Yes South Australia Cann - Medicinal Cannabis and Industrial Hemp Industries in SA

South Australia is experiencing a major transformative change. This is spearheaded by our ageing population, evolving environmental challenges and significant economic reorganisation. With any change come new opportunities. The emerging medicinal cannabis and industrial hemp industries present opportunities that have the potential to support a more sustainable, healthier and prosperous future.

Both industries face many challenges in breaking through perception barriers and resistance from established interests. However, by understanding the background, the characteristics, and the domestic and international movements in these industries, we can begin to imagine South Australia also realising the potential and benefits.

The estimated number of Australians using cannabis on a weekly basis is 750,000 [i]. Recently, older Australians have also been found to be using cannabis more than younger Australians [ii]. This is thought to be related to the number of older Australians suffering from cancer, chronic pain and other symptoms.

There are over a hundred unique chemicals that are known as cannabinoids in cannabis plants. Tetrahydrocannabinol (THC) and Cannabidiol (CBD) are the two common cannabinoids that are primarily used for medicinal purposes. THC is psychoactive and CBD is not psychoactive and depending on both the condition of the patient and the product, THC and CBD can be used to treat epilepsy, cancer, HIV/AIDS, Alzheimer disease, multiple sclerosis and chronic pain conditions.

Plants grown for industrial hemp are different to the plants grown for medicinal purposes. They contain very low concentrations of THC; therefore there are minimal or no psychoactive effects with the product. Industrial hemp has many outputs and has been used for thousands of years and commercially used for hundreds of years. In the 18th and 19th centuries, industrial hemp was the top cash crop in the United States and in the 1940s, the United States Government actively encouraged farmers to grow hemp for the production of ropes, clothing, shoes, parachutes and other materials for the war effort. The fibers can also be used to make fabrics, paper and animal bedding.

Promisingly, industrial hemp has strong thermal and sustainability properties and can be made into insulation, fiber boards and hempcrete for construction of houses. According to the Industrial Hemp Association of South Australia, a 135m2 house could be constructed from 2.5 hectares of hemp [iii].

Other uses include the production of a hard composite for car bodies. This approach was trialed by Henry Ford and also in the 2017 Renew Sports Car. The composite used for the car was reportedly 10 times stronger than steel and lighter than fiberglass. Industrial hemp also has many health benefits and is used in a wide variety of foods such as cereals, milk, icecream, bread and also animal feed. Seed and oil can be turned into bio/fuels, ethanol, paints and inks and many more applications.

The existence and growth of medicinal cannabis and industrial hemp industries is reliant on a myriad of State and Federal Government, Acts, Regulations and authorities and departments. Recent changes have opened up opportunities for innovation, development and commercial realisation.

Private organisations and State Governments are starting to test the potential for medicinal cannabis cultivation and product markets in Australia. In early 2017, 25 entities had applied to grow and manufacture medicinal cannabis in Australiaiv, with licenses awarded to eightv. Five research licenses and five manufacturing licenses had also been issued by the Therapeutic Goods Administration [vi].

In Victoria, the State Government has led the field and produced its own cannabis crop. Private company The Cann Group has gained a license to research and cultivate medicinal cannabis in Victoriavii and another company MediPharm Labs proposes to build a large scale processing plant south east of Melbourneviii. Medifram has gained Federal Government approval to grow medicinal cannabis in Queensland and when their greenhouse is completed, it could eventually help up to 5000 patients [ix].

AusCann, which is backed by the world’s biggest producer of medicinal cannabis has produced a crop in Chile and is seeking to cultivate near Perthx. In partnership with Tasmanian Alkaloids, AusCann has also obtained licenses for cultivation, research and development in Tasmaniaxi. To note, Tasmania is also a significant contributor to the global poppy industry and a broader expansion into medicinal cannabis would be quite possiblexii. In South Australia, it is understood several companies have applied to cultivate.

South Australian company GD Pharma has gained a license to import pure THC and CBD powder by the kilogram from the Netherlands and currently produces medicinal cannabis oil in metropolitan Adelaide. Each kilogram can make 400 25ml bottles of THC and CBD oil [xiii].

