Canada's Canopy Growth shares jump 11% on deal to develop industrial hemp farms in New York
Canopy Growth has been granted a license by New York state to process and produce hemp with the help of efforts by Gov. Andrew Cuomo and U.S. Sen. Charles Schumer.
Canopy Growth hopes to establish large-scale production capabilities focused on hemp extraction and product manufacturing within the United States. Depending on board approval of a specific site, Canopy plans to invest between $100 million and $150 million in its New York operations, "capable of producing tons of hemp" on an annual basis.
The company is currently evaluating a number of sites in the Southern Tier of New York, which will become one of its first extraction and processing facilities outside Canada. Management hopes to announce the specific location within 100 days.
Canopy shares jumped 11 percent after the announcement and finished Monday's session at $42.49.
The company said in a press release that Cuomo's office helped create the Hemp Research Pilot Program, while Schumer's was "instrumental" in the passage of the recent U.S. farm bill, that allows growers to produce hemp as an agricultural commodity.
Canopy Growth's investment in the Southern Tier "is a true win-win for Canopy Growth, who will be positioned at the forefront of Upstate New York's industrial hemp revolution, and for the Southern Tier's economy and farmers, which will receive a major shot in the arm in new good-paying jobs," Schumer said in the release.
The company will source hemp exclusively from American farmers for its U.S. operations once functional. The move will also bring Canopy closer to Constellation Brands, the brewing giant that owns Corona beer and which recently made a $4 billion strategic investment in the cannabis company.
Consumers are increasingly interested in CBD, a nonpsychoactive compound found in hemp plants thought to help with a range of conditions, such as anxiety, sleep disorders and inflammation.
Recreational use of cannabis in Canada became legal Oct. 17, though each of the country's 10 provinces will be able to regulate the market within their jurisdiction independent of Ottawa. Marijuana use is still illegal in the United States at the federal level, though many states have passed laws legalizing the use of cannabis for medical or recreational purposes.