CannabisNewsWire
Editorial Coverage: Rising hemp production is putting pressure
on processing.
Sugarmade Inc. (OTCQB: SGMD) (SGMD
Profile), a provider of cultivation equipment, is
adding processors to its catalog of products, focusing on
next-generation machinery. Canopy Growth Corporation (NYSE:
CGC) (TSX: WEED) will be among the companies with a rising
demand for processing, as it increases both its cultivation
capacity and its product lines. Demand is rising in part thanks to
CBD’s public profile, with deals such as the partnership between
Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB) and
UFC shining a spotlight on the plant and its potential. New uses
for CBD are also increasing demand for the plant, with R&D led
by companies such as Cronos Group Inc. (NASDAQ: CRON) (TSX:
CRON) and Aphria (NYSE: APHA) (TSX:
APHA).
- Hemp can be processed to extract both fibers and cannabidiol
(CBD).
- CBD is currently the most valuable segment of the North
American hemp market, though demand is likely to grow for fiber
processing.
- Larger machines offer one option to increase the scale of
processing.
- New technology may provide a more efficient answer.
To view an infographic of this editorial, click here.
Masses of Hemp
The year 2019 looks to be a bumper year for the U.S. hemp
industry. Rising consumer demand has met the legal relief of the
2018 Farm Bill, whose passage in December paved the way for legal
hemp cultivation and processing across the country. The industry is
preparing to make hay while the sun shines — or in this case, make
heaps of hemp.
This rise in production, which is expected to continue into next
year and beyond, is inevitably creating complications. Most
important among these is the challenge of processing the hemp. U.S.
hemp-processing businesses are relatively new and small scale, as
is much of the machinery with which they work. If the industry is
to profit from the massive rise in hemp production, then it needs
to ramp up its processing capacity. Otherwise today’s bumper crops
could become tomorrow’s waste.
What We Get from Hemp
Hemp production and processing has risen from nothing to become
a huge business in just the last few years. Companies working in
the sector, such as Sugarmade Inc. (OTCQB: SGMD),
cover a wide range of products and services, from providing cultivation supplies to marketing new
products to consumers.
Those products usually incorporate one of the two main
ingredients that can be extracted from hemp: fibers and cannabidiol
(CBD).
Fibers are how hemp has been traditionally cultivated and used.
For centuries, hemp was the basis of rope and cloth, playing an
essential part in equipping navies and clothing people. This use
fell out of fashion in the 20th century, as sailing was
replaced by mechanical shipping, and hemp became caught up in drugs
criminalization efforts. As a result, America is not well
positioned to produce hemp fiber, and imports most of
what it uses from China, a country with a more advanced hemp
fiber industry. But with growing interest in hemp and the
disruption of trade wars, home-grown fibers have moved onto center
stage, with more companies recognizing the significant opportunity
the crop offers.
The product that has brought American companies such as
Sugarmade into the hemp space is one of the breakaway commercial
phenomena of the past decade — CBD. A natural chemical found in
hemp and related plants, CBD has recently been the subject of much
research and development. Claims have been made for its
effectiveness in relaxation, pain management and countering
anxiety. The component has become a popular ingredient in health
and well-being products, including supplements, foods and
toiletries.
With a bumper harvest of hemp expected this fall, companies
throughout the value chain are asking how raw hemp can most
effectively be processed to provide for the massive demand for
CBD.
Scaling Up
The industry is clearly going to have to scale up to meet the
challenge of hemp processing. This burgeoning increase is creating
unprecedented levels of demand for processing machinery.
“Our staff has done extensive research into the fast-growing
hemp industry,” said Sugarmade CEO
Jimmy Chan. “We continue to see an imbalance between
cultivation outputs and extraction capacities within the industry.
This leads us to believe the market for extraction services and the
equipment required by these extraction companies will continue to
accelerate.”
The company has responded by entering the market for hemp
extraction technologies and equipment. As a supplier of cultivation
supplies, Sugarmade has already benefited from the
green rush surrounding the Farm Bill and the growing interest
in hemp that preceded it. Moving from cultivation equipment to
extraction equipment is a natural next step for a company whose
business model is built around supporting cultivators.
