The cultivation of industrial cannabis should be deregulated

What is wrong with the regulation of the cannabis market and why and why Ukraine cannot compete with the EU and the US in this segment.

What do the first US paper money and the first Bible have in common? They are made of industrial hemp fibres.

It is hemp that does not contain the tetrahydrocannabinol (THC) psychoactive component and, therefore, cannot cause intoxication.

It may be hard to believe, but this agricultural crop is also used to make paper, construction materials, fur, fuel, cosmetics, medicines, and, of course, food. This list goes on.

More than a hundred years ago, the United States Department of Agriculture recognized cannabis as the most profitable crop, but in Ukraine, it remains underestimated.

The sector regulation is complex and ineffective while leading to a loss of potential from the use of industrial hemp, at least for industrial purposes.

The other day, the President’s Office initiated a popular consultation on the legalization of medical cannabis, because, as the authors explain, at least two million Ukrainians need cannabis-based drugs.

Although this is medical rather than industrial hemp, this confirms that the benefits of simplifying the regulation of the cultivation and processing of this crop can be much greater, and some steps can be taken now.

Lagging behind

The world has long demonstrated that hemp can be used in completely different sectors of the economy. For example, in the case of construction of ecological houses, hemp materials can replace classic heat-insulating materials, and the granular hemp dust added to the asphalt for coating durability is used in road construction.

Paper made from hemp is stronger and cheaper to produce than paper made from wood. A hectare of hemp can produce as much paper as four hectares of forest. However, hemp grows much faster than trees: 120 days instead of 20 years.

Audi, BMW, Mercedes-Benz, Fiat, and Ford companies use hemp composite to make cars. Hemp is also used to make clothing, alcohol, food, plastic, perfume, cosmetics, oil, and sweets.

Ukraine also has successful examples of using the products of fiber crop processing, such as the construction of the Kyiv-Odesa highway. There may be many more such cases.

It would seem that if industrial hemp cannot be intoxicating while being a versatile crop, it can be grown like potatoes and sold freely, but it is not so simple.

Excessively regulated market

In Ukraine, it is legally allowed to grow industrial hemp with up to the 0.08% THC psychoactive component content. For comparison: in the EU, the permitted THC level n industrial hemp is 0.2%, in the US, Canada, and China – 0.3%. This is much higher than 0.08% in Ukraine.

Due to the too low permitted THC level, Ukrainian agricultural producers cannot fully compete in the international market, as they do not have the right to use most industrial hemp varieties registered in the world.

In Ukraine, average yields of permitted industrial hemp crops are 1.5 tons per hectare, while there are 8 tons of permitted crops per hectare in France and the Netherlands. The difference is crazy. In 2019, there were 2-4 thousand hectares of industrial hemp crops in Ukraine, while in France – 14.5 thousand hectares, in Canada – 37 thousand hectares. In the United States – 60 thousand hectares, i.e. 30 times more than in Ukraine.

In addition to the THC level, we have some other regulatory burdens on businesses that frighten potential producers and make it impossible to grow industrial hemp. The market is controlled simultaneously by the Ministry of Internal Affairs, the State Service on Medicines and Drugs Control, and the Ministry of Health.

The Ministry of Internal Affairs issues permits for the use of facilities and premises intended for the circulation of narcotic drugs, psychotropic substances, and precursors, which unreasonably include industrial hemp.

The State Service on Medicines and Drugs Control issues licenses for the economic activity related to the cultivation of plants included in the list of narcotic drugs, psychotropic substances, and precursors, which includes industrial hemp. The agency also sets annual quotas for the cultivation of “narcotic” plants, which also apply to industrial hemp.

The experience of Western countries

World practice shows that law enforcement agencies should have nothing to do with the cultivation, storage, and processing of industrial hemp. In developed countries, industrial hemp is a common crop not included in the list of narcotic drugs. For foreign companies, it is primarily a raw material for the production of more than 50 thousand types of products.

To grow industrial hemp in the EU, it is necessary to use certified seeds and be registered in the farmers’ register. The industrial hemp exports and imports require a license, which is issued by the Member States and valid throughout the EU.

Moreover, the EU provides state support to farmers for industrial hemp cultivation under the Common Agricultural Policy (CAP). Thus, they are clearly aware of market prospects.

The United States Department of Agriculture is working to provide insurance coverage for industrial hemp production. Hemp growers can receive insurance coverage under the Whole-Farm Revenue Protection program (WFRP) for the 2020 crop year.

Progressive countries are actively developing the sector, working on a legal framework, and implementing incentive-based regulatory tools.

Despite excessive regulation and outdated legislative acts, Ukrainian agricultural producers continue to attract million worth investments in the hemp industry development. Some of them set up research institutes, conduct own selection work, and researches to create high-yielding hemp varieties.

However, the efforts of business owners alone are not enough. At this stage, the state should become more active. The tools used by the authorities to implement market policies should primarily stimulate producers and potential investors, not discourage them.

That is why it is necessary to simplify regulation, especially in terms of the procedure for obtaining permits for activities and the THC level in industrial hemp, as well as introduce incentive-based mechanisms for producers, such as state support and agricultural insurance.

A radical change in approaches to the organization of Ukrainian industrial hemp production will create a market that will be attractive for investment.