Canada became the second country ever to fully legalize cannabis back in late 2018, however, the country continues to struggle with meeting the exorbitant demand. Additionally, cultivators and producers are facing regulatory challenges which are hindering their operations. For example, the Canadian government has provided a very limited number of cultivation licenses and curtailed retail operating hours. Consequently, supply shortages have significantly impacted many retailers and dispensaries’ financials. Certain Canadian provinces, such as Ontario and Quebec, were ultimately forced to close down select brick-and-mortar stores due to the overwhelming demand. And while supply shortages seemed to be a major problem within the Canadian cannabis marketplace, Brock University Professor Michael Armstrong believes otherwise. The industry just became fully legal in Canada not even a year ago, meaning the industry is still heavily monitored and regulated. Even so, Armstrong said that legal production began ramping about half a year prior to Canada’s legalization. Moreover, Armstrong cites data from 2017 and highlights that production rates have actually grown year-over-year. He mentions that producers have been stockpiling supply and are continuing to grow cannabis at a faster rate. And if licensed producers can continue increasing their inventory size, Armstrong predicts that supply will catch up to the demand by the end of 2019. Furthermore, cultivators have implemented new technologies and farming methods in order to bolster their yield per harvest. The combination of increasing production rates, as well as the use of new technologies, is expected to eventually close the gap between supply and demand. According to data compiled by Verified Market Research, the global marijuana market was valued at USD 42.20 Billion in 2016. By 2025, the market is expected to reach USD 466.81 Billion while registering a CAGR of 35.3% from 2018 to 2025. Canopy Rivers Inc. (OTC:CNPOF) (TSXV:RIV.VN), Canopy Growth Corporation (NYSE:CGC) (TSX:WEED.TO), Innovative Industrial Properties, Inc. (NYSE:IIPR), HEXO Corp. (NYSE-A:HEXO) (TSX:HEXO.TO), CannTrust Holdings Inc. (NYSE:CTST) (TSX:TRST.TO)
There are various methods farmers have implemented in order to obtain a higher yield each harvest. Primarily, techniques such as extending the harvest length, increasing light intensity, manipulating the plants’ growth, providing essential nutrients, and having a controlled environment can lead to higher yields. Moreover, careful trimming can also provide a better harvest. While the genetics of a strain may play a large role in the harvest, proper cultivation care can also play a significant factor. Some growers have thus taken an extra step and integrated state-of-the-art technology to help their plants grow much more richly. For example, technological entrepreneurs have developed innovative technology such as lighting and air circulation systems. These systems are designed to provide a more controlled setting as well as ample lighting and airflow to the plants. Moreover, some companies have taken a step further, also integrated artificial intelligence or smart technology to fully automate their grow houses. Furthermore, the controlled growing procedure can also produce more potent strains and controlling the environment can potentially lead to an increase in trichome development on the cannabis plant. A significant portion of the cannabinoids found in the cannabis plant is located predominantly within the trichomes. Additionally, more companies are continuing to expand upon their innovative technologies or introducing unique and modern machinery. As such, the advancements in technology are further propelling the overall cannabis industry, allowing cultivators and growers to produce top quality strains while increasing their harvest. “With over 10,000 years of history, cannabis cultivation remained quite traditional up until prohibition in the 1930s. As law enforcement became increasingly drastic, cannabis cultivation went indoor, switching from agricultural to horticultural practices. This led to efficiencies but also to a certain evolution of varietals being grown, driven by the new constrains imposed by prohibition. With legalization, we probably won’t go back in time but evolve toward new, less constrained or… otherwise constrained techniques,” said Alan Founder, Chief Executive Officer of Strainly.
Canopy Rivers Inc. (OTC:CNPOF) (TSXV:RIV.VN) is also listed on the TSX Venture Exchange under the ticker (TSXV:RIV.VN). Earlier today, the Company announced, “an investment and strategic collaboration between Canopy Rivers and ZeaKal, a California-based plant science innovator with proprietary technologies that sustainably increase photosynthesis, improve plant yield and enhance nutritional profiles for a variety of agricultural crops. The investment from Canopy Rivers marks another significant corporate milestone this calendar year for ZeaKal, following the February announcement of its R&D collaboration with Corteva Agriscience (NYSE:CTVA), the recently spun-out and NYSE-listed agricultural science division of DowDuPont.
