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Hemp Investing in Australia
Hemp may be a fledgling industry in Australia, but it's a rapidly growing market.
Hemp is a versatile plant with many uses. The fibre can be used for textiles and paper, and as a food it’s a high-protein option beloved by gym-goers and vegans.
It’s considered a fledgling industry because hemp was banned in Australia in 1937 due to shifting attitudes about marijuana around that time.
The film "Reefer Madness," which stigmatised hemp and associated it with marijuana, was characteristic of this era. It is thought that the anti-marijuana movement set the Australian hemp industry back by a century.
Is hemp legal in Australia?
In 1998, Victoria was the first state to allow select farmers to grow hemp, but only for exportation to countries in which hemp was legal. Queensland followed by allowing industrial hemp growing under a licence.
It wouldn't be until November 12, 2018, that the Australia New Zealand Food Standards Code was changed to legalise hemp seed products as food, as well as safe for human consumption.
Now that hemp products have been legalised, hemp seeds, hemp hearts and hemp seed oil are all popular health products with high levels of protein and omega-3, and they are used in products such as health food bars, supplements, cereal and even beer.
Today, industrial hemp is legal to grow in all of Australia's states and territories, providing the THC content is below certain levels. In New South Wales, Queensland and South Australia, that level is 1 percent. Tasmania and Western Australia cannot have hemp grown with THC in excess of 0.5 percent, while in Victoria and in Australia’s territories, the level of THC must be below 0.35 percent.
Australia’s hemp acreage peaked in the 2019 to 2020 season at 4,200 hectares, according to an Agrifutures report. At that time, New South Wales led the states of Australia for production, with 1,900 hectares of hemp. The 2020 to 2021 season saw a significant reduction in hemp production, down to around 2,500 hectares of farmland being used for hemp growing. This acreage is still up from the 185.5 hectares grown in 2011. Tasmania now leads the Australian states in hemp production, accounting for 1,000 hectares of hemp farming, or 40 percent of the crop.
What are the uses of hemp?
As mentioned, hemp is suitable as a textile for clothing, linen, rope and canvas.
Hemp is also very efficient for carbon sequestration; according to the European Industrial Hemp Association, "One hectare of industrial hemp can absorb 15 tonnes of CO2 per hectare." When hemp is turned into the building material “hempcrete,” it will absorb carbon dioxide as it continues to cure.
Hemp can be considered an alternative to textiles like cotton and wool or to available building insulation materials. It’s also been shown to be effective in decontaminating soil in Chernobyl.
What are the options for investing in ASX hemp stocks?
Since Australia's hemp industry is still so young, there aren't many options for those who want to put money into hemp stocks listed on the ASX.
Below are a couple of options to consider; data was collected using TradingView's stock screener, and was accurate as of October 4, 2022. Companies are listed in order of market cap from largest to smallest.
Current market cap: AU$71.76 million
The company has been in decline for some time. According to its annual report, released on August 19, 2021, it recorded a AU$7 million loss after tax and a decrease of 43 percent in revenue. 2021 is the latest annual report available from Ecofibre as of October 4, 2022. Stocks have continued to drop from 2021 to 2022, as well.
COVID-19 has had a strong negative impact on Ecofibre's Ananda Hemp pharmacy brand in the US pharmaceutical market. The company has attributed the brand's struggles to a lack of online sales through pharmacies.
Other brands in the Ecofibre family include Ananda Food and Hemp Black, the latter of which is a profitable textiles division. Ecofibre acquired TexInnovate in August 2020 to aid in Hemp Black's commercialisation.
2. Elixinol Wellness
Current market cap: AU$6.85 million
Once a leader in cannabis, Elixinol Wellness (ASX:EXL) withdrew its bid of 9 million euros for the German brand CannaCare Health in June 2021. The company is now focused on manufacturing hemp-derived food, cosmetics and nutraceuticals. It operates in Australia, Latin America, Europe, the US and the UK.
Elixinol's Australian subsidiary Hemp Foods Australia has seen growth over the past 12 months, contributing almost 40 percent of the company's total revenue.
Elixinol plans to expand into pet wellness and also aims to target the zero-THC consumer. After its Good Night capsules made it into the 2021 Oscars swag bags, this brand's star power might brighten in the future.
Perhaps because of Hemp Foods and the potential pet wellness market, and despite their stock’s decline, Elixinol Wellness released an annual report in 2022 that states that the “business remains on track for a strong turnaround.” The report cites a rebounding 13 percent in revenue over H1 in 2022 as well as loss reduction and a “strong funding position” closing out 2022’s H1.
Bonus: Creso Pharma
Current market cap: AU$51.79 million
Although not specifically a hemp company — it is more interested in medicinal cannabis and psychedelics — Creso Pharma (ASX:CPH) is looking into developing a hemp-based lozenge, and might be part of the hemp companies of Australia soon. We include this small write-up to that end.
Creso Pharma says that they are in the final development stages as of February 2022, so this development might transpire quickly.
Don't forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Ryan Sero, hold no direct investment interest in any company mentioned in this article.
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Ryan M. Sero is a writer from Southern Ontario, Canada. His background lies mostly in the arts sector, where he worked as a playwright. However, he has experience working in a variety of formats, including including commercials and corporate writing. As an editor, he has worked on fiction manuscripts, plays and financial sector documents.
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