Acknowledging the medicinal cannabis cultivation trials around the country, there is potential for production in South Australia. According to MGC Pharmaceuticals, for Australians that are specifically suffering epilepsy, cancer, HIV/AIDS, Alzheimer’ disease, multiple sclerosis and chronic pain, the potential domestic demand for pure THC is 166.6kg per annum and for CBD, 404.7kg per annum. If prescribed more broadly and in herbal or oils forms, the Australian domestic demand could reach 8,000kg per annum (based on consumption rates in the Netherlands and Canada) and even up to 31,450kg per annum (based on consumption rates in Israel)xiv. This translates to between 13,000m2 and 51,000m2 of greenhouse growing spacexv (51,000m2 is the approximate size of three Sydney Cricket Grounds) [xvi].

In total, an industry in Australia could be worth more than $100 million AUD per annumxvii. Whilst our domestic potential is slowly transforming into a more mature and functioning supply and demand market, entities can now also export medicinal cannabis following changes to Commonwealth laws in January 2018. The export potential for Australia is expansive and according to Technavio, the global market is expected to grow from $28.8 billion USD in 2015 to $140.5 billion USD by 2020 [xviii].

Medicinal cannabis is currently available in Austria, Canada, Czech Republic, Finland, Germany, Israel, Italy, the Netherlands, Portugal and Spain. In the United States the market is expanding rapidly with 29 states and the District of Columbia allowing medicinal cannabis usage [xix].

Israel is one of the most advanced medicinal cannabis countries and has the potential to be the epicenter of the global industry. The Netherlands also has an advanced industry that exports refined products. In Canada, where the industry and exports are strong, sixteen medicinal cannabis pharmaceutical companies are now listed on the Toronto Stock Exchange. Investors can now follow and invest in the North American Medical Marijuana Index [xxx]. These countries provide examples of mature industries that we can learn from.

Industrial hemp is currently produced in over 30 Countries [xxi]. The European Industrial Hemp Association estimates 33,000 hectares of land was used for hemp cultivation in 2016 and expects this amount to increase in the coming years. The greatest amounts are cultivated in France, the Netherlands, the Baltic countries and Romania [xxii].

In Australia, industrial hemp is controlled by both State and Federal Governments. Consumption of food with low THC hemp seed or oil is made possible and controlled by the Food Standards for Australia and New Zealand. Industrial hemp cultivation and possession is controlled at the State level. In comparison to medicinal cannabis, the industry is more mature and industrial hemp can currently be grown in Victoria, New South Wales, Queensland, Western Australia and Tasmania [xxiii].

In South Australia, the Industrial Hemp Act 2017 (and Regulations) came into effect in November 2017, which allows entities to apply for licenses from Primary Industries and Regions South Australia and start cultivating and producing industrial hemp [xxiv]. As industrial hemp can be made into a diverse range of products there are many domestic (and potentially international) opportunities and markets that can be explored.

The State Government has created the Office for Industrial Hemp and Medicinal Cannabis as a single point of contact for industry across government agencies. Research and evidence is critical to unlocking supply and South Australia has a cultural and infrastructure advantage in the health and medical research and development sectors with assets such as the South Australian Health and Medical Research Institute (SAHMRI) and Health Industries SA. New South Wales has established the Centre for Medicinal Cannabis Research and Innovation and the University of Sydney has established the Lambert Initiative for Cannabinoid Therapeutics. Both centers provide a model for further consideration.

South Australia’s universities have powerful research abilities, are entities that are well controlled and can be trusted to run tests and disseminate information for public benefit. PIRSA is currently working with The University of Adelaide to test industrial hemp seed varieties and plans to release findings and provide advice to prospective growers. There is even potential for universities to assume greater leadership and commence cultivation and research themselves – much like how colleges can cultivate industrial hemp in the United States [xxv].

South Australia has many avenues through which to launch industries. The State has the ability to lead medicinal cannabis cultivation and production like the Victorian State Government and similarly to the way PIRSA is currently pursuing industrial hemp trials. The aim would be to demonstrate growth, improve policy and unlock pathways for industry. The State Government has various funds, schemes and case management approaches to help South Australian companies launch trials and products. Alternatively, the government could either attract domestic or international companies to cultivate and produce or attract pharmaceutical companies for research, development and production. International partnerships would certainly assist in not only fast tracking development of products and the industry but also forging international partnerships to export products. There are a myriad of leavers, controls and incentives to support and grow these industries in South Australia.

