Hydroponic System Market is Expected to Grow $25.1 billion by 2027

The global hydroponics market is valued at USD 12.1 billion in 2022 and is projected to reach USD 25.1 billion by 2027. The global hydroponics crop market is estimated to be valued at USD 37.7 billion in 2022 and is projected to reach USD 53.4 billion by 2027, recording a CAGR of 7.2%. The emergence of indoor farming led to the evolution of artificial lighting technology to assist plant growth. LED technology has proved to be more energy-efficient and long-lasting in general lighting applications. This is anticipated to drive the market.

Hydroponics Market Growth Dynamics

Drivers: Hydroponic systems help conserve natural resources

A key advantage of hydroponic farming is the lack of soil and land required to grow plants. By stacking plants vertically, the requirement of vast parcels of land for farming is dismissed as more crops can be grown in a fraction of the area. Commercial hydroponic growers can cultivate hydroponic produce in only one-fifth of the land needed against those farmed conventionally. It helps farmers save significantly on land costs while also being able to cultivate the produce in higher volumes with lower space and energy requirements. Growing vertically and stacking plants closer together helps grow multiple crop types with minimal complexities as those faced in conventional farming.

Restraints: High capital investment for large-scale farms

The initial investment required to set up a hydroponic farm is high; the equipment needed for a hydroponic farm is extensive and often expensive to buy and maintain. Different types of equipment, including HVAC systems, fans, ventilation, irrigation systems, control systems, rails, and lights, are the key cost factors in a hydroponic farm. On average, a 500-sq. ft. hydroponic farm can cost up to USD 110,000 for a base-level system that is not fully automated. Larger and more automated farms can cost USD 500,000- 800,000 per 1,000 sq. ft., depending on the level of autonomous function. The costs in this instance are considering only the setup costs of the farm; however, when upgrades are factored in, it can result in a recurring cost for the farm as the equipment will need to be upgraded every 3–4 years to improve the yield and productivity of the farm.

Opportunities: Growth in popularity of hydroponics to provide high profit margins

More than 700 companies are operating in the hydroponics space globally. While around 300 startups farms are currently involved in the market, some of the notable startup companies are Easy Urban Garden (Industrial Hydroponics), WallFarm (Automated Hydroponics), Oasis Biotech (Indoor Hydroponics), HydroGreen Global Technologies (Livestock Feed), and Ponix Systems (Consumer Hydroponics). Due to the increased popularity and adoption of hydroponics, many new players are entering the market. Larry Ellison, founder, chairman, and CTO of Oracle launched a hydroponic farming startup named Sensei in Los Angeles. The company plans to build ten greenhouses covering 200,000 square feet on the Hawaiian island of Lanai, and instead of measuring output by volume, Sensei will measure nutrition per acre.

Challenges: Debate on certifying hydroponic produce as organic

There has been a debate on the certification of hydroponically grown crops as organic. In Europe, crops grown hydroponically cannot be labeled as "organic," while in the US, crops grown hydroponically can be labeled as organic as long as they meet other criteria for USDA certification. In 2018, members of the European Parliament voted to approve new regulations for the certification and labeling of organic food. According to this new regulation, by the beginning of 2021, the European Union will no longer accept produce labeled "organic" that has been produced hydroponically, including "container production." European hydroponic producers who use approved organic inputs will still be able to export their produce to the US.

In terms of equipment, the LED grow light segment dominates the hydroponics market. Grow lights, such as high-pressure sodium lights (HPS), metal halide bulbs (MH), and fluorescent bulbs, emit different spectra of light that stimulate and promote plant growth. Grow light technology has created opportunities for the majority of indoor farming systems.

The nutrient segment is a significant player in the hydroponics market. During nutrient application, nutrient concentration must meet the plant's needs at every growth phase, and EC strength at the growth stage must be monitored. Trace elements also play a vital role in plant growth, and trace minerals are nutrient catalysts that provide auxins, gibberellins, and cytokinins to promote cell division, enlargement, differentiation of cells, development of chloroplasts, and a delay in aging.

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The vegetables segment has the largest market share in the hydroponics market, producing vegetables such as tomatoes, leafy greens, and cucumbers. Hydroponic systems protect crops from harsh conditions such as cold, wind, pests, drought, and more. Growing vegetables in these systems allows for creating the most suitable conditions for crops, such as moisture, light, temperature, fertilization, humidity, and irrigation.

The European region accounted for the largest share of the global hydroponics market, followed by North America due to the availability of required infrastructure to run a hydroponic farm and the adoption of modern farming techniques. The Asia Pacific region is experiencing high growth in the market due to the increasing demand for fresh food among the urban population and government support in establishing hydroponic farms by means of subsidies.

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