Milan Kluko Indoor Farming

This interview details Artesian Farm, an indoor farming company based in the United States. The interview is with Milan Kluko, former CEO and the vertical farm system designer of Artesian Farm. Since late 2021 he has been consulting with operators in the Controlled Environment Agriculture space.

Source: Artesian Farm

Can you share more about your background? 

During the late 90s, I collaborated with Archer Daniels Midland (ADM) on various projects, including consulting on an aquaponics greenhouse, primary growing lettuces. The greenhouse, located in Decatur, Illinois, covered about four acres and used an NFT nutrient film technique. ADM was among the first to cultivate hydroponic lettuce at this scale. They also grew seedless burpless cucumbers indoors, making compost corn and other agricultural residuals.

They utilized some of the waste heat from their process boilers, and also provided CO 2 for the aquaponics growing systems. They raised tilapia to provide most of the nutrient water for the lettuces grown in the greenhouse. Although the system was already up and running by the time I joined, I conducted economic evaluations that indicated it would not be a profitable business model. For ADM, the focus was more on demonstrating how they could deploy a CEA operation potentially co-located at other ADM locations while providing electricity, heat, and CO 2 to the growing environment from onsite industrial operations.

This was my initial introduction to indoor farming, and since then, I have continued to consult on it and explore its potential. In 2011, I founded Green Spirit Farms, which operated until 2018 before rebranding to Artesian Farm.

Source: Artesian Farm

In 2012, a group of investors led by Jeff Adams from Detroit visited Green Spirit Farms and inquired about starting a similar operation. The group raised approximately $1M in 2014, and on Earth Day 2015, Artesian Farms in Detroit opened their doors. Green Spirit and Artesian Farms provided indoor farmed vegetables to an entire Whole Foods distribution center, which was unusual at the time. We were also able to sell our produce directly to stores, a significant accomplishment since few people were familiar with vertical farming and all of it was direct store delivery versus going through a distribution center.

In March 2020, Artesian Farms was purchased by a consortium of Cannabis growers, and the vegetable indoor growing operation was discontinued. Green Spirit Farm in New Buffalo was then rebranded as Artesian Farm and continued its vegetable indoor farming business. Although I left the organization in 2021, I remain a partner and led the rebranding effort to ensure that our customers were well cared for.

Source: Artesian Farm

What are you up to now in your consulting roles? 

I am currently involved in multiple projects located in Northwestern Wisconsin and Michigan that are primarily focused on cultivation. These projects encompass a variety of crops including hemp, cannabis, as well as traditional vegetables.

One of the projects I am working on involves the cultivation of cannabis in a controlled environment within a warehouse, using methods similar to those used in controlled environment agriculture. Although I have experience with greenhouse cultivation, I do not differentiate between the two approaches in my mind.

Source: Artesian Farm

What are some of your thoughts on the current CEA market, how do you view the market?

During my time operating indoor farms, our grow floor covered 10,000 square feet, and the rest of the facility was dedicated to support services like supply chain packaging, shipping and receiving, and sanitation. We were able to get the farm operational within 120 days, with a cost of under a million dollars. We were primarily producing basil, kale and mixed leafy greens, yielding between 150 to 200 pounds of basil per week through a "cut and come again" approach. This involved replanting and harvesting the basil three times before pulling the plant and selling only the leaves – no stems. We applied a similar method to kale, harvesting each plant up to seven times. In 2012-14, we experimented with lettuce harvesting technology but found that the waste increased by 25% due to the limitations of the technology of the machines. This caused the overall cost to outweigh the savings and labor benefits, and we concluded that knowing how to grow sustainably was the key factor.

Source: Artesian Farm

As a consultant, I emphasize the importance of training people to grow effectively, rather than relying on technology. Last fall, I noticed a trend among larger vertical farming companies, such as Kalera, Fifth Season, and others, that experienced shutdowns. I recommend caution and focusing on training people and using “appropriate technology”, rather than expanding too fast to several locations, growing what you can sell profitably and reliably.

Artesian Farms is an example of a successful model, with multiple operating facilities. Our own Green Spirit Farms started a teaching farm in 2015 and serviced clients in Michigan, South Bend, and Chicago. 80 Acres is another model that has gained attention, and their model is smaller distributed farms however it remains to be seen if their growing systems will continue to prosper as the market gets more competitive. When investor groups ask me to evaluate whether to pick struggling companies for pennies on the dollar, I generally advise against it. It is important to grow sustainably, use appropriate technology, not expand too fast and continue to focusing on farming and less on “technology”.

Source: Artesian Farm

How do you think about the viability of container farms versus large indoor vertical farms moving forward? Do Container Farms in some way have an advantage? 