In addition to increasing the number of machines available, many
companies are looking into providing bigger machines that can
process ever bigger volumes of biomass. But the drawback of this
“bigger is better” philosophy is cost. The larger machines being
installed in many extraction facilities are expensive, not just for
the machines themselves but also the associated costs. Expenses
such as real-estate square footage and ethanol storage have to be
factored in, and once those costs are included, a modern
hemp-extraction facility can easily cost tens of millions of
dollars, a cost passed on to cultivators through processing
fees.
While the industry’s processing capacity clearly needs to
increase, the best solution may not be the most obvious. Sugarmade
is looking at a different approach.
New Technology
Rather than focus on larger versions of current machines,
Sugarmade is exploring the next generation of hemp-processing
technology.
Most CBD extraction in the United States currently uses ethanol
to chemically separate the CBD from the rest of the plant and make
it available for use. But other options are available and are
becoming more sophisticated. New technology using water-based
sonication extraction, microwaves and other techniques may
transform the way extraction is carried out — and significantly
impact costs as well. These machines, which Sugarmade plans to make
available to its customers, could reduce the cost of extraction and
so help cultivators increase their output without exorbitant
increases in cost.
These technologies may also help with other steps in the
processing of hemp. New machines could perform additional functions
that currently require auxiliary equipment, such as THC remediation
and removing heavy metals. Skipping steps in processing would only
add to the efficiency of operations, reducing costs and increasing
speed of processing.
To bring this new technology into the American market, Sugarmade
is working with Chinese manufacturers. The Chinese market is
advanced in its approach to extraction, thanks to its reliance on
essential oils for herbal medicines. For more than a thousand
years, Chinese farmers have been cultivating and extracting
essential oils from hemp. This expertise has led to an in-depth
understanding of the process and the equipment needed to complete
the task. Working with Chinese manufacturers could allow Sugarmade
to provide its customer with more advanced and efficient
technology.
Hemp processing needs to scale up. But just because eventual
outputs need to be bigger doesn’t mean that bigger is necessarily
better where machinery is concerned. In many cases, bigger may be
just more expensive, whereas improved technology could bring real
benefits.
Companies in Need of Processing
The pressure on processing capacity for hemp and related plants
comes in part from the emergence of large companies in the sector.
Among these is Canopy Growth Corporation (NYSE: CGC) (TSX:
WEED), a leading player that has benefited from investment
from other industries. The company has been steadily growing,
including through the acquisition of a
company making hemp skin-care products, creating demand for
more CBD from within the company. To help meet this demand, it has
been preparing another acquisition
of Acreage Holdings Inc.
Another of the large Canadian companies with an interest in hemp
and CBD, Aurora Cannabis Inc. (NYSE: ACB) (TSX:
ACB) is exploring new ways in which these products can be
of use. The company recently announced a partnership with mixed martial arts company UFC. As
part of this arrangement, Aurora will explore ways in which its
research and products might help athletes, whether in pain relief,
dealing with the strains put on muscles, or helping with rest and
relaxation. The partnership could help raise the company’s profile
by association with an exciting sport and some of the world’s most
impressive athletes.
Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) is
also looking for new approaches to CBD, with the creation of a recent R&D facility. While R&D
work may only consume relatively small amounts of plants, its
results include new products that could expand the market and
increase demand for processing facilities. The company’s CEO, Mike
Groenstein, has also been raising the profile of this work through
a series of conference appearances, as the sector becomes better
connected and interdependent.
The law around CBD and related products continues to evolve, and
with it the products that can be sold. Aphria (NYSE: APHA)
(TSX: APHA) is developing
vaporization products in anticipation of changes in Canadian
law later this year. As more states and countries bring in ever
more liberal laws, product ranges should continue expanding, and
with that growth will come the sector’s rising demand for
equipment.
For more information on Sugarmade, visit Sugarmade Inc.