ZeaKal’s proprietary technology, PhotoSeed(TM), increases a plant’s intrinsic photosynthetic capacity, meaning that PhotoSeed(TM) plants can convert more sunlight and carbon dioxide into energy for growth. This results in substantial improvement in seed and grain yield, as well as improved macronutrient profiles that drive an increase in both oil and protein content. For farmers, this means better productivity and profit margins; for consumers, this means higher nutritional profiles and an environmentally friendly way to meet growing global demand. With multi-year field trials across diverse plant species in the United States, Canada and New Zealand, the initial commercial focus has been on major row crops. Following Canopy Rivers’ investment, ZeaKal intends to expand its program to include cannabis and hemp.
‘Our investment in ZeaKal, the fifth consecutive international transaction for Canopy Rivers, builds on our thesis of selecting globally scalable and innovative processes, products, and technologies from complementary industries, and applying them to the cannabis and hemp economy,’ said Mary Dimou, Director of Business Development at Canopy Rivers. ‘Plant sciences is a mostly overlooked but absolutely critical segment of the cannabis and hemp value chain, and we are seeking to address this gap with this investment. ZeaKal’s technology has already realized success across a number of crops during field trials, and these are crops that have been commercialized for decades. The application of this innovative technology throughout the Canopy Rivers portfolio and the cannabis and hemp industry at large could be a game changer.’
Canopy Rivers believes that ZeaKal’s PhotoSeed(TM) technology has the potential to translate into significant benefits for the cannabis and hemp industry. Due to prohibition, the cultivation of cannabis and hemp has lacked the agricultural research and advancements that have significantly improved the cultivation of other crops. Canopy Rivers believes that applying ZeaKal’s PhotoSeed(TM) technology to cannabis and hemp represents a significant step forward – with increased crop yield, higher oil production, additional grow cycles, and enriched cannabinoid output numbering among the potential benefits of the technology. While trials on cannabis and hemp have yet to begin, the positive results already achieved give Canopy Rivers confidence in ZeaKal’s experienced team and its ability to successfully optimize and adapt its technology for expansion into this industry.
‘We are elated that Canopy Rivers, a cannabis and hemp industry authority, has selected ZeaKal as an agriculture partner,’ said Han Chen, Chief Executive Officer of ZeaKal. ‘Beyond the capital, it is further validation that PhotoSeed(TM) is a next-generation blockbuster trait that can be utilized across diverse industries. With its rich domain and technical expertise, Canopy Rivers is supporting our entry into the cannabis and hemp markets with a technology we expect to be transformative for the sector.’
As a result of its US$10,000,000 investment, Canopy Rivers owns approximately 8.7% of ZeaKal on a fully diluted basis and holds an observer seat on ZeaKal’s board of directors.
About Canopy Rivers: Canopy Rivers is a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. Canopy Rivers works collaboratively with Canopy Growth Corporation (TSX: WEED, NYSE: CGC) to identify strategic counterparties seeking financial and/or operating support. Canopy Rivers has developed an investment ecosystem of complementary cannabis operating companies that represent various segments of the value chain across the emerging cannabis sector. As the portfolio continues to develop, constituents will be provided with opportunities to work with Canopy Growth and collaborate among themselves, which Canopy Rivers believes will maximize value for its shareholders and foster an environment of innovation, synergy and value creation for the entire ecosystem.
About ZeaKal: ZeaKal is a plant science company developed from the incubation pipeline of Kapyon Ventures in partnership with AgResearch Ltd. The company is focused on developing, PhotoSeed(TM), a next-generation trait technology that has been proven to increase the photosynthetic capacity and yield of several major crops.”
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Canopy Growth Corporation (NYSE:CGC) (TSX:WEED.TO) is a world-leading diversified cannabis, hemp and cannabis device company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms, as well as medical devices through the Company’s subsidiary, Storz & Bickel GMbH & Co. KG. Canopy Growth Corporation recently introduced Spectrum Therapeutics, a new global brand that will encompass all of the Company’s ongoing commercial medical and clinical research operations including Spectrum Cannabis, Canopy Health Innovations (CHI), and the most recent addition to Canopy Growth’s medical portfolio, Bionorica SE-founded C3 Cannabinoid Compound Company (“C3”), a European leader in cannabinoid-based medical therapies. Incorporating these entities into one unified ecosystem will integrate the Company’s medical efforts as one global healthcare enterprise. Spectrum Therapeutics now encompasses the production and distribution of full-spectrum and single cannabinoid medical cannabis products; industry-leading education, resources and support for patients and healthcare practitioners; as well as pre-clinical and clinical research and the development of cannabinoid-based medicines. “We’ve always been a company that provides more than medical cannabis to our patients,” commented Dr. Mark Ware, Chief Medical Officer, Canopy Growth. “We also offer education for patients and healthcare professionals and are engaged in research to define the safety and efficacy of cannabinoid medicines and the development of new cannabinoid-based treatments. Integrating our commercial medical businesses and clinical research arm under a single entity better reflects our position as a healthcare company that’s driving further acceptance of cannabinoids as mainstream medicine and addressing the medical and wellness needs of our patients worldwide.”