Beyond cultivation and production there are many other opportunities for medical practitioners and educators. There is currently a gap in terms of established results, education and awareness of medicinal cannabis and industrial hemp, which creates the opportunities for training, education and providing regulatory environments that reduce risk and provide professional protection and support. Adelaide has one of the best Convention Centres in the world and could host medicinal cannabis and industrial hemp conventions such as the CannaTech event that is proposed to be held in Sydney.

South Australia also has a marketing and branding advantage built on a strong reputation for high quality produce. Our highly controlled and regulated industry and our stable political environment is an advantage when internationally marketing and exporting sensitive products.

The cultivation of medicinal cannabis is suitable to our climate (plantations also absorb high levels of carbon) and can either be grown indoors, outdoors or in greenhouses. According to MGC Pharmaceuticals, outdoor production is the cheapest form both in capital and recurrent costs, however the yield is lower and outdoor plants are exposed to external forces, weather patterns and security risks. Greenhouses require a greater capital expenditure, however they are more secure, can produce multiple harvests per year and even have the capability to produce up to 600kg of medicinal cannabis crop per 1000m2 of growing space per annum [xxvi]. Greenhouses are the most efficient way to grow medicinal cannabis and appear to be the preferred model for AusCann and Medifarm.

Medicinal cannabis greenhouses and outdoor plantations could be developed in a number of locations across the southern areas of the state. Such a location would provide access to both Adelaide and the eastern state markets. Our strong growing regions on the northern, eastern and southern fringes of metropolitan Adelaide could also be suitable locations to develop farms. The close proximity of these regions to established food production areas and logistics infrastructure would increase the potential to export products domestically and internationally.

Indoor hydroponic production is also a possibility and is favoured by medicinal cannabis company Cann Group in Victoriaxxvii. Indoor is the most expensive option, due to capital infrastructure, energy, climate control and ventilation costs. However a business case might find that disused manufacturing plants, factories and warehouses across metropolitan Adelaide could be effective if supported by affordable energy sources like large-scale solar energy generation.

Industrial hemp requires little water, is grown in the warmer months and can produce 2-3 crops per year [xxviii]. Industrial hemp can be grown on existing agricultural land and during crop rotations [xxix]. Primary Industries and Regions South Australia (PIRSA) has initially favoured regional South Australia and has trailled industrial hemp cultivation at Kybybolite Research Centre and Loxton Research Centre through their research entity the South Australian Research and Development Institute.

Current trials and approaches favour both separate and undisclosed locations to ensure security and maintain cultivation and product integrity. In the future there might be scope for a specified medicinal cannabis and industrial hemp region(s) in South Australia to take advantage of benefits created through industry clusters and to generate critical mass for infrastructure and comprehensive security schemes. GD Pharma currently produces oil in an undisclosed location in suburban Adelaide however in the future there might be potential to co-locate with other researchers and producers or even consider a mini research and development innovation cluster. Strict requirements for security, background checks and product tracking might also create logistical, technological and dispensary opportunities in the future.

The broader social and economic case for a mature industry is sound. Formalized industries and market places should reduce inconsistent and potentially dangerous produce and black market activity. Mature industries will provide structured economic activity, create employment opportunities across a wide spectrum of fields, drive infrastructure development, support the property sector and assist urban and regional renewal.

These industries will also provide additional revenue to the State Government from taxation sources, licenses and fees. We only need to look at the state of Colorado where overall cannabis sales now reach $1 billion per annum and generate the second largest tax revenue for the state. In Pueblo County Colorado, revenue is reinvested into education and the provision of college scholarships to graduating high school students [xxx]. Overall, the industry in Colorado has created 18,000 new jobs and provides an economic impact of $2.39 billion [xxxi].

There is strong potential for deeper industry research and economic modeling into the demand and supply opportunities for both medicinal cannabis and industrial hemp. Modeling could investigate the full economic benefits, consider how to reduce costs for both industry and patients (the oil is understood to be very expensive and according to GD Pharma retails for approximately $250 per 25ml for THC and $500 per 25ml for CBD respectively)xxxii and explore any threshold issues or pathways that could ease or unlock industries to grow with confidence and at a faster rate.