(OTCQB: SGMD)
About CannabisNewsWire
CannabisNewsWire (CNW) is an information service that provides
(1) access to our news aggregation and syndication servers, (2)
CannabisNewsBreaks that summarize
corporate news and information, (3) enhanced press release
services, (4) social media distribution and optimization services,
and (5) a full array of corporate communication solutions. As a
multifaceted financial news and content distribution company with
an extensive team of contributing journalists and writers, CNW is
uniquely positioned to best serve private and public companies that
desire to reach a wide audience of investors, consumers,
journalists and the general public. CNW has an ever-growing
distribution network of more than 5,000 key syndication outlets
across the country. By cutting through the overload of information
in today’s market, CNW brings its clients unparalleled visibility,
recognition and brand awareness. CNW is where news, content and
information converge.
Receive Text Alerts
from CannabisNewsWire: Text "Cannabis" to
21000
For more information please visit https://www.CannabisNewsWire.com and
or https://CannabisNewsWire.News
Please see full terms of use and disclaimers on the
CannabisNewsWire website applicable to all content provided by CNW,
wherever published or re-published: http://CNW.fm/Disclaimer
CannabisNewsWire (CNW)
Denver, Colorado
www.CannabisNewsWire.com
303.498.7722 Office
Editor@CannabisNewsWire.com
DISCLAIMER: CannabisNewsWire (CNW) is the source of the Article
and content set forth above. References to any issuer other than
the profiled issuer are intended solely to identify industry
participants and do not constitute an endorsement of any issuer and
do not constitute a comparison to the profiled issuer. The
commentary, views and opinions expressed in this release by CNW are
solely those of CNW. Readers of this Article and content agree that
they cannot and will not seek to hold liable CNW for any investment
decisions by their readers or subscribers. CNW is a news
dissemination and financial marketing solutions provider and is NOT
registered broker-dealers/analysts/investment advisers, hold no
investment licenses and may NOT sell, offer to sell or offer to buy
any security.
The Article and content related to the profiled company
represent the personal and subjective views of the Author, and are
subject to change at any time without notice. The information
provided in the Article and the content has been obtained from
sources which the Author believes to be reliable. However, the
Author has not independently verified or otherwise investigated all
such information. None of the Author, CNW, or any of their
respective affiliates, guarantee the accuracy or completeness of
any such information. This Article and content are not, and should
not be regarded as investment advice or as a recommendation
regarding any particular security or course of action; readers are
strongly urged to speak with their own investment advisor and
review all of the profiled issuer’s filings made with the
Securities and Exchange Commission before making any investment
decisions and should understand the risks associated with an
investment in the profiled issuer’s securities, including, but not
limited to, the complete loss of your investment.
CNW HOLDS NO SHARES OF ANY COMPANY NAMED IN THIS RELEASE.
This release contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E the Securities Exchange Act of 1934, as amended and
such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. “Forward-looking statements” describe future expectations,
plans, results, or strategies and are generally preceded by words
such as “may”, “future”, “plan” or “planned”, “will” or “should”,
“expected,” “anticipates”, “draft”, “eventually” or “projected”.
You are cautioned that such statements are subject to a multitude
of risks and uncertainties that could cause future circumstances,
events, or results to differ materially from those projected in the
forward-looking statements, including the risks that actual results
may differ materially from those projected in the forward-looking
statements as a result of various factors, and other risks
identified in a company’s annual report on Form 10-K or 10-KSB and
other filings made by such company with the Securities and Exchange
Commission. You should consider these factors in evaluating the
forward-looking statements included herein, and not place undue
reliance on such statements. The forward-looking statements in this
release are made as of the date hereof and CNW undertakes no
obligation to update such statements.
Source:
CannabisNewsWire
Contact:
CannabisNewsWire (CNW)
Denver, Colorado
www.CannabisNewsWire.com
303.498.7722 Office
Editor@CannabisNewsWire.net
Sugarmade (PK) (USOTC:SGMD)
Historical Stock Chart
From Sep 2024 to Oct 2024
Sugarmade (PK) (USOTC:SGMD)
Historical Stock Chart
From Oct 2023 to Oct 2024
