CropLogic has secured a supply agreement worth $15 million from it's Hemp Farm Trial.
The award-winning global agronomy, farm management and agtech company, CropLogic Limited (ASX:CLI), announced today that it has executed a supply agreement with an industrial hemp processing facility located in Central Oregon, known as Deschutes Labs.
The deal between the two companies will see CropLogic supply Deschutes with $15 million worth of product, which will amount to less than 30% of the hemp farm trial's current production estimate.
The news is a huge boon to CropLogic investors, as it validates the company's agronomy, farm management and agtech expertise, while also putting them on target to generate over $45 million in revenue from the 2019 harvest period.
More importantly, selling to a diversified buyer base will also significantly mitigate the pot stock's default risk—which is part of CLI's broader commercial strategy—as opposed to limiting offtake activities to a single company.
"This initial sale confirms that CropLogic's agronomy, farm management and agtech expertise can be successfully applied to industrial hemp and has been recognised by industry participants. This Supply Agreement establishes CropLogic as a viable producer and assists in developing credibility amongst other hemp farmers that we are pitching to."
– CropLogic CEO, James Cooper-Jones
"CropLogic has received many enquiries and is seen as a corporate primary producer and farm manager."
"We will seek to understand larger scale local production and I am sure our experienced team will be able to present a strong business case for further development of our hemp expertise," Cooper-Jones said.
According to terms of the supply agreement, Logical Cropping LLC— CropLogic's wholly-owned subsidiary—will begin supplying Deschutes Labs with hemp biomass in weekly allotments beginning 20 October 2019, with payments to be made following each delivery.
These supply requirements should be easily achievable by Logical Cropping, as the potential yield from its current 500 acre hemp farm trial is expected to generate from 800,000 to 1,100,000 pounds of biomass.
In response to the growing demand from the market, CropLogic's management team has also tasked with reviewing and recommending strategies for enhancing the company's hemp growing activities during the next upcoming 2020 growing season using insights derived from the current trial farm.
Among other factors, the trial hemp farm review will include an assessment of seed selection, performance, and scope for larger scale growing operations, while also studying potential scalability.
The manager of Deschutes Labs, Anthony Vivolo, was similarly bullish about the agreement, saying that "our mission is to produce the highest quality hemp extracts and isolates from premium American grown industrial hemp".
"Deschutes Labs is proud to be operated by the industry's best, boasting an extraction team with over a decade of professional experience. Determined to offer the highest quality products for the rapidly growing consumer market, we spared no expense in designing our state-of-the-art facility," Vivolo said.
"While being fully compliant with industry-leading safety and regulation standards, our lab was designed to reach maximum extraction potential."
"Through our relationship with Croplogic, a growing partner offering vast knowledge in hemp genetics, we can offer our customers consistent and abundant CBD products."
News of the deal caused CLI stock to climb in value by 7.69%, and as of midday 6 August CropLogic's share price had risen to 0.084.