The ongoing national deregulation of medicinal cannabis and the State’s deregulation of industrial hemp is creating many new and exciting opportunities. The industries are young and arguably fragile but also wide and complex. This creates significant opportunity for South Australian companies and entities to explore or even claim potions or whole sections of these industries. Medicinal cannabis and industrial hemp can contribute to commercial innovation, advanced manufacturing and the research and health care industries, sectors the State is strategically focusing on and planning to excel in the coming decades. South Australia has the emerging opportunities, climate, culture and instruments to realise this potential and add further complexity and richness to the transforming industrial, commercial and health sectors.

ARTICLE

In 2017 the AIUS-SA hosted an event to discuss the potential for medicinal cannabis and industrial hemp industries in South Australia. This essay provides greater insight into the potential and opportunity for South Australia.

TITLE

Yes South Australia Cann: Medicinal Cannabis and Industrial Hemp Industries in South Australia

AUTHOR

UFX Member

PUBLISHER

Urban Future Exchange (previously known as the Australian Institute of Urban Studies SA).

This essay was prepared in 2017-18. Medicinal cannabis and industrial hemp legislation and codes change rapidly. For accurate and up to date information please refer to the relevant agencies and companies.

The views expressed in this article are those of the author, not the Urban Future Exchange (previously known as the Australian Institute of Urban Studies SA).

REFERENCES

i Victoria Law Reform Commission cited in University of Sydney, Medicinal Cannabis in Australia: Science, Regulation & Industry, p. 8, viewed March 10 2017, https://mgcpharma.com.au/wpcontent/ uploads/2016/03/mgc_whitepaper_final-sml.pdf.

ii Australian Institute of Health and Welfare cited in University of Sydney, Medicinal Cannabis in Australia: Science, Regulation & Industry, p. 9, viewed March 10 2017, https://mgcpharma.com.au/wpcontent/ uploads/2016/03/mgc_whitepaper_final-sml.pdf.

iii Industrial Hemp Association South Australia, Hemp Information, viewed 20 November 2017, <https://www.ihasa.com.au/hemp-info>

iv Claughton, D. 2017, Medicinal cannabis market offers new opportunities for agriculture, ABC, viewed 21 September 2017, <http://www.abc.net.au/news/rural/2017-02-22/medicinal-cannabis-new-agriculturalopportunity/ 8287346>

v Langenberg, A. 2017, ‘The Good Oil’, Sunday Mail, 13 August 2017, p.11

vi Langenberg, A. 2017, ‘The Good Oil’, Sunday Mail, 13 August 2017, p.11

vii Claughton, D. 2017, Medicinal cannabis market offers new opportunities for agriculture, ABC, viewed 21 September 2017, <http://www.abc.net.au/news/rural/2017-02-22/medicinal-cannabis-new-agriculturalopportunity/ 8287346>

viii French, R. 2018, Company plans to open a cannabis processing plant in Wonthaggi, ABC, viewed 13 August 2018,

ix Hair, J. 2017, Medicinal cannabis farm allows rare glimpse into construction at secret Queensland location, ABC, viewed 21 September 2017, <http://www.abc.net.au/news/2017-07-31/medifarm-medicinal-marijuanafarm- qld-sunshine-coast/8759502>

x Claughton, D. 2017, Medicinal cannabis market offers new opportunities for agriculture, ABC, viewed 21 September 2017, <http://www.abc.net.au/news/rural/2017-02-22/medicinal-cannabis-new-agriculturalopportunity/ 8287346>

xi Whitson, R. 2017. Medicinal cannabis in Tasmania: Everything you need to know about the state's rules, ABC, viewed 22 September 2017, http://www.abc.net.au/news/2017-07-13/tasmania-pathway-to-medicinalcannabis- explained/8702520

xii Whitson, R. 2017. Medicinal cannabis in Tasmania: Everything you need to know about the state's rules, ABC, viewed 22 September 2017, http://www.abc.net.au/news/2017-07-13/tasmania-pathway-to-medicinalcannabis- explained/8702520

xiii Langenberg, A. 2017, ‘The Good Oil’, Sunday Mail, 13 August 2017, p.70

xiv University of Sydney, Medicinal Cannabis in Australia: Science, Regulation & Industry, p. 34, viewed 10 March 2017, https://mgcpharma.com.au/wp-content/uploads/2016/03/mgc_whitepaper_final-sml.pdf.

