A Canadian greenhouse vegetable producer producing an expansion into hemp is bracing for Latin American competitors as it expands its operations.
“The self-confidence that I have in Canada is, I assume we can really compete on oil with Latin America,” Village Farms’ CEO Michael DeGiglio mentioned final week in a webcast with MJBizDaily’s Investor Intelligence.
“I actually think that we can retain our fees down to that level, so I assume it is seriously going to rely on the branding tactic,” he added.
Village Farms projects costs for wholesale hemp flower will be about $two/kilogram in the midterm.
Rates are at the moment larger but maintaining a cost forecast at that level forces the enterprise to hold fees to $1/kilogram or significantly less so that it can turn a profit, DeGiglio mentioned.
This must also shield against Latin American competitors, he added.
Colombia point of view
Pablo Fog, CEO of Colombian grower and processor Colombian Organics, doubted Canada would be capable to compete with Colombians on price. He mentioned Colombian producers project that in the medium term they will be creating flower at a price of about 20 cents to 30 cents/kilogram.
“It is nonetheless not at these levels as production is just beginning,” Fog told Hemp Sector Everyday.
A Canadian or North American grower “would under no circumstances attain a price related to ours” he mentioned, citing larger labor and power fees.
Fog mentioned other crops show Colombia can lead markets in top quality and costs.
“Let’s just appear at the flower market and there you can clearly realize,” Fog mentioned.
According to the Colombian trade promotion agency ProColombia, about 70% of decorative flowers that come into the United States come from Colombia.
Leveraging vegetable experience for CBD achievement
In addition to cannabis production, Village Farms has an established network of vegetable growers across North America, like Mexico, as properly as with groceries and other retailers that will be significant for CBD retailing and brand developing.
The enterprise has however to choose which locations of the CBD market place it will penetrate 1st. Hemp Sector Everyday projects the U.S. market place for hemp-derived CBD will expand to as substantially as $11.three billion by 2024.
“We assume there are a lot of possibilities out there,” he mentioned. “It is a fragmented market place nonetheless.
“Once we make that investment and we have penetration, we want to leverage out our partnership that we have with nearly all the retailers, a very good portion of the grocery retailers across the nation.”
No plans to import from Latin America
Village Farms is unlikely to import any flower from Colombia or elsewhere in South America, he mentioned. It also plans to create resin inside North America for the reason that “CBD is mainly an extractive solution so production fees can also be controlled there.”
“Once we have a brand we (can differentiate) saying we create in the United States of America. We like to pursue that at 1st, as opposed to importation from Latin America, even if it is significantly less dollars,” he mentioned.
Although Village Farms has explored production possibilities in South American nations, such as Colombia and Ecuador, it is a lot more interested in what Central America could provide in terms of markets.
“We are undoubtedly interested in Mexico as a nation,” he mentioned.
Future guidelines could settle it
Regulations however to come in the United States will be the final word on exactly where most CBD is developed. That is according to Kris Krane, president of 4FrontVentures, a Phoenix-primarily based multistate retail marijuana operator.
“This is all speculation at this point, considering the fact that we do not know specifically how the CBD import market place will be regulated and how that will in the end influence pricing.
“I have a tendency to agree that it will be really complicated for North American producers to compete with Colombian farmed goods on wholesale pricing,” Krane wrote in an e mail.
“If that occurs on a significant scale, they could potentially undercut pricing even from Colombia, or at least support drive down international wholesale pricing. But all in all, I think Colombia is set up properly to turn into a low price producer nation for the Western Hemisphere and North American markets,” Krane mentioned.
Village Farms trades as VFF on the Toronto Stock Exchange and the Nasdaq.
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