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Sep 18, 2018

'Monsanto of pot': How cannabis firms are seeking to lower growing costs

'Big, big, big' beverage brands have come knocking on CannTrust's door, CEO says

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As cannabis producers add to their harvest as Canada prepares to legalize recreational use starting Oct. 17, some companies are already exploring novel ways to dramatically reduce the cost of growing pot.

While most cannabis companies build massive indoor facilities and greenhouses to meet the expected demand that Canadians will have for legal pot, the cost needed to operate these modern grow-operations is also climbing with the average cost of producing marijuana hovering at about $1 a gram.  

Now, producers are turning to old-school methods such as outdoor production as well as new technological innovations in an effort to reduce the cost of growing a gram to pennies on the dollar.

CannTrust Holdings Inc. began a pilot program this month to sell marijuana seeds to farmers with a plan to buy their harvest and reduce the cost of a gram of pot to as little as 20 cents through lower overhead and production charges, said Brad Rogers, the company’s president and chief operating officer.

“We want to be the Monsanto of pot,” Rogers told BNN Bloomberg in a recent interview. “Right now, we’re in control of our own destiny with supply. We need to be. But the farmers can farm and we can take that raw material and process that in any way shape or form.”

Bayer AG bought Monsanto Co. and its portfolio of seeds for US$63 billion in June, creating the world’s largest seed and pesticides maker. The name of Monsanto, however, has for years been synonymous with opponents of genetically modified seeds. Rogers said he believes his Vaughan, Ont.-based firm will not carry the same stigma as Monsanto following the U.S. agrochemical company’s controversies involving traces of genetically-modified genes found in organic crops, adding that he doesn’t expect any similar issues working with farmers on its seed-program.

CannTrust’s pilot program is recruiting farmers for next year’s crop and enticing them with prices that could easily double or triple their current acreage yield, according to Rogers. If successful, the company could ditch its growing business altogether and let farmers grow their cannabis crop for them, he added.

“We don’t need to have the infrastructure. As a producer, you can cut your cost of infrastructure down to nothing, cultivate in a simple hoop house and have up to three crops a year depending on how you heat it,” Rogers said. “Eventually, we’re going to be out of the grow game and be in the seed provision game.”

Keith Currie, head of the Ontario Federation of Agriculture and a Collingwood-area hay and sweet corn farmer, is cautiously optimistic about farmers’ involvement in cannabis.

“We don’t know a lot about it yet, but there’s going to be an opportunity there,” Currie told BNN Bloomberg in an interview. “There’s going to be people who will grow it for consumption but we need to know if there’s an economic opportunity as well.”

Meanwhile, some producers are looking to minimize their overhead, the biggest cost associated with growing cannabis, with something more high tech – robots. Aphria Inc., Aurora Cannabis Inc., Canopy Growth Corp. and Maricann Group Inc. are all in various stages of replacing the dozens of workers needed to snip off cannabis flower from plants with robots that will automate the entire process.

“They don’t call in sick, they don’t go on vacation and they work as hard as you want them to be,” said Vic Neufeld, Aphria’s chief executive, in an interview with BNN Bloomberg. The company is nearly done transitioning one of its Leamington, Ont. indoor facilities to be fully automated, he said. Doing so will reduce the company’s workforce from 15 workers per acre to about three, while slashing the cost per gram by about 20 per cent, Neufelt added.

“Labour will be a key restrictive factor for any greenhouse that has scale,” Neufeld said.

Some producers are also looking even longer term, casting an eye toward lab-grown cannabis that could eventually replace the millions of square feet of space built to grow the plant and reduce the cost of pot to a couple pennies per gram. Cronos Group Inc. recently announced a deal with Boston-based Ginkgo Bioworks Inc. to develop microorganisms that can be cultivated and produce high quality cannabinoids such as THC and CBD. Meanwhile, Organigram Inc.’s $10-million investment in Hyasynth Biologicals, which boosts its access to technology to produce phytocannabinoids in a lab, has been described by the company as a potential “game changer.”

“We’re putting together plans now for some larger scale manufacturing and putting together our team so we can do deals with bigger [licensed producers] and pharmaceutical companies across the industry,” said Hyasynth’s chief executive Kevin Chen in a Sept. 13 television interview with BNN Bloomberg.

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.