The ODC's new hemp cultivation guidelines have made things a lot easier for hemp cultivators in Australia.
Cannabis legislation has been changing rapidly over the past few months, and the global cannabis industry has felt major gains as a result. In early November, five states in the U.S. voted to legalize some form of cannabis, followed shortly by the U.N.'s announcement that cannabis would be removed from its list of Schedule IV substances, where the plant previously sat alongside heroin.
Most recently, the MORE Act (Marijuana Opportunity Reinvestment and Expungement) passed in the U.S. House of Representatives, which aims to remove marijuana from the Controlled Substances Act and create a shared federal-state control of cannabis programs, though it's unlikely it will also pass in the Republican-controlled Senate.
And, here in Australia, cannabis advocates are waiting with bated breath for CBD medicines to be made accessible over the counter, as medicinal cannabis prescriptions continue to climb month-on-month.
Cannabis is being increasingly accepted by countries and governing bodies, thus allowing the benefits of legal cannabis to become more widespread.
However, there are recent changes to the Australian cannabis industry that have largely gone unnoticed involving Australian hemp cultivation. These changes could have much wider impacts for the hemp industry at large in Australia, and in particular, for one publicly-listed company.
1. Hemp Crops May Be Processed For Both Flower & Fibre
Prior to the ODC's recent changes, Australian hemp cultivators had to nominate whether they were growing their crop for industrial hemp or medicinal cannabis. If a cultivator were to nominate their plant as an industrial hemp plant, this meant that they were no longer allowed to extract CBD from it.
As Dr. Les Baxter from Tasmanian Alkaloids explained, this bifurcation of the hemp plant was leading to a lot of waste:
"If you assume that there's maybe two percent CBD in the residual plant, you're talking about up to 200 tonnes of CBD [nationally] that is potentially there and currently not accessible to the pharmaceutical industry for extraction."
As such, the concept of 'dual use' hemp plants was raised when discussing barriers to medicinal cannabis prescription in Australia, which would allow for the use of industrial hemp as well as the extraction of CBD in the same plant.
This dual-use of hemp plants has since been implemented by the ODC, meaning that Hemp crops may be processed for both flower and fibre, provided that the companies which seek to do so have all the requisite licenses.
This allows hemp cultivators to save capital as well as reducing waste, should they wish to produce both industrial hemp and medicinal CBD extracts.
2. Security Is No Longer Needed for Hemp Plants
As per the Office of Drug Control, "The illicit value of cannabis makes the risk of diversion a significant one requiring sound and holistic security arrangements."
Put simply, due to the intoxicating effects of marijuana and the prevalent cannabis black market in Australia, there is a heightened risk of theft for Australian cultivators. In response to this, the ODC requires that cannabis cultivators establish "sturdy, high fencing" to prevent "the risk of diversion."
However, prior to the September changes from the ODC, even hemp cultivators were subject to these same rules and regulations, despite having a non-intoxicating amount of THC within them.
This meant that hemp cultivators were required to spend significant sums of capital on security measures in order to limit diversion that was unlikely to occur.
For the nascent hemp industry, additional and unnecessary regulations can only serve to discourage new players from entering the space. As the founder of Ecofibre, Phil Warner said to ABC "[Australia] can produce better [cannabis] than anybody else can but if it has to be behind a 12-foot barbed wire fence with security guards, lights and swipe cards to get in and out — it's not going to happen."
Now, as per the September update, fencing is no longer required for low-THC hemp plants, with the ODC stating: "The low THC content means that it is not attractive for 'recreational' use and it would therefore be far less attractive to black market diversion. Essentially, low THC medicinal cannabis is no more attractive to criminal diversion than is industrial hemp."
This will allow hemp cultivators to reduce expenditure required to begin their operations.
ECS Botanics (ASX:ECS) is Poised To Reap The Rewards of These Changes
ECS Botanics (ASX:ECS) is an Australia based cultivator and producer of hemp and hemp-based food products, in addition to a medicinal cannabis project.
ECS has the full suite of licenses needed to cultivate, supply, and manufacture industrial hemp in Tasmania, in addition to a growers license in Queensland and the required medicinal cannabis cultivation and manufacturing licenses from the Australian Office of Drug Control (ODC) to capture this opportunity.
The founder of ECS Botanics, Alex Keach, spoke on the benefits of growing hemp in Tasmania, stating that Tasmania has "a cool climate but warm long summer days which are perfect for producing hemp seed and a consistent and concentrated profile of secondary metabolites."
"Tasmania also has an abundance of water supply, the state has a moratorium on genetically modified crops, some of the cleanest air in the world, plus has a clean, green image which is recognised globally," concluded Keach.
As one of the only major publicly listed Australian hemp players, few companies are as well-positioned to reap the rewards of these recent ODC changes than ECS Botanics.
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