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These marijuana stocks have an inside track on hemp following the passage of the farm bill

Feb 7, 2019

Despite a slow-down in the U.S. Department of Agriculture’s rollout of the newly passed farm bill due to the government shutdown, lawmakers and companies are moving full steam ahead now that hemp is legal in all 50 states.

The USDA is now working to implement plans for increased hemp research and provision of oversight to state plans for growing hemp. As the USDA makes laws clearer, CBD retailers will enter the U.S. market in a major wave.

Despite the slow start, the farm bill is one of the most significant pieces of agricultural legislation to happen in quite a while because it removes hemp from the U.S. controlled substances list and makes cultivation legal across the nation.

Hemp is not to be confused with marijuana; indeed the plants are different, yet there is a plethora of confusion surrounding the topic. CBD can be derived from both hemp and cannabis, and the farm bill has the added bonus of beginning to separate and distinguish the two crops.

The farm bill is good news for any company producing CBD derived from hemp because companies are now free to legally manufacture, distribute and sell hemp-derived CBD products on a federal level. In a word, the impact of the bill is huge.

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The hemp CBD sector was experiencing a quiet build-up, but the U.S. government’s move opened the floodgates to a market that many industry insiders predict will be worth $22.2 billion in 2022 – just three short years from now. Mass-market retailers will begin stocking their shelves with CBD products, and everyone is racing to be first-to-market with CBD-infused beverages.

Here are the companies that are most likely best poised to take advantage of this emerging U.S. market.

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Canopy Growth

Some analysts state that companies like Canopy Growth Corporation (NYSE:CGC) will make a killing. Canopy is already considered the biggest worldwide player in cannabis and CBD, and the company is set to fast-forward its CBD-infused beverages, with the help of partner Constellation Brands Inc (NYSE:STZ). Last year, Constellation made a whopping $4 billion investment in Canopy – the largest cannabis investment to date – to poise the companies as a first mover in the beverages sector.

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Immediately after the farm bill passage, Canopy issued a press release stating that the company plans to fully participate in the American market “now that there is a clear federally-permissible path to the market.” Canopy will likely participate in a big way. They reportedly can produce 7,000 kilograms of hemp-derived CBD per year, and they also have hemp-specific intellectual property acquired from the Colorado-based company ebbu Inc. The company was just granted a license in New York State to process and produce hemp. Canopy has committed to a $100 to $150 million investment to establish the Hemp Industrial Park to build “large-scale production capabilities focused on hemp extraction and product manufacturing within the United States.”

Tilray

Like Canopy, Tilray is a heavy hitter in the industry and is also teamed with beverage giant Anheuser-Busch (NYSE:BUD). Tilray’s stock has been beleaguered of late, but the company just signed a deal to be the preferred supplier of CBD ingredients for the Authentic Brands Group product portfolio.

Charlotte’s Web Holdings Inc.

Colorado-based Charlotte’s Web Holdings Inc. (CWEB) has already stated they will pursue listing on a major U.S. exchange if the farm bill passes. The company is the world’s leading brand (by market share) in hemp-based CBD wellness products and is one of a handful of CBD producers capable of producing large volumes of hemp extract.

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Charlotte’s Web reported an increase of harvested hemp more than 10 times larger in 2018 than in 2017. In fact, the company produced nearly 700,000 pounds of hemp in 2018 from its three cultivation sites in Colorado, Kentucky, and Oregon.

The large harvest gave the company control over its costs of goods because it reduced or perhaps even eliminated the company’s dependence on third-party sourced material, and the price fluctuations that come with that. Canaccord recently rated the stock as a firm buy and even gave it a CA$21 price target, a 43 percent upside from where it has been trading in early 2019.

Curaleaf Holdings Inc. 

U.S.-based Curaleaf Holdings Inc. (CURA) is a cannabis cultivator and owner of 28 dispensaries, but since October, the company has gone from 575 to 900 employees to roll out its hemp-derived CBD products including soft gels, lotions and vape pens under the CuraleafHemp brand. The products will be sold in dispensaries as well as through the company’s new e-commerce site.

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