Village Farms International Sets its Sights on Hemp, CBD

Village Farms International (TSX:VFF), one of the Canadian marijuana stocks, said it has signed a JV for hemp cultivation and CBD extraction

SmallCapPower | March 6, 2019: Village Farms International, Inc. (TSX:VFF), a vertically-integrated greenhouse grower and one of the Canadian cannabis stocks, Friday announced that it has signed a joint venture agreement with Georgia-based farming operation Nature Crisp for outdoor hemp cultivation and CBD extraction in multiple states throughout the U.S. Owned 65% by Village Farms and the remaining 35% by Nature Crisp, the JV ‘Village Fields Hemp’ will help both companies to enter the hemp and hemp-derived CBD market.

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Under the terms, Village Farms International will invest ~$15 million for startup costs and working capital of the JV, while future capital investment for extraction capabilities will be dependent on the locations of hemp production and the extraction operations. Village Fields expects to start hemp cultivation by Spring 2019, aiming to direct 500 to 1,000 acres for production during 2019. Extraction capabilities that will enable the JV to supply CBD oil on a wholesale basis will be put in place by the end of 2019, while production of CBD products will commence in 2020.

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In addition to outdoor hemp cultivation plans, Village Farms International is also pursuing greenhouse hemp growing in Texas and continues to monitor the developments on the legalization of commercial cultivation of hemp and hemp-derived CBD products. Village Farms could become the largest greenhouse hemp operator in North America if it converts its existing 5.7 million square feet greenhouse facilities in West Texas.

Village Farms International Chief Executive Officer Michael DeGiglio stated “Jennings Group is a pioneer in hemp cultivation and this joint venture establishes a new powerhouse in hemp cultivation that significantly advances Village Farms’ vertically integrated CBD strategy … Over the past several years, they have rapidly become a leading authority on hemp cultivation, renowned for their understanding of the plant and their success applying their cultural and genetic expertise to meaningfully improve CBD content and yield. Moreover, the Jennings Group team brings extensive relationships with the farming community across the U.S., as well as with geneticists, academics and researchers, that will be invaluable to the success of this new business. We expect a sizeable portion of the forecasted US$16 billion in U.S. CBD sales by 2025 to be composed of CBD derived from hemp grown in controlled environments to address the demand for exacting specifications and consistency from the health and wellness and pharmaceutical segments of the market. We believe we are very well-positioned to address this exciting opportunity.”

Following the announcement, shares of Village Farms International climbed 9% to close at $15.25 on Friday. Its stock has soared more than 225% so far in 2019 to its current price of $14.72.

Village Farms is a vertically-integrated greenhouse growers in North America, producing and distributing fresh produce to national grocers in the U.S. and Canada. Village Farms International stock currently trades at a market cap of $727 million on the TSX.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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