Village Farms to place marijuana crops in Delta greenhouses

Village Farms is getting into marijuana production. The company made an official announcement of a new joint venture agreement with Emerald Health Therapeutics, which will convert an initial 25 acres of their Ladner, B.C. greenhouse facility into a state of the art glasshouse for the annual production of 75,000 kilograms medical, and if permitted by applicable law, recreational marijuana for the adult-use market.

Village Farms, currently one of North America's largest growers of greenhouse produce, says that the launch of the joint venture is a transformational opportunity to grow 'a substantially more profitable agricultural product'. "Based on our conservative market pricing forecasts and yield projections, 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", Village Farms CEO Mike DeGiglio said.

Village Farms CEO Mike DeGiglio speaking in April 2016 at the Indoor Ag-Con.

B.C.-based Emerald Health Therapeutics holds a license to cultivate and sell medical cannabis flower and oils out of its facility located in Victoria. By teaming up with Village Farms, the joint venture aims to become the lowest-cost, highest-quality cannabis producer in Canada, with a targeted production cost of less than 1.00 Canadian dollar per gram.

The transformation of the 25 acres in Ladner is the first step of the new partnership. The potential conversion of all of Village Farms' Delta, BC greenhouse operations, if the applicable options were exercised, would conservatively be expected to yield approximately 300,000 kg of cannabis annually. Village Farms and Emerald believe this has the potential to fill a substantial portion of the potential Canadian production gap for both medical and non-therapeutic adult-use cannabis.

Village Farms' move into the cannabis space does not come as a complete surprise. In February last year, CEO Mike DeGiglio already expressed interest in this new 'cash crop' during a television interview with thestreet.com. "We will be building greenhouses, expanding our distribution model where we market for our partners who grow and we will also look at alternative crops," he then said.

DeGiglio added that aside from their latest cannabis venture, Village Farms will remain committed to its existing greenhouse produce business and that the company does not expect that the cultivation of cannabis will have a material impact on its existing produce production and distribution business. "We remain steadfastly committed to our existing produce business. We will continue to provide our customers with the premium-quality products they have come to know and expect throughout our 30-year history," DeGiglio said. "In fact, the favourable economics of cannabis production are expected to provide Village Farms with the financial strength and resources necessary to further expand and solidify our industry-leading position. We fully expect to continue to expand capacity in our produce business to meet customer demand by exploring consolidation opportunities, as we have successfully done in the past, and through organic initiatives at our U.S. operations."

The Village Farms locations in Ladner are state of the art glasshouses that use specially developed technologies to use methane gas from a local landfill to generate heat and electricity to grow tomato crops.