Foreign investors have begun seeking Israeli cannabis cultivation partners for the purpose of developing large scale grow facilities in Israel. This is a relative first, as foreign investment in the Israeli cannabis industry has thus far largely been focused on R&D opportunities rather than agriculture. Much debate exists in the global industry as to whether or not cannabis will become fully commoditized, essentially signifying an eventual “race to the bottom” when it comes to the price of flower and raw product.
However, even if the industry ultimately moves in that direction, there are significant value drivers that make cultivation in Israel highly desirable.
In no particular order, investors are taking notice of the following indicators:
Geography – the Israeli climate is ideal for year-round cannabis cultivation (as noted by Cronos, one of the largest Canadian licensed producers: http://www.newswire.ca/news-releases/cronos-establishes-international-low-cost-production-in-israel-642850243.html) and Israel’s proximity to Europe provides access to one of the largest markets in the world (currently largely limited to CBD-based products, with medical THC becoming available already in Germany, the largest European market, under a strict regulatory regime).
Export – it is widely expected that the Israeli government will approve the export of medical cannabis over the coming months. According to figures made publicly available by the Israeli Ministry of Agriculture, the government expects Israeli cannabis exports to top NIS 1 billion per year.
Crop Status – the Ministry of Agriculture recently reclassified the cultivation of medical cannabis, so that it now is considered an official “farming sector” under Israeli regulation. This entitles Israeli cultivators to government aid, grants, water quotas and educational training in growing methods and processes. This reclassification will make cultivation more economically beneficial and will encourage additional players to enter the space.
When combined with Israel’s status as a “cannabis capital” in terms of research and innovation, the appeal of a local economically profitable cultivation center is significantly enhanced.
It is expected that there will be additional investor movement over the coming months, as the export market officially opens up and international players, particularly the large Canadian LP’s, seek to establish beachheads in established cannabis markets.
