect that the building owner can recoup the cost of the green roof in five to ten years,” said Meyer. “A typical green roof has a payback period of 20 to 25 years.” That’s a combination of the money coming in through the lease, but also energy savings provided by the vegetation and added longevity of the roof membrane.

“Our model shows that within five years, we’re going to be beating California’s central valley.”

Another rooftop option has the potential to scale up much larger. Commercial greenhouses are nothing new in agriculture, but locating them in urban areas is. One organization pioneering commercial urban greenhouses is Gotham Greens, based in New York. The company has over 170,000 square feet of urban greenhouse space across four facilities.

One of those is the world’s largest rooftop farm atop the Method soap plant in Chicago’s Pullman neighborhood. Opened last year, the facility has the capacity to churn out ten million heads of lettuce per year. “Our greenhouse in Chicago is about two acres, but the yield that it produces is equivalent to about 50 acres of field production,” said Viraj Puri, CEO and Co-founder of Gotham Greens.

Traditional agriculture is the leading source of both water pollution and greenhouse gas emissions globally, and consumes more water than any other industry. “So agriculture, while it feeds billions of mouths each day, does have this enormous environmental impact,” said Puri. “Doing more urban greenhouses is not going to solve all those issues, but it can certainly play a role while making our cities a little bit more sustainable and provide jobs as well.”

The four different facilities that Gotham Greens maintains represent different site uses. Two were installed atop existing buildings, one an old toy factory and the other a former bowling alley. The others were built in cooperation with new construction: the Method facility and another over a Whole Foods grocery store.

All have a symbiotic relationship with their downstairs neighbors. The buildings receive exceptional insulation while the greenhouses can exist in a dense urban environment without the cost-prohibitive need to acquire land.

Both of these rooftop options have an obvious benefit in that they receive abundant, free sunshine. FarmedHere, in suburban Bedford Park, is proof that there are ways around that. The indoor farm has been in operation since 2012 out of a 90,000 square foot abandoned box factory.

FarmedHere makes use of two different hydroponic technologies. The nutrient film technique uses very little water and is essentially seeds propagating on burlap, with nutrient-rich water circulating past the bare roots. For other products, like basil, deep water culture is used, where the roots hang down into a larger container of nutrient-rich, aerated water.

“To truly be financially sustainable, consumers can’t just buy the product because of the novelty of it being grown in an urban area. It truly has to be a superior quality product at a better price. That’s the way of the world.”

The operation started out using aquaponics, where fish waste provides the plant nutrients. They have since switched to purchasing water-soluble nutrients that—compared to farming fish on-site—are cheaper, more consistent and provide greater yields.

There’s one obvious difference with growing indoors: light. When FarmedHere first began operations, LED lighting was prohibitively expensive and less efficient. “Now statistics show that the price of LED lights is going down by 50% every five years and their power and efficiency is increasing,” said Megan Klein, FarmedHere President. “Our model shows that within five years, we’re going to be beating [California’s] central valley.”

In order for commercial urban farming to compete with traditional agriculture, the process—rooftop, greenhouse or indoor—is only part of it. “Food safety is the one thing that everybody has to focus on. When people talk about local, they kind of leave that part out sometimes. But we cannot. I cannot,” said Peter Testa, the third generation President of Testa Produce. “Once I touch it, I become legally responsible for it.” Any commercial urban farming operation must adhere to strict food safety guidelines and be prepared for recalls.

Of course, the biggest competition between traditional and urban agriculture is the almighty dollar. “To truly be financially sustainable, consumers can’t just buy the product because of the novelty of it being grown in an urban area,” said Puri. “It truly has to be a superior quality product at a better price. That’s the way of the world.”

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