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This Weed Company Just Revealed a Lucrative CBD Strategy

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The past year has been a tumultuous one for the biggest names in the cannabis industry. Profits continue to keep a distance from the largest market capitalization cannabis stocks. At the same time, small-cap Village Farms (TSX:VFF)(NASDAQ:VFF) has been able to achieve three consecutive quarters of profitability.

Village Farms has transformed that outlook into a positive one despite what appeared to be a challenging year. The reason that Village Farms has a positive outlook is that the company has set a solid game plan for growth.

A significant prospect that the company is banking on is the relationship this company has established with cannabis, CBD, and hemp.

A word on Village Farms

Village Farms International is one of the largest and the longest operating greenhouse growers in North America. Village Farms is also the only publicly traded greenhouse produce company in Canada. The company’s vertically integrated greenhouse facilities grow premium-quality produce throughout the year.

Village Farms distributes the produce to national growers in Canada and the U.S. through over nine million square feet of CEA greenhouses in Texas and British Columbia along with partner greenhouses.

Village Farms and the cannabis industry

Village Farms has been growing crops like peppers, tomatoes, and cucumbers for over three decades. The company ventured into the cannabis industry a year before Canada’s legalization of marijuana in 2018.

According to the CEO Michael DeGiglio’s interview with Jim Cramer, the company’s venture into cannabis was “just, really, another agricultural crop and in that regard, we saw the transformation of our assets to a much more valuable crop from produce.”

Village Farms is leveraging the 30-year experience the company has as a vertically integrated grower for the massive opportunity the global marijuana industry presents. The company has entered into a partnership with British Columbia-based firm, Pure Sunfarms. Sunfarms has one of the largest cannabis growing operations in the world, which could mean that Village Farms is looking to establish a strong foothold for itself in the industry.

Expansion into U.S. outdoor hemp cultivation and CBD

Village Farms also intends to pursue opportunities to become a vertically integrated leader in the U.S. hemp and CBD markets. On May 21, 2019, the company announced its intention to work with Arkansas Valley Hemp. Both firms entered a joint venture for the outdoor cultivation of CBD hemp and CBD extraction in Colorado.

Village Farms is making a quick move to scale the outdoor cultivation of high CBD hemp and CBD extraction. This move will complement the company’s already state-of-the-art greenhouse operations in North America.

The company’s experience in vertically integrated greenhouse growing, along with the partnership with experienced outdoor cultivators Arkansas Valley Hemp, puts Village Farms in a strong position to make significant headway in CBD and hemp production.

Village Farm CEO has said that the company remains firmly on track “…to begin sales of hemp biomass this year, transitioning to sales of CBD crude oil early in 2020, and then commence CBD product manufacturing.”

Under the terms of the agreement, Village Farms is going to contribute US$5 million to Arkansas Valley Hemp for start-up costs, along with working capital.

What is the outlook?

The Q2 2019 earnings for Village Farms were US$53.5 million, a 27% jump from US$42 million in the previous year. The company’s stock price is at $14.37 at the time of writing.

Village Farms is on track to begin sales of hemp biomass this year. The cannabis producer anticipates launching CBD crude oil sales in early 2020 as well. It’s safe to say the outlook for Village Farms is quite favourable for the coming few years.

Village Farms’ CBD strategy spells excellent news for the company’s stock price in the near future, which is why you should take a closer look at the share prices and consider investing in the stock.

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of Village Farms International, Inc.

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