Greenhouses switch to pot as recreational deadline looms

Sprawling farm in Delta that used to grow tomatoes signs deal to supply B.C., others

The air in Pure Sunfarms’ harvest room is thick with a sweetly fragrant scent as workers busily separate cannabis buds from recently picked flowers. It’s a company in a hurry to meet the Oct. 17 deadline for the availability of legal, recreational weed.

Up until last November, tomatoes would have been the crop coming out of the sprawling 10-hectare greenhouse in Delta. Now, about a quarter of the facility has been turned into clean, security-sealed growing rooms for cannabis. Ten hectares is the equivalent of nine-and-a-half FIFA-sized soccer pitches laid out in orderly rectangles.

The remaining eight hectares of glass rooms are rapidly being converted for the same purpose as joint-venture partners in the Pure Sunfarms facility — licensed medicinal cannabis producer Emerald Health Therapeutics and greenhouse-grower Village Farms — gear up for the legal, recreational market.

“We’ve had some history growing [cannabis] in Victoria at a facility that’s about 3,000 square feet,” said Emerald Health chief financial officer Rob Hill. “So, to go to this scale, call it 225,000 square feet, but heading to 1.1 million square feet, that’s a big jump.”

That, however, is indicative of the opportunity that Emerald Health and other licensed cannabis producers are betting is out there, and the Pure Sunfarms venture isn’t alone in the effort to secure the facilities and expertise of greenhouse growers.

Canopy Growth Corp., Canada’s cannabis behemoth has secured two massive greenhouses in the Lower Mainland under the name B.C. Tweed — a 15-hectare facility near Pure Sunfarms in Delta and a 12-hectare greenhouse in Aldergrove.

Canopy Growth and Emerald Health are among the 32 federally-licensed cannabis producers that have signed memorandums of understanding to supply the B.C. Liquor Distribution Branch, designated as the province s exclusive distributor for recreational cannabis.

Last month, the B.C. government gave municipalities the authority to limit new cannabis-related development on Agricultural Land Reserve. However, Emerald and Canopy’s operations have moved into pre-existing greenhouses not included in the new regulation.

“Clearly, (the BCLDB) is doing the right thing by trying to sign a lot of suppliers quite early on,” said Deepak Anand, vice-president for business development and government relations at the consulting firm Cannabis Compliance.

And from the producers’ point of view, Anand said moving into large greenhouses was a way to expand their capacity to a large scale faster than they could through building indoor growing facilities.

“There is a cost advantage [to greenhouses] versus indoor,” Anand said. “Who the winners will be remains to be seen, it’s very early to determine that, but I think it’s a good opportunity.”

To date, the BCLDB hasn’t talked publicly about what kind of volumes it will be looking to purchase.

In an email, BCLDB spokeswoman Viviana Zanocco said memorandums suppliers have signed are not official commitments, but do set out expectations for what it expects to purchase.

“Future purchase orders will be legally binding, and will be based on demand, Zanocco wrote. “So if a [licensed producer’s] particular strain or [stock unit] doesn’t sell, it won’t be replenished.

Amounts, however, are not small. Canopy Growth, for instance, said that under its memorandum it expects to make 5,719 kilograms available to B.C.’s distribution branch within the first 12 months following Oct. 17.

Canopy has also made supply commitments to six other provinces and one territory, including Quebec, Alberta and Yukon worth a total of 67,000 kilograms of product.

“Investing in a reliable, national production footprint has made all the difference,” Canopy president Mark Zekulin said in a statement.

At Pure Sunfarms, Hill said the joint venture has only signed a memorandum with B.C. so far, but is in discussions with other provinces.

Emerald Health’s initial memorandums with BCLDB spells out agreed-upon costs and prices for 1,086 kilograms of cannabis for the legal, recreational market, but could see the facility deliver about 13,000 kilograms for the non-medical cannabis market in B.C. over the first 18 months.

“Nobody has farmed [cannabis] on this scale before,” said Hill, adding that while Emerald has skill in cultivating and growing cannabis, Village Farms’ staff brought the expertise in producing crops on a phased and continuous basis, “harvesting every day [like] a conveyor belt, almost.”

The company is still fleshing out its prices, but Hill expects that as it ramps up production, economies of scale will bring production costs down to less than a dollar per gram.

“With the recreational market opening up and expanding in the fall, everybody in this space is looking to get to profitability in 2019, if not 2018,” Hill said.

Canopy Growth posted a $54-million loss in its fiscal 2018, which ended March 31 while Emerald Health showed a $5-million loss in its financial quarter that ended March 31.