Using hydroponic science to grow greens in coal country is not only possible, it's also profitable

Little Leaf Farms uses controlled environment
agriculture. (Photo via Lancaster Farming)

Hydroponics has been used to grow plants since 600 B.C. when Babylonians first used it to create lush Mesopotamian gardens. Present-day farmers grow hydroponic crops using the same science used 2600 years ago, but they apply it in vastly different ways. In Pennsylvania, the practice has revitalized parts of coal country.

"The borough of McAdoo lies in the heart of Pennsylvania’s Schuylkill County coal region, and one business finds the landscape perfect for growing green," reports Tom Venesky of Lancaster Farming. "Little Leaf Farms raises leafy greens — primarily lettuce varieties — for its packaged salad brand utilizing controlled environment agriculture, an intensive form of hydroponics."

The plants' growth model is much more organized and contained than outdoor greens farming, which is exposed to the elements. "A conveyor belt that carries seeds planted in gutter-style trays through the building as the plants grow," Venesky explains. "Rainwater is harvested from the roof for the plants, and at the end of the growth cycle the conveyor carries the plants to the harvesting and packaging areas."

With more predictable and efficient plant production, Little Leaf Farms has become profitable and plans to expand. "Each 10-acre greenhouse replaces 300 acres in a traditional farm setting, according to Paul Sellew, the company’s founder and CEO," Venesky writes. "The fourth greenhouse will open next fall and will encompass 10 acres."

Little Leaf Farms isn't staying little. In fact, its two greenhouse campuses "make the brand available to over 7,000 grocery stores," Venesky reports. The company "has the highest household penetration of all controlled environment agriculture leafy green brands. . . . Consumer demand for leafy greens is also healthy for the economy, according to Sellew, who points out the Pennsylvania campus now employs 300 staff since it opened in 2022."

Appalachian greenhouse-farming firm re-engineers its finances but needs more cash flow, and maybe political help

UPDATE, Feb. 16: The company netted $37.1 million by selling 40 million shares at $1 per share, Rick Childress of the Lexington Herald-Leader reports. It issued a prospectus saying, “We believe that net proceeds from this offering, together with our current cash and cash equivalents and other potential sources of financing, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through the end of calendar year 2023.”

The AppHarvest 15-acre farm just north of Berea, Ky., grows salad greens. (Photo from AppHarvest Facebook page)

AppHarvest, a publicly traded startup that is trying to bring commercial farming back to the Appalachian foothills on a huge scale, sold one of its hydroponic greenhouse farms this week and leased it back to its marketing and distribution partner, "freeing up more funds for the financially struggling fruit and vegetable grower," reports John Cheves of the Lexington Herald-Leader.

The company also announced the opening of its fourth farm, all in Kentucky, and said it is "focused on operations to ramp up production and revenue." That is an existential challenge, according to its earnings report for the third quarter of 2022, which said, “Absent additional sources of financing, we expect that our existing cash and cash equivalents will only allow us to continue our planned operations into the first quarter of 2023.”

The sale-and-leaseback deal of the 15-acre farm near Berea, the company's smallest, provides cash, but it has production problems. "AppHarvest’s chief financial officer, said that the low numbers were due to crop health issues," Liz Carey reports for The Daily Yonder. The company will change the tomatoes it raises to varieties that bring higher prices, a spokesman told Carey.

But James Branscome, a Yonder supporter who started as an Appalachian journalist and ended up evaluating companies for S&P Global, has issues with the firm's business model: “The best high tech in agriculture will not overcome a bad business model based on selling a commodity product – tomatoes – in a highly competitive market,” he told Carey. “AppHarvest does use the highest tech in greenhouse production from the Netherlands, and its commitment to Appalachian Kentucky has rightfully given it a very high profile. The strategy of moving beyond the tomato market to vegetables and berries is a good business strategy; however, the company is in a race against the oldest challenge in business: Can it execute that strategy when the business cash flow is so dismally poor?”

Branscome seems to think not: “At this point their future depends more on financial engineering than agricultural engineering,” he said. “There is value in what they have constructed, but the cash flow from operations is so small that there is no way sales can bail them out over the next few years.”

There could also be some political engineering. Company founder and CEO Jonathan Webb said at the groundbreaking for the firm's 30-acre berry farm in Somerset in July, "Where AppHarvest goes from here is going to be dependent largely on the communities around us." Gesturing to Democratic Gov. Andy Beshear and Republican U.S. Rep. Hal Rogers, he said, "Where we take it from here, I turn to our political leaders, I turn to our community leaders, I turn to our university leaders; we want to partner with you."