Business valuation strategy for new hydroponic farm development – a proposal towards sustainable agriculture development in United Arab Emirates

Abstract

PurposeThis study aims to evaluate a hydroponic farm (through nutrient film technique) while considering uncertainty, sustainability and the system's utility in the dominant desert geography. The idea of the hydroponic farm is to allow individuals/businesses to grow plants. Given the geographical condition, the hydroponic system may be useful in the Gulf context and may lead to food security and sustainability. Additionally, the UAE government has initiated several support schemes that can be availed for investing in such businesses that can contribute to the nation's food security.Design/methodology/approachThe hydroponic farm is evaluated using the net present value and real options approach. The authors studied five scenarios: 1. business as usual, 2. 50% subsidy on initial investment through Khalifa funding, 3. 4% premium, 4. Subsidy plus premium and 5. solar panel installation with bore well.FindingsAs per the assumptions and data usage, all the scenarios shows a positive net present value (NPV); Nevertheless, scenarios 4 and 5 report the significant highest net present and delay value.Research limitations/implicationsThis study has environmental, economic and social implications. Lower imports indirectly lead to lower carbon footprints. The local production of food ensures higher employability in the sector and increase in local consumption. Additionally, fresh food consumption is directly associated to good health.Practical implicationsSupportive policies such as subsidies through Khalifa funding may accelerate the expansion of such projects through domestic and foreign investments. One of the important takeaway from the study is to invest in the training of the workforce.Social implicationsGiven the geographical condition, the UAE usually depends on food imports. If the hydroponic farms become popular, the residents will have access to fresh vegetables and fruits. Higher engagement in agriculture activities also ensures a significant increase in agriculture-related businesses and higher employability.Originality/valueThe study adds novelty to the literature because the effect of Khalifa funding and investment analysis on solar (wells) has not been evaluated in any hydroponic studies. We presented the results with tornado graphs using NPV risk and real options approach in the Gulf context. The study represents functional scenarios that were previously not found in the literature.

Assessing Opportunities and Difficulties in Hydroponic Farming

“…So when these initial costs are met, more challenges must be solved in order to make sure a profitable and secure hydroponic farm. There are some challenges (Raviv et al, 1998) for adopting hydroponic as an advanced agricultural technique due to the following reasons: a) Less interest of farmers because of the uncertainty of yield (Sisodia et al, 2020). b) It demands a high initial cost, but once a setup builds up, no more infrastructure is required, only demand of nutrient solution will be required.…”

“…Otherwise, the hydroponics system fails. Finally, courage, moderation and determination inputs are necessary to run the system (Khan, 2018), (Sisodia et al, 2020), (Sayara et al, 2016), (Cifuentes Torres et al, 2021).…”

Food Security and Sustainability: Discussing the Four Pillars to Encompass Other Dimensions

“…Urban agriculture may be another solution; however, in this case, additional studies are needed for a more complete assessment [45]. Farming fish is another possibility to achieve more sustainable food security [46], as are the home food gardens [47], revitalising local food systems [48], using insects as bioconverters of organic waste [49], obtaining protein from food waste [50], food forestry [51], natural food [52], better governance and conception [53], hydroponic farm [54], organic farming [55], crops resilience assessments [56], wild edible greens [57], food loss, and waste management [58].…”

An overview of IoT based intelligent irrigation systems for greenhouse: Recent trends and challenges

“…A greenhouse is a building with a wooden or metal foundation covered with nets or transparent material. Since 1960 the greenhouse has evolved from a building that only protects plants into a system for studying plant growth in a controlled environment [6,7]. Changes in agricultural land usage, lower irrigation water output in primary, secondary, and tertiary canals, and global microclimate changes contribute to the rising use of greenhouses in world agriculture [8].…”