I don't see container firms replacing vertical farms. But with all the technology used in vertical farming, container farms can operate efficiently on a very small scale without relying on any advanced technology. In my opinion, the concept of a container farm seems to have some advantages but is very limited except in the case of Square Roots. The Square Roots model shows some promise.

I developed container farms specifically tailored for island economies, such as Puerto Rico. When a devastating hurricane struck, the economy was in ruins and needed a catalyst for recovery. However, the island lacked a functional power grid. During the period between the closure of traditional farms in Greensboro and the reopening of an Artesian Farm, I designed container farms that were transported to Puerto Rico. These farms operated using solar and wind energy, regardless of the type of vertical farming being practiced. They also were able to use a backup diesel powered generator as well.

Source: Artesian Farm

In vertical farming, labor costs are typically the highest expenditure, followed by packaging and electricity costs. These three components alone make up 90% of the total costs. In some cases, depreciation may become the primary cost factor if a farm requires a significant investment, such as a $20 million facility. However, the crucial aspect lies in selling the produce into the agricultural supply chain at a competitive price like other traditional farms. Container farms such as Square Roots seem to have achieve this goal effectively and we’ll see what the future brings.

The farms that I designed for a specific customer, two of which used NFT technology and one of which was shallow water culture. They were designed as containerized farms, which were multi-40-foot containers and a 53-foot container, with a couple of lettuce containers, kale containers and an herb container. The design concept was to build a smaller structure for the local supply chain. Then I got out of the container business due to people wanting to restart Green Spirit Farms and wanting to just redo the vertical in 2018. I had some experience taking a cannabis grow and putting it into containers, which was very lucrative at that time.

Containerized growing is becoming increasingly popular in the cannabis industry. There was a company in Atlanta that seemed to grow very quickly and subsequently went out of business in 2015 however they had good market penetration and were growing in containers. It’s all situational and driven by local market conditions. However, I believe they were a little too early to the market and did not have enough understanding of how to grow efficiently. This suggests that there is a role to play for containerized growing in the future for a hyper local market of for a consortium of restaurants looking for year-round supply of certain crops and are willing to pay higher prices for these crops.

Source: Artesian Farm

Do you think indoor farming is best suited for certain regions of the world? 

The US has a vast agricultural infrastructure, mostly concentrated on the west coast, and Yuma County in particular and decisions were made to grow out west when water was plentiful and cheap. There is no more arable land around the world, and farming in marginal lands will most likely have marginal outcomes, so the US should focus on growing food where the people are. 90% of leafy greens and wintertime, in the Midwest come from Yuma County, Arizona. We are located in the Midwest about 1,800 miles closer and supply reliably “24/7 365”.

We completed a design project for a group from Dubai or another country in the Middle East. They came to learn more about our operation in 2012. The design of a vertical farm in a desert, which was to use geothermal and solar panels to generate electricity and keep heat off the building.

Source: Artesian Farm

The design is based on a 20-foot ceiling and 75% of the building underground using the floors for thermal massing keeping the facility relatively cool. The solar panels on the roof would generate electricity and keep a good deal of heat off the structure.

Vertical farming can be a sustainable technology that can use renewable energy as a good “under-the-roof” user as well as combined heat and power approaches to bring fresh local vegetables to communities and reduce energy costs in more rural areas, such as England, Ireland, and Ukraine – but it’s situational. However, nations and communities can create their own food sovereignty – it takes some planning. It can be used to offset coal and other energy costs. I am a patent holder on biomass renewable energy technologies using biomass residuals to make renewable boiler fuel and it has been used in very large (industrial) boiler systems as well as smaller systems. This approach can be applied to offset coal and natural gas and other energy costs.

There will be a saturation point in vertical farming and there is a need to design a system that can grow food globally, locally with reliability.

The key is to allocate resources, and one size does not fit all. Therefore, it is important to look at any place around the world and come up with an appropriate model that works for those locations rather than “bigger is better” of one size fits all approach. It’s still farming, and I think the larger farms struggle since they were developed more as “technologies” versus farms and were sold to investors as technology companies. We have seen this has not worked well the past 12-16 months.

Source: Artesian Farm

What are some of your predictions for the future of the indoor farming industry? 

The vertical farming space will become right sized, and sooner than later and there will be less reliance on technology. There won't be as many vertical farms, but they will be sized, built the right way, and they will become more effective within the local agricultural supply chain. Innovation will catch up, but it may take an additional 24 to 36 months to assess the recent events leading to facility closures or scaling back of ambitious announcements.

We have seen finance folks raise a lot of money for “indoor farming” and we will continue to see a shakeout and there will be more of a tendency to further embrace greenhouses due to the economics and the more reliable technology associated with it. The next few years will be interesting in the Controlled Environment Agriculture space – with further definition of what works and what doesn’t in vertical farming and how to better assess the effective blending of indoor and outdoor farming.

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