6th October 2022
Regenerative agriculture AgriHub
Americas Corporate Environment Vertical Farming

CubicFarm Shares Study Results & Corporate Update

Hydrogreen Carbon Study
  • Study Finds a Nine Per Cent Increase in Daily Weight Gain for Cows Fed Using HydroGreen Fresh Forage
  • Study Validates Value for Carbon Commercialization Using HydroGreen Fresh Forage Emission Reductions, Validates Potential for Additional Cash Flow Stream

CubicFarm® Systems Corp. (TSX:CUB), announced the preliminary results of its methane and carbon dioxide-equivalent reduction study and beef finishing carcass study. The Company also provided updates related to the Company’s HydroGreen division and previously announced carbon commercialization program and a corporate update.

The study’s data indicates a significant improvement in animal performance and a reduction in the environmental footprint of cattle while providing compelling unit economics and a payback period.

Study Highlights
Carcass Study

  • Results through the beef finishing stage demonstrated approximately a nine percent increase in daily weight gain, a six percent increase in dry matter intake, and a four percent increase in nutritional efficiency
  • Confirmed: In line with previous studies, the Carcass Study showed that feeding beef cattle HydroGreen fresh forage lowered methane emissions by approximately 48 percent on a per kilogram weight gain basis

Carbon Study

  • A preliminary lifecycle analysis indicates total carbon dioxide equivalents (“CO2e”) reduction in the range of approximately 1.8 to 2.3 tonnes per head per annum for beef cattle, largely dependent on certain assumptions related to daily rate of gain versus control
  • Six commercial scale HydroGreen Automated Vertical Pastures™ (“AVPs”) generating fresh forage have the potential to reduce over 5,000 metric tonnes of CO2e per year

Quantification of Value

  • The daily rate of gain increase of 0.13 kilograms per day, when combined with an assumed approximately USD$6.61 realized revenue per kilogram of weight gain1, results in daily increased revenue of approximately USD$0.86, or USD$314 annually, per animal fed fresh forage grown using commercial scale AVPs exclusive of additional qualitative benefits described below under “Premium Co-Benefits”
  • Carbon credits could conservatively realize between USD$12.50 to over USD$20 per tonne of CO2e at current pricing in various offset markets, which is expected to increase with global net zero commitments. The opportunity given compliance market acceptance, or with party-to-party carbon inset sales, could be significantly greater

Verra Carbon Standard certification can be used to monetize greenhouse gas (“GHG”) emission reductions by converting them into tradeable carbon credits. The enteric methane reductions are understood to be categorized under the VM40001 methodology, which would allow for sales in carbon credit offset markets.

HydroGreen Patents Pending Issuance
HydroGreen has filed patent applications that protect its proprietary growing methods, including HydroGreen’s indoor growing system hardware design. Over the past several months, HydroGreen has filed eight additional patent applications related to HydroGreen’s process and benefits of sprouting grains, reducing methane in beef cattle, and improving fertility in cattle.

In addition to the Carbon Study and the Carcass Study beef data, previously announced research data demonstrated that feeding dairy cows HydroGreen fresh forage lowers methane emissions by approximately 24 per cent on a per unit milk output basis. HydroGreen continues to pursue further dairy studies to extend the addressable carbon commercialization for the dairy market.

Carbon Credit Opportunity
Global consumer demand for beef and dairy is expected to grow for the foreseeable future2 as global living standards rise. To mitigate the environmental effects of increased global consumer demand for beef and dairy, livestock producers will need to invest in innovative solutions to reduce methane emissions from cattle, such as HydroGreen technology.

By pre-selling farm-based inset and offset carbon credits to organizations with net-zero goals, the Company believes it is ideally positioned to create recurring cash flow from operations and capture carbon credit streams as demand and value of carbon credits increase.

Premium Co-Benefits
In addition to the methane reduction from feeding cattle fresh forage grown in commercial scale AVPs, the Company identified premium co-benefits, including:

  • Reducing the number of acres needed to grow feed crops
  • Land upcycling by substituting 15 to 20 per cent of conventional feeds
  • Diminished fuel and energy use contributing to a 7.4 per cent reduction in fuel and energy emissions
  • Potential qualitative benefits, which remain to be fully validated, include fewer liver abscesses, optimized fat distribution, and an improvement in rumen papillae length and width

“It isn’t often that a globally applicable technology can both benefit the environment and drive performance increases supported by compelling unit economics,” said Dave Dinesen, Chief Executive Officer, CubicFarms. “HydroGreen continues to prove its value as a leading livestock feed technology that not only significantly improves animal performance and delivers meaningful environmental benefits, but also positions us to enter the carbon credit market.”

Corporate Update
A total of 223 CubicFarm System and HydroGreen sales orders under contract that are pending manufacturing, installation, and site readiness, are valued at approximately USD$30.7 million:

Geographic Territory Country Division Number of Modules Estimated Value

(USD Millions)

Expected Completion Date
Indiana USA Fresh 20 3.0 2022 Q3
New South Wales Australia Fresh 19 2.7 2022 Q4
Manitoba Canada Fresh 27 4.0 2023 Q1
British Columbia Canada Fresh 26 3.4 2023 Q1
Montana USA Fresh 21 2.9 2023 Q2
British Columbia Canada Fresh 100 12.6 2023 Q4
Texas USA Feed 10 2.1 2022 Q4
Total 223 30.7

FreshHub Commercial Validation Project
CubicFarms has completed Phase I of its rapid project to achieve commercial validation of its larger FreshHub configuration using the CubicFarm System technology and approach, prior to the installation of the first FreshHub targeting the end of December 2023. Phase II is currently underway, with Phase III equipment being ordered for installation:

Intention Target Commercial Outcome Progress
Phase I Proof of concept using latest CubicFarm System technology Build and manufacture the FreshHub prototype modules Complete
Phase II Validate produce output Growing the volume of produce necessary at scale and quality to run a FreshHub operation Targeting October 2022
Phase III Validate commercial earnings Validate operating model economics to run a FreshHub operation, targeting a return on invested capital of 20% Targeting February 2023

 

Footnotes
1Assumed value based on estimates of realized pricing. Wholesale market pricing for beef ranges from approximately USD$3.50 per kilogram. for ground beef to approximately USD$24.50 for choice grade tenderloin. Source: United States Department of Agriculture market news for the week ended August 5, 2022.

2Organization for Economic Co-Operation and Development (OECD).

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