Most LPs avoid talking about yields, but certain companies believe crop yield should be the leading metric for appraising cannabis cultivation systems.
Crop yield is a useful metric when measuring the scale and success of a cannabis cultivation operation.
Cannabis companies with large-scale greenhouses love to talk about the size of their operations, however, recently cannabis companies have begun to focus on measuring cannabis crop yield. Grow space numbers are often impressive and easy to understand, but they rarely tell the full story. Major cannabis cultivation facilities are often economies of scale that prioritize quantity over quality, resulting in a standardized end product that can be produced at large volumes.
In order to grow a premium cannabis product, cultivators must design and implement efficient systems capable of controlling every possible input. This requires purpose-built indoor facilities. Maximizing yield is of critical importance for cannabis producers, and those that pay attention to the finer details are more likely to be rewarded with the high-quality cannabis consumers crave. Through careful facility design and the latest precision growing innovations, cannabis growers are able to get more from less, unlocking the full potential of their operations.
Crop yield is one of the most important metrics for profitability. The amount of product that a grower can produce weighed against the resources used to produce it is the purest measurement of efficiency. In today’s cannabis industry, there are still many producers operating at a loss due to the low margins associated with low-quality cannabis. While these greenhouses may have the resources to produce at a commercial scale, their operations are not optimized to the point where the product is more valuable than the resources spent.
Cannabis producers with the foresight to design optimized modular operations could see higher yield efficiency in the long run. Clean, highly controlled environments are necessary to achieve the highest crop yields, which requires significant attention to detail.
Demand for legal cannabis in Canada is growing rapidly, and, due to a range of regulatory and logistical factors, the industry is not currently producing enough supply to meet that demand. Additionally, new markets opening up around the world are creating export opportunities. With quality cannabis in high demand, producers are developing new facilities capable of fine-tuning every parameter in order to produce the finest possible product while maximizing yield.
Measuring cannabis cultivation
Most cannabis producers shy away from stating their official yield figures. One 2016 survey by Cannabis Business Times shows that, while 72 percent of respondent cannabis growers kept track of this stat, 38 percent of those that did measure yield admitted they didn’t know the yield of their operation’s most recent harvest, and some admitted to measuring the metric somewhat informally. To Flowr (TSXV:FLWR) Co-CEO Vinay Tolia, yield is a critical component to the success of a cannabis business.
“Simply put, yield is the most important measurement of potential profitability. It represents efficiency, pure and simple. The higher the yield, the more crop you’re able to produce per unit of grow space.” Measuring cannabis crop yield gives the producer a clear indicator of how well its space is being used. If a particular strain is producing lower than others, that strain can be swapped, or grow conditions can be adjusted.
Optimizing cannabis cultivation
Once a growing operation’s capacity has been quantified, the next step is to figure out which growth factors can be adjusted to improve the quality of the product. There are numerous factors that have an impact on a crop’s yield, including facility design, lighting, genetics, air quality and soil quality. There are thousands of cannabis strains in circulation in the legal cannabis market and not all strains are created equal. Once a strain has been selected, growers must deploy the optimal design and maintenance strategy to produce the finest product in the highest volume possible. Each strain can respond differently to environmental inputs, leaving growers to fine-tune their operations based on the desired result. In order to maximize yields, growers must consider all aspects of their growing environment, including temperature, airflow, lighting, fertilizer and many others.
To many in the cannabis industry, the size and setup of a cultivation facility can have a major impact on the quality of cannabis grown there. The larger the grow space, the harder these inputs are to control, and the harder it is to keep the facility clean of pests and pathogens. According to Tolia, the decision to optimize cultivation is a key aspect of the company’s business strategy. “Our entire thesis is based on maximizing yield and thereby reducing the marginal costs of production using purpose-built, highly efficient and extremely clean indoor growing facilities.”
Cannabis companies incorporating these strategies
Cannabis companies are increasingly using optimal design and cultivation techniques to grow the finest cannabis possible. Canadian licensed producer Flowr, for example, aims to achieve yields of up to three times the industry average with purpose-built facilities designed by a team with decades of cultivation experience. Flowr’s proprietary cultivation setup is specifically designed for the Dutch-style “sea of green” method, which allows for higher yields when managed by a skilled team. By continuing to optimize its growing methods while measuring cannabis crop yield, Flowr hopes to achieve yields of over 400 grams per square foot by the end of 2022.
MedReleaf, now a division of Aurora Cannabis (TSX:ACB,NYSE:ACB), has made itself known as the industry leader in yield. The company achieved its industry-leading yields in the years preceding recreational legalization thanks to a forward-thinking, data-driven approach to facility design that helped it to develop growing innovations that are widespread in the industry today.
The cannabis industry is growing at an unprecedented rate around the world, where new markets are continuing to open up, providing opportunities for established North American players. Companies endeavoring to optimize their growing conditions through efficient facility design could be positioning themselves for higher yields and higher operating margins.
This article was originally published by the Investing News Network in April 2019.
This INNSpired article was written according to INN editorial standards to educate investors.