Cadiz Inc. Announces New Hemp Crop Research at Cadiz Valley Ranch Agricultural Operation

(Los Angeles, CA) – Cadiz Inc. (NASDAQ: CDZI) (the “Company”) is pleased to announce it has begun an experimental commercial hemp research program at its agricultural property in Cadiz, California, in the Mojave Desert approximately 100 miles northeast of Palm Springs. The trial program will inform the potential for large-scale commercial production of hemp, a newly legalized and innovative crop, at Cadiz and in other desert environments.

“We are enthusiastic about the opportunities presented by the commercial production of hemp at Cadiz, where we offer an ideal location for this highly sought-after crop,” said Cadiz Inc. CEO and President Scott Slater. “Hemp presents an attractive opportunity for us to farm our overlying land in a manner complementary to our water conservation objectives Pending the results of the trial, we look forward to expanding operations and delivering new business opportunities to the community.”
Hemp is a strain of the Cannabis sativa plant species that is grown specifically for the industrial uses of its derived products. Hemp is related to marijuana, another strain of Cannabis sativa, but hemp contains only very low concentrations (less than 0.3%) of the compound tetrahydrocannabinol (THC), the psychoactive compound that marijuana is known-for. Hemp can be refined into over 25,000 different uses.

Hemp is a fast-growing plant crop in which the whole of the plant is harvested and put to use. It was one of the first plants turned into usable fiber 10,000 years ago and today commercial uses of hemp include paper, textiles, clothing, biodegradable plastics, cement, paint, insulation, biofuel, food, and animal feed. Hemp oil from the seeds can be used in the manufacture of oil-based paints, in creams as a moisturizing agent, for cooking, and in plastics. Hemp seeds are also used in health foods, organic body care, and other nutraceuticals. Hemp contains over 100 different compounds or cannabinoids, of which cannabidiol (CBD) is currently the most popular and sold for a variety of end-uses.

According to New Frontier Data, a market research firm concentrated on the cannabis industry, total US sales for hemp-based products were approximately $1.1 billion in 2018, and are projected to more than double by 2022. An April 2019 report from Bank of America Merrill Lynch estimated the potential average annual spend on CBD products in the U.S. at $1.9 billion in 2019, growing to $11.5 billion by 2032.

The hemp trial program at Cadiz is focused on studying growth potential of a variety of strains in the desert environment. Hemp is an attractive rotation crop for farmers because it detoxifies the soil and prevents soil erosion. After harvest, the remaining root structure breaks down into the soil, providing valuable nutrients. Hemp is more water efficient than tree, nut and row crops, relying on only 1.5- 2 acre feet of water per acre of planted land. Hemp at Cadiz will be sun-grown in the open air, not in a green house, and will be grown organically increasing its value in the market. The location has access to rail and highway infrastructure to bring products to market.

Cadiz is already the largest agricultural operation in San Bernardino County. The Company owns 35,000 acres of private property with water rights overlying an extensive groundwater aquifer system with more water in storage than Lake Mead. Since the 1980s Cadiz has farmed vineyard, orchard and seasonable row crops, relying on groundwater for irrigation. Approximately 10,000 acres of the Cadiz Valley property is permitted for agricultural production, and the balance is zoned for agricultural use. Groundwater relied upon for irrigation is managed in accordance with permits from the County. Groundwater use has been sustainable for 25 years with water levels in the aquifer presently at an all-time high and no adverse surface land impacts. Water quality is also secure with TDS below 350 ppb and meeting all state and federal drinking water standards without treatment.

“Our remote location, abundant land and water resources, combined with our decades of desert agriculture experience make Cadiz a perfect setting and partner for commercial hemp production,” Slater continued. “Organic hemp at Cadiz will face no issues attributable with the drift of pesticides or cross pollination that applies in areas with heavily concentrated agriculture. We are excited about the prospects of being on the front-end of the sustainable, organic, sun-grown hemp agriculture research.”

The farming of industrial hemp was made legal nationwide on December 20, 2018 when the Agriculture Improvement Act of 2018 (the “2018 Farm Bill”) was signed into law. The Hemp Farming Act (S. 2667), included in the 2018 Farm Bill, modified the Controlled Substances Act (“CSA”) to exempt hemp from the definition of marijuana and removed it from the list of Schedule I substances under the CSA. The 2018 Farm Bill allows hemp cultivation broadly, not simply pilot programs for studying market interest in hemp-derived products. Industrial hemp will now be treated like an agricultural commodity, not a controlled substance.

California began regulating industrial hemp in September 2013 with the passage of the California Industrial Hemp Farming Act, Senate Bill 566, which separated it from the definition of marijuana. On September 30, 2018, Governor Jerry Brown signed and approved Senate Bill 1409, which amended the definition of industrial hemp to no longer be limited to a fiber or oilseed crop and allowing for cultivation of industrial hemp for commercial and research purposes.

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