xv University of Sydney, Medicinal Cannabis in Australia: Science, Regulation & Industry, p. 36, viewed 10 March 2017, https://mgcpharma.com.au/wp-content/uploads/2016/03/mgc_whitepaper_final-sml.pdf.

xvi Watson, T. 2017, Legalising medicinal cannabis would create $100 million industry, University of Sydney, viewed 20 June 2017, https://sydney.edu.au/news-opinion/news/2016/03/29/legalising-medicinal-cannabiswould- create--100-million-industry.html.

xvii Watson, T. 2017, Legalising medicinal cannabis would create $100 million industry, University of Sydney, viewed 20 June 2017, https://sydney.edu.au/news-opinion/news/2016/03/29/legalising-medicinal-cannabiswould- create--100-million-industry.html.

xviii Ackerman, G. 2016. Want to Research Medical Marijuana? Israel Is Open for Business, Bloomberg, viewed 15 September 2017. < https://www.bloomberg.com/news/articles/2016-12-12/medical-marijuana-researchtakes- off-in-israel

xix Ackerman, G. 2016. Want to Research Medical Marijuana? Israel Is Open for Business, Bloomberg, viewed 15 September 2017. < https://www.bloomberg.com/news/articles/2016-12-12/medical-marijuana-researchtakes- off-in-israel>.

xx The Economist, 2017, Weed capital: investing in cannabis, viewed 5 September 2017, https://espresso.economist.com/d397c2b2be2178fe6247bd50fc97cff2.

xxi Australian Hemp Party, Cultivation, viewed 25 September 2017, https://australianhempparty.com/page/cultivation.

xxii European Industrial Hemp Association, 2017, Press Release: Record cultivation of industrial hemp in Europe in 2016, viewed 25 September 2017, <http://eiha.org/document/record-cultivation-of-industrial-hemp-ineurope- in-2016/>.

xxiii Australian Hemp Party, Cultivation, viewed 25 September 2017, https://australianhempparty.com/page/cultivation.

xxiv Primary Industries and Regions South Australia, 2017, Industrial hemp production in South Australia, viewed 30 November 2017, http://www.pir.sa.gov.au/primary_industry/industrial_hemp.

xxv Ayers, R. 2016, Industrial Hemp: A History and Overview of the Super Crop—and it’s Trillion-Dollar Future, UH Maui College, viewed 29 September 2017, http://maui.hawaii.edu/hooulu/2016/01/15/industrial-hemp-ahistory- and-overview-of-the-super-crop-and-its-trillion-dollar-future/.

xxvi University of Sydney, Medicinal Cannabis in Australia: Science, Regulation & Industry, p. 36, viewed March 10 2017, https://mgcpharma.com.au/wp-content/uploads/2016/03/mgc_whitepaper_final-sml.pdf.

xxvii Claughton, D. 2017, Medicinal cannabis market offers new opportunities for agriculture, ABC, viewed 21 September 2017, <http://www.abc.net.au/news/rural/2017-02-22/medicinal-cannabis-new-agriculturalopportunity/ 8287346>.

xxviii Hempcrete Australia, Sustainability, viewed 29th September 2017, <http://www.hempcrete.com.au/index.php?option=com_content&view=article&id=24&Itemid=25>. xxix

xxix Hempcrete Australia, Sustainability, viewed 29th September 2017, <http://www.hempcrete.com.au/index.php?option=com_content&view=article&id=24&Itemid=25>.

xxx Robinson, M. 2017. A Colorado county is sending students to college on the $445,000 it made from legal weed. Business Insider Australia, 23 February 2017. accessed online 25 January 2018: https://www.businessinsider.com.au/colorado-marijuana-tax-college-scholarship-2017-2?r=US&IR=T

xxxi Ackerman, G. 2016. Want to Research Medical Marijuana? Israel Is Open for Business, Bloomberg, viewed 15 September 2017. < https://www.bloomberg.com/news/articles/2016-12-12/medical-marijuana-researchtakes- off-in-israel>.

xxxii Langenberg, A. 2017, ‘The Good Oil’, Sunday Mail, 13 August 2017, p.70