Dive Brief:
- Village Farms International and Health Canada-licensed medical marijuana producer Emerald Health Therapeutics have formed a 50/50 joint venture in which vegetable farmer Village Farms will convert a 25-acre greenhouse in Delta, British Columbia to grow cannabis, according to The Packer.
- The Village Farms facility is expected to be used for marijuana production by late 2018. Plans are in the works for 1.1 million square feet of initial greenhouse marijuana production, which should eventually yield more than 75,000 kilograms of product per year, once licensing and greenhouse conversion is completed.
- Village Farms CEO Mike DeGiglio said in a statement that the company remains committed to its established tomato and cucumber business, which it grows in greenhouses throughout Texas and British Columbia. However, DeGiglio also said that the partnership with Emerald Health is a chance to grow “a substantially more profitable agricultural product.”
Dive Insight:
Who can blame Village Farms for going where the growth and green is? The medical marijuana market is huge and on a growth trajectory. Twenty-nine U.S. states and D.C. have already legalized marijuana in some form, primarily for medicinal purposes. A growing number also allow it for recreational purposes.
By forging the partnership with Emerald Health, Village Farms intends to become a large-scale, low-cost supplier of medical marijuana. DeGiglio told The Packer his farms can produce cannabis for less than $1 per gram, versus an industry average of more than $2.
DeGiglio also told The Packer how lucrative the new crop would be. “…conversion of our Canadian greenhouse facilities to cannabis production could generate revenue of 10- to 15-times that of our current Canadian vegetable production with EBITDA margins potentially expanding to more than 50% compared with our current Canadian vegetable margins.” It’s hard to argue with those kinds of performance figures.
Needless to say, several parties — including farmers, floral producers, trade associations and legal bodies — will be keeping a watchful eye on future developments in the marijuana production space as a major commercial grower like Village Farms embarks on conversion initiatives.
Despite the fact that vegetable demand is surging, especially for organics, more lucrative marijuana may begin to creep in and take over growing space now that it is becoming legal in more places. Something similar has happened with grain farmers, who have planted record soybean acreage this year. Soybean prices have increased 9.2%, and for the first time in more than three decades, more U.S. acres are devoted to the crop than corn.
If restrictions on marijuana an its cultivation continue to loosen, it will be interesting to see if it becomes a popular crop for produce farmers trying to earn more. Could it ever become so popular that the existing vegetable supply becomes constrained, resulting in unmet demand and possible price hikes?