Cadiz : Enters Hemp Business

AGRICULTURE: Water firm, cannabis company team up

LA Business Journal | By Howard Fine

Field of Dreams: Graham Farrar (left) and Scott Slater at Cadiz's land in the Mojave Desert. Photo by Amy Steinfeld

With its long-awaited water project encountering yet another delay, Los Angeles water developer Cadiz Inc. is turning to a new cash crop for its desert land holdings: hemp production.

Cadiz earlier this month entered into a joint venture with a division of Long Beach-based California Cannabis Enterprises Inc. to grow hemp on Cadiz-owned land that sits atop a Mojave Desert aquifer. The two companies would evenly split proceeds from hemp sales.

Downtown-based Cadiz signed the joint venture with Glass House Farms, the hemp and marijuana cultivation division of California Cannabis Enterprises, a vertically integrated cannabis and hemp company that includes both production and retail operations.

Under the deal, the joint venture will be called SoCal Hemp Co. and will cultivate organic hemp on 9,600 acres Cadiz owns north of Joshua Tree National Park.

Once it's fully running in a few years, the combined farming and hemp extraction operations will employ roughly 1,000 people on site, executives with the companies said. That would make for one of the largest commercial hemp-growing operations in California, targeting both business and consumer markets.

A multipurpose crop

With its low water requirements, hemp fiber derived from the cannabis plant is increasingly used as a cotton substitute in clothing. And cannabis oil, or CBD, can be extracted from hemp. The market for CBD has grown exponentially in recent years with consumers using it for medicinal purposes.

For Cadiz, the deal gives the company a chance to more fully monetize its vast desert land holdings as the approval process for its water project drags into its third decade. Cadiz leases a portion of its land to Santa Paula-based Limoneira Co. for the production of lemons, receiving roughly $440,000 a year in lease payments. Hemp requires less water to grow than most commercial crops do, making it suitable for a desert environment with access to an aquifer.

'With our water and land, we will be able to supply a continuous cycle of hemp production to the market,' said Cadiz Chief Executive Scott Slater. 'And with this joint venture arrangement, as the market rises for hemp, we will be right in the middle of it.'

The joint venture allows California Cannabis Enterprises - through its Glass House Farms division - to enter the lucrative industrial hemp market, supplementing its cannabis farming and retail operations.

Glass House Farms has 500,000 square feet of greenhouse space for cannabis cultivation near Lompoc in Santa Barbara County, while parent California Cannabis Enterprises has retail cannabis operations throughout Southern California and several branding arrangements.