A landmark deal has recently been struck on the 2018 Farm Bill, ending months of partisan debate, and effectively legalizing the growing of hemp for the first time in nearly a century. The agreement's impact is set to not only resonate across farmer's fields in all 50 states, but also into hemp-related stocks such as CROP Infrastructure Corp. (OTC: CRXPF) (CSE: CROP), GW Pharmaceuticals plc (NASDAQ: GWPH), Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB), Isodiol International Inc. (CSE: ISOL) (OTC: ISOLF), and Namaste Technologies Inc. (TSX.V: N) (OTC: NXTTF).
Technically speaking, hemp is a species of the cannabis plant containing less than 0.3% tetrahydrocannabinol (THC), the psychoactive ingredient in marijuana, but yielding its non-psychoactive cannabinoid cousin, cannabidiol (CBD). The key takeaway from this newly reached agreement is that CBD will no longer be in a legal grey area.
News of the Farm Bill's incoming approval has put a spotlight on companies that have ramped up their exposure to CBD, such as CROP Infrastructure Corp. (OTC: CRXPF) (CSE: CROP), which earlier this year established a 2,115-acre hemp-CBD farm in Nevada. In the lead-up to nation-wide legalization, CROP has already engaged an ISO/GMP rated extraction facility developer to build a one-ton-per-day extraction facility on the farm.
CROP is just one example of a sector that's been building off the momentum for CBD and CBD-infused products over the last 18-months. Projections for the blossoming sector peg it to become a $22 billion industry.
CBD'S UNSTOPPABLE MOMENTUM
The Farm Bill came only months after the US Drug Enforcement Administration (DEA), downgraded CBD from a Schedule I drug to Schedule V, allowing for FDA-approved drugs to contain the cannabinoid.
When that news hit back in September, shares of GW Pharmaceuticals plc (NASDAQ: GWPH) soared, due to their CBD drug Epidiolex becoming the first to receive approval.
Pre-rolled CBD cigarettes are already starting to catch on in popularity, while new beauty products are cropping up with CBD in their list of ingredients—it's official that CBD is going mainstream. Now the market is anticipating a flood of new CBD-infused products to soon hit the market across all 50 states.
While North American markets are just starting to open up to CBD's potential, the EU has already been in business for quite some time.
Prior to its Nevada hemp operation getting into full swing, CROP Infrastructure had already begun targeting CBD's potential, through an exclusivity deal with XHemplar for products in Italy. CROP ramped up its supply chain by leasing an 87,120 sq ft Italian greenhouse facility. The strategy involves securing low-cost and high-quality pure CBD isolate and CBD products to be sold into the European CBD market.
ISOLATING HEMP'S VALUE
In Nevada, CROP Infrastructure Corp. (OTC: CRXPF) (CSE: CROP) has secured a 500,000 pound annual supply agreement (1.5 million pounds over 3 years) with a commercial extraction technology company, that will also be developing and providing extraction equipment fo the CROP Nevada extraction facility.
Despite its potential as a material for clothing, rope, paper, etc, the greatest value that hemp can derive is through CBD isolates. Pure CBD can be infused in beauty products, or food and beverage items, such as CROP's anticipated plans to infuse its CannaDrink functional beverage with Naturally Splendid's HempOmegatm.
The company has already announced its Nevada CBD flower off take is to be delivered in shipments of 50,000 dry pounds on a bi-monthly basis to its processor which will provide a finished product of ISO-certified CBD isolate.
"The synergies and relationship between CROP and our off-take partner continue to evolve," said CROP CEO, Michael Yorke. "We look forward to continuing to develop this new partnership into new opportunities and other territories."
CROP's tenant on the Nevada farm has already completed a harvest of 240 acres of CBD hemp. Samples have been sent out for independent testing to determine CBD concentrations and for a Certificate of Analysis ('COA'). The company has also completed site testing at the entire Hemp-CBD project and soil is ready for 2019 planting.
To maximize its returns from its CBD production, CROP is developing lines of CBD capsule and tinctures. Its hemp, CBD isolate, and related products will be sold under the company's Hempire and Tiff CBD brands and utilized for the Canna Drink beverage line.
"We believe in the nutritional spectrum and health benefits of both hemp and CBD so adding a consumer goods vertical is a logical progression as consumer data shows strong trends in plant-based foods and nutritional products," said Michael Yorke. "We see it as a tremendous opportunity for CROP Infrastructure's branding & IP portfolio."
FELLOW FARM BILL BENEFICIARIES
GW Pharmaceuticals plc (NASDAQ: GWPH)
After recently losing its head of marketing Rupert Haynes to rival FSD Pharma who tapped him to be their new CEO, GW Pharma still has plans to ramp up marketing on its epilepsy drug Epidiolex. The drug made history as the first cannabis-derived drug to receive FDA approval back in June. Epidiolex hit shelves earlier in November, albeit with some blowback over its steep $32,500-per-year price tag. With an influx of hemp to come in the aftermath of the Farm Bill, a roadmap to getting the drug's price down to something more palatable could be on the horizon.
Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB)
While most notable for its medical marijuana and recreational cannabis production, Aurora Cannabis still has a hand on the CBD side of the cannabis sector. Most recently, the cannabis giant acquired a majority stake in CBD extracts company Hempco Food and Fiber Inc. Now with a 52.7% interest in Hempco, Aurora is looking ahead to secure access to low-cost raw material for the potential production of CBD extracts. Now that legalization is in place, Aurora can begin branching out its strategy into a variety of CBD-infused products. Hempco is expanding its processing ability to meet global demands at its 56,000 sq ft facility at Nisku, Alberta, Canada.
Isodiol Internatioanl Inc. (CSE: ISOL) (OTC: ISOLF)
Solely focused on developing CBD-based pharmaceuticals and consumer products, Isodiol has seen the potential from its very beginnings. Since its inception, Isodiol has worked toward advancing CBD research, education, development, and manufacturing. Most recently, the company announced its entry into the golf market, through its subsidiary Iso-Sport. As well, the company in November announced it was set to debut its new CBD beverage ingredient, Heneplex p200, in anticipation of the Farm Bill's legalization, which can be simply mixed into food and beverage products, including protein shakes, juices, soda, coffee, tea, baked goods, frozen goods, or simply added to a glass of water.
Namaste Technologies Inc. (TSX.V: N) (OTC: NXTTF)
Back in September, Namaste threw its hat into the CBD market outside of the United States, through a distribution agreement with BlueSky Biologicals to distribute BlueSky's full-spectrum, hemp-derived CBD products in its UK and EU marketplace. The UK already has CBD classified as a food supplement. Now with the Farm Bill in place, an opening has been created for Namaste to consider adopting a similar business strategy in the US, where the CBD craze is only just beginning to warm up.
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