Innovative Industrial Properties, Inc. (NYSE:IIPR) is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Innovative Industrial Properties, Inc. recently announced that it had closed on the acquisition of a property in Saxton, Pennsylvania, which comprises two buildings totaling approximately 266,000 sq. ft. of industrial space. The purchase price for the Pennsylvania property was USD 13.0 Million. Concurrent with the closing of the purchase, IIP entered into a long-term, triple-net lease agreement with a subsidiary of Green Leaf Medical, LLC (Green Leaf Medical), which intends to operate the property as a licensed medical-use cannabis cultivation and processing facility. Green Leaf Medical has redeveloped approximately 103,000 sq. ft. of industrial space for medical-use cannabis cultivation and processing, with the remaining approximately 163,000 sq. ft. of industrial space available for future redevelopment. As the pioneering real estate investment trust (REIT) for the medical-use cannabis industry, IIP partners with experienced medical-use cannabis operators and serves as a source of capital by acquiring and leasing back their real estate assets, in addition to offering other creative real estate-based capital solutions. “We are pleased to add multi-state operator Green Leaf Medical to our premier tenant roster,” said Paul Smithers, President and Chief Executive Officer of IIP. “Green Leaf Medical has achieved tremendous success in Maryland in a short period of time, and is focused on replicating that model across a number of states, including Pennsylvania. We are thrilled to serve as one of their capital sources to allow them to continue those expansion initiatives and reach an ever-growing number of patients across the Northeast.”
HEXO Corp. (NYSE-A:HEXO) (TSX:HEXO.TO) is an award-winning consumer packaged goods cannabis company that creates and distributes prize-winning products to serve the global cannabis market. HEXO Corp. and Newstrike Brands Ltd. recently announced that they had entered into a definitive arrangement agreement under which HEXO will acquire, by way of a plan of arrangement under the Business Corporations Act (Ontario), all of Newstrike’s issued and outstanding common shares in an all-share transaction valued at approximately USD 263 Million. The Transaction gives HEXO the capacity to produce approximately 150,000 kg of high-quality cannabis annually. The Transaction also provides HEXO access to four cutting-edge production campuses totaling close to 1.8 million sq. ft. of near-term cultivation space and diversified growing and production techniques. This is in addition to HEXO’s 579,000 sq. ft. facility for a manufacturing and product development center of excellence in Belleville, Ontario. Combined, HEXO and Newstrike have established distribution agreements in 8 provinces including Ontario, Quebec, British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia, and Prince Edward Island, allowing broad consumer access to HEXO’s products across Canada. Newstrike’s licensed indoor facility provides HEXO with access to diversified growing techniques and positions HEXO for flexibility for international exports as global cannabis markets continue to open. “We’re thrilled to welcome the Newstrike team into the HEXO family. Jay Wilgar (Chief Executive Officer of Newstrike) and his team have built incredible relationships, including teaming up with The Tragically Hip, and they share HEXO’s vision of bringing exceptional branded cannabis experiences to adults everywhere,” said Sebastien St-Louis, Chief Executive Officer and Co-Founder of HEXO Corp “With Newstrike, we’re adding talented employees and infrastructure to take HEXO to the next level on our journey to become one of the largest cannabis companies in the world. We’re extremely proud of our record of execution, and today are committing to achieving over USD 400 Million in net revenue in 2020.”
CannTrust Holdings Inc. (NYSE:CTST) (TSX:TRST.TO) is a federally regulated licensed producer of medical and recreational cannabis in Canada, and the 2018 Canadian Cannabis Awards “Top Licensed Producer of the Year”. CannTrust Holdings Inc. recently announced that it had finalized a Letter of Intent with Société québécoise du cannabis to provide Quebec with high quality cannabis for the recreational market. The LOI will serve as an introduction of CannTrust’s recreational brands to the Quebec market beginning with two of the Company’s most established strains that will be available through SQDC later this year. “This LOI signifies the first step towards a long and impactful relationship with the SQDC and consumers in Quebec. This is an important milestone as we have secured national distribution across all ten provinces for our adult-use products,” said Peter Aceto, Chief Executive Officer, CannTrust. “This will allow us to develop our brand presence in Quebec at a time when consumers are beginning to develop their preferences.”
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