From the exterior it looks like another boarded-up building on Chicago’s South Side. But within the small brick structure are rows of lush basil floating in water, thriving beneath the white glow of low-hanging fluorescent lights. In the corner, hundreds of tilapia swim aimlessly in a large 300-gallon tank.
If the founders of City Micro Farms LLC are successful in their business plan, this scene may become a significant part of the future of urban food production.
“We are going after old agriculture, is what we are doing,” said Alan Rose, chief marketing director and co-founder of City Micro Farms.
In its testing facility, the Chicago startup grows a variety of vegetables and herbs, meticulously controlling every environmental input, including temperature, lighting, humidity and water.
At the heart of this operation is a growing technique known as aquaponics. It is a process of raising fish and plants together in a manmade ecosystem, creating a symbiotic relationship. The fish fertilize the water used to feed the plants. In turn, the plants filter the water, making it habitable for the fish.
This, proponents say, constitutes an efficient system for food production.
From Hawaii to upstate New York, aquaponic farms are popping up across the country.
Using less than 1 percent of the water required by traditional agriculture, aquaponics can yield more than 10 times the produce in the same amount of grow space, said Myles Harston, one of the early pioneers of aquaponics and a co-founder of City Micro Farms.
While neither hydroponics (growing plants in nutrient-rich water) nor aquaculture (raising fish in a controlled environment) is new, the synthesis of the two techniques gained adherents amidst a crippling recession and soaring fuel prices.
“Just in the last five years there has been a serious awareness of aquaponics,” said Rebecca Nelson, president of an aquaponics systems manufacturer. “That comes from the demand for local food and concerns for food safety.”
Nelson’s Wisconsin-based company, Nelson and Pade Inc., has been selling systems since the early ‘90s, but in the past four years the company has experienced significant growth. In 2010 the company sold 22 systems. This year it's on pace to sell 30 or more.
This boom is due in part to the flexibility of where one can set up operations: outdoors, in greenhouses or inside buildings. But more importantly, the aquaponics industry is growing because it is proving to be a profitable venture.
Friendly Aquaponics Inc., a family-run operation in Hawaii, offers classes on how to set up and run a commercial aquaponics business. According to the owner, Tim Mann, Friendly was able to generate an operating profit margin of 72 percent, excluding labor. This is a best-case scenario as the farm avoids typical heating, cooling and lighting costs growing outside in a tropical climate.
When Mann compiled these numbers he generated $9,700 a month on $13,400 of revenue from a farm comprising 3,600 square feet of grow space and 2,700 fish. Since then, he has expanded the farm to over 6,400 square feet.
Mann also points out that aquaponics is not a get-rich-quick scheme.
“You are a primary producer and you are doing real work,” he said.
According to Rose, farmers who use aquaponics but who are not organically certified typically price their goods in a soft spot between organics, which command top dollar, and traditionally farmed products, which are often shipped from hundreds, if not thousands of miles away.
“If a package of lettuce costs $3.99 a bag, we’ll sell ours for $3.50,” Rose said.
Nelson said her pre-packaged aquaponics systems have a typical payback period of three to four years. The price for these setups range from $4,000 for a personal system to just under $60,000 for a full-scale commercial operation that can produce approximately 3,500 pounds of fish and 48,000 heads of lettuce a year.
Chicago-based startup 312 Aquaponics LLC sell aquaponic systems that are modeled for a payback period of less than three years.
“Not bad considering the equipment payoff term for an outdoor farm is at least 10 years, often more like 15 years,” Andrew Fernitz, co-founder of 312 Aquaponics, wrote in an email last week.
Fernitz added that his team plans “to develop a growing system in the near future that can be paid back in a year, is scalable and stackable, for organic production of food year round."
Acquaponically-produced food, still only a fraction of the food market, is enjoying a surge in popularity.
Sweet Water Organics in Milwaukee produces a variety of lettuce, herbs and fish using aquaponics. Since opening in 2008, the company has had a steady increase in sales.
“Right now we are in a situation where we can’t grow enough to meet demand,” said Todd Leech, Sweet Water Organics’ sales manager.
Chris Smith, a former construction worker in Hawaii who turned to aquaponics in 2009 after he could not find work amid the recession, has expanded his growing area from 52 square feet to more than 1,000 square feet. While he and his wife were the only ones working at first, he now uses interns who want to learn the craft.
Three days a week Smith sells an array of leafy greens to his neighborhood.
“Ninety percent of our food is imported, so anyone who sells locally has a huge advantage,” Smith said of his community in Kona, Hawaii.
Now companies like City Micro Farms are attempting to bring this commercial enterprise to Chicago.
But before the seven-month old venture is crowned a success, it must pass two major hurdles: energy costs and Chicago zoning laws.
Because the four entrepreneurs grow indoors, they face extra expenses. To date, most commercial aquaponics facilities operate in greenhouses where growers capitalize on the use of free sunlight, or outdoors in warm climates where heating, cooling and lighting are not needed.
Referring to indoor aquaponics systems, Nelson said, “that scenario has not proven economically viable.”
Still, City Micro Farms is modeled for an operating profit margin greater than 20 percent, citing some technical advantages.
Harston, who has been designing systems since 1992, said growing indoors is actually a boon compared to greenhouse or outdoor operations.
Growing indoors will allow City Micro Farms to produce consistently year round without environmental disruptions such as heavy winds or insects, said Harston. He added that advances in LED and fluorescent lighting have driven down energy costs. Finally, for Midwest climates, buildings are able to control heating and cooling costs better than greenhouses during the harshest winter and summer months.
The other immediate challenge is the Chicago zoning code, which currently classifies fish as livestock. This is a problem since raising commercial livestock is prohibited within city limits. While an amendment is under consideration by the City Council, it is not expected to pass anytime soon.
Because sale of its fish represents only 10 percent of revenue, Rose said the restriction is not a major problem in the short term.
However, City Micro Farms wants to expand to 30,000 square feet of growing space by this fall. Because of the ordinance, Rose and his team are looking for a facility in Bedford Park.
If City Micro Farms can successfully navigate the zoning laws and its expenses, the founders expect a healthy profit, while providing a locally grown product to Chicagoans.
When calculating its potential profit, City Micro Farm used a model of $13.50 per pound of basil and an annual yield of 10 pounds per square foot, both figures the founders consider conservative.
This suggests that if City Micro Farm were to grow only basil on its expected 30,000 square feet of production space, it can achieve annual revenues of $4.1 million and estimated operating profits of $810,000.