Hemp cultivation by SoCal hemp in the Mojave desert lands of Cadiz Inc.
Long Beach-based cannabis company Glass House Group had been looking for a place to grow cannabis without the residential opposition it has regularly experienced in its large-scale cultivation near Carpinteria.
And 18 months ago it found this place: in the middle of the Mojave Desert, miles from civilization. The land is owned by downtown water infrastructure developer Cadiz Inc. and sits on an aquifer.
Glass House and Cadiz formed a joint venture in late 2019 to grow hemp on the property with the aim of converting the hemp into a range of usable products, from cannabidiol or CBD oils to chewable gums. They took advantage of a new law passed by Congress under the Agriculture Act of 2018 that legalized hemp production across the country.
“The benefits of growing cannabis in the desert aquifer included the distance from the residents and the relative lack of crop pests,” said Graham Farrar, president of the Glass House Group and general manager of the SoCal Hemp joint venture. “There aren’t many places in California where you have these conditions.”
For Cadiz, the company was an opportunity to monetize its properties as the company’s 25-year quest to pump water from the aquifer and pipeline it to water agencies across California had encountered a new round of delays. Under pressure from environmental associations, the state parliament passed a law that stipulates a further level of environmental assessment.
The first test for the joint venture was to see if hemp could be grown in the harsh desert environment. In the spring of 2020, SoCal Hemp planted a test crop on 200 acres of the Cadiz property. Water was pumped from the aquifer and pushed through a newly installed drip irrigation system.
But as the growing season continued for the test crop, the wind turned out to be a problem.
“We had to install windshields, which we were not used to with our other acreage,” said Farrar.
The harvest of the first trial crop proved a success, yielding hundreds of thousands of pounds of dried hemp. The hemp was then shipped to a third-party processing facility in Klamath Falls, Oregon, where it was processed into CBD oil and other products. The Glass House Group can sell and distribute to other retailers from its four retail stores across the state.
“We have proven that you can grow hemp on a large scale in the desert,” Farrar said.
But for SoCal Hemp, that may be the easy part. The greatest challenge may lie ahead when trying to find markets for its hemp-derived products.
That’s because there is now a glut of hemp.
“We saw an influx of companies starting businesses during the 2019 hemp boom,” said Michelle Mabugat, a cannabis industry legal advisor who now serves as a Greenberg Glusker Fields Claman & Machtinger office in Century City. “In 2019, farmers overproduced hemp in anticipation of the high demand for CBD. In retrospect, this demand was oversubscribed. “
The result, she said, is that there is currently a consolidation among hemp growers.
The SoCal Hemp project could be supported by a recent development involving the Glass House Group. On April 8, the company announced that it had acquired a $ 567 million deal from Mercer Park Brand Acquisition Corp. based in Toronto, a specialty company founded in 2019 to build a major marijuana brand. Mercer Park plans to publicize its acquisition on the Toronto Stock Exchange.
“We’ll be better funded to get bigger and on a bigger scale than before,” Farrar said of the deal.
Mabugat said this additional capital base could give SoCal hemp more ability to withstand the current decline in the hemp production market.
“Operating the size of SoCal hemp would probably allow the company to take more risks and weather the downturn in the market,” she said.
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