The Hit in Chinese Industrial Hemp(Especially CBD)

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on whatsapp
Share on pinterest
industrial hemp | | soho

The China law and regulation only allow the hemp to use in the fibers and seeds industry, and it has never been allowed to use in medicine and food additives

The regulatory pouring of cold water has not quenched the enthusiasm for industrial hemp stocks.

Since the beginning of this year, affected by the news of legalization of industrial hemp in the whole world, industrial hemp has become one of the hottest concept plates in A-share stocks this year in China. Up to April 19, the Chinese wind industrial hemp index has gained 175.53 percent this year, far out performing most of the concept indexes.

The craze of Chinese secondary markets continues to spread in the industrial chain. Since the beginning of February, the industrial hemp sector has added more than 10 new enterprises every month steadily. Up to April 19, more than 10 of the 45 A-share industrial hemp stocks listed in the data collected by Flush data have doubled in price.

The market is enthusiastic, so are the local governments. Currently, Yunnan and Hei Long Jiang are the first two provinces that have issued regulations on the cultivation and sale of industrial hemp, Besides, Ji Lin is expected to become the third(Yunnan Hei Long Jiang and Ji Lin are the province in China) .

It is worth noting that most of the enterprises that have recently announced industrial hemp business in these three provinces are pharmaceutical enterprises, focusing on the extraction and application of CBD in industrial hemp. Cannabidiol (CBD) is the main non-addictive ingredient in hemp plants which has the medical effects on analgesia, anti-inflammation, and anti-convulsion. and it has a good applied prospect in the fields of biological medicine, food and cosmetics. Zhao lining, deputy director of the flax hemp research department at the Chinese academy of agricultural sciences, told China News Weekly that several countries have announced to lift their bans on CBD applications, and the market space is expected to more than $10 billion, which is very attractive to enterprises. “The Chinese hemp market has both practical development and a large speculation.” said Zhao.

The Global Ban-lifting Trend about CBD

The potential for cannabidiol (CBD), which is the key ingredient in this industrial hemp craze, lies in the use of health care and food additives. According to Chinese policy, the use of industrial hemp is limited to fibers and seeds and has never been approved for using in medicine or food additions.

Chinese regulatory standards for industrial hemp have been similar to the provisions of the 1961 single convention on narcotic drugs, an international convention, since 1985.

According to international standards, it is considered as drug marijuana that the one with more than 0.5% tetrahydrocannabinol (THC), a toxic substance that can cause hallucination. while the one with less than 0.3% THC is considered as intermediate marijuana, and only the one with less than 0.3% THC is considered industrial marijuana. This type of hemp is not considered to have drug use value and is widely used in textile, papermaking, food health, cosmetics, biological medicine, building materials and other industries internationally.

Currently, industrial hemp is grown in about 30 countries in the whole world. China is the largest producer and exporter of industrial hemp among them. holding about half of the world’s industrial hemp cultivation area and providing nearly one-third of the world’s industrial hemp production. Textiles account for three-quarters of the productive value in the domestic hemp industry.

“China has been growing industrial hemp for more than 6,000 years and is now a world leader in the cultivation, processing, processing and export of industrial hemp.” Su Jianguang, a third-level researcher at the hemp research institute of the Chinese academy of agricultural sciences, told China news weekly that of the more than 800 known seeds resources of industrial hemp, dozens of varieties have been put into modern industrial production and utilization.

Industrial hemp, which mainly means the derivation from hemp such as cannabidiol (CBD) , is close to the red line of domestic regulation, used in food and medicine field. In the past, CBD has been on most countries’ lists of controlled pills, even treated as a drug, because the chemical formula of THC and CBD are so similar that they were once considered to be the same thing. In recent years, chemical science has proved that CBD is non-addictive and has medicinal value, and the extraction technology has been developed to the level of separating CBD from THC .

A worldwide CBD ban lifting trend has emerged since 2017. In 2017, New Zealand, Germany, Brazil and Argentina legalized medical marijuana to varying degrees and lifted the ban on CBD products. In January 2018, the world anti-doping agency (WADA) officially remove CBD out of the “prohibited substances list”. In June, the world health organization (WHO) formally affirmed that CBD is not addictive and has medical value. In December, the U.S. passed the farm bill, legalizing CBD in all 50 states. Subsequently, the United Kingdom, Israel, South Korea, Thailand and other countries began to make varying degrees of industrial hemp ban lifting.

Late last year,the world health organization also submitted a proposal to “remove CBD and CBD preparations from the international drug control convention”, in response to the ban on CBD and CBD preparations in the 1961 single convention on narcotic drugs” If the proposal is adopted, China, as a party to the convention, may also lift the ban on CBD use.” Industrial securities analyst li yuebo told China News Weekly.

License to tighten

Domestic ban has not been lifted, the concept plate has been heated. To cool the market, regulators have further tightened licensing.

In the notice on strengthening the control of industrial hemp issued by the national commission for the prevention of drug abuse and illicit trafficking, the state requires all provinces to strengthen the examination and approval of industrial hemp licenses, review and approve the licenses approved in the past, and strictly regulate the industrial hemp industry.

By the end of December 2018, Yunnan province, which was the first province to issue regulations on the cultivation and sale of industrial hemp in China, had issued 45 licenses for the cultivation of industrial hemp in Yunnan province, and 6 licenses for the flower and leaf processing of industrial hemp in Yunnan province, namely Han Kang, HanMuSen, BaYo Biological, HanSu, A San Wu Xing and CAAS.

“Licenses are the key to entry into the industrial hemp business.” As a result of the new policy, li told China News Weekly, the prices of companies that already hold industrial hemp licenses have risen and the prices of licenses on the market have started to rise. “From the market point of view, the existing industrial hemp cultivation license price of 10 million to 20 million yuan, Mosaic processing license price of 1.1 billion to 1.6 billion yuan. For the factories in the pre-license stage, the quoted price is estimated at 200 million to 600 million yuan, which mainly depends on the production capacity, application progress, construction progress and technical level.

“The threshold of planting license and processing license is different, especially in the CBD extraction layout of enterprises, only planting license without processing license is unable to carry out extraction operations. Ma institute of agricultural sciences researcher Su Jian Guang revealed.

According to the regulations on industrial hemp cultivation and processing license of Yunnan province issued in 2010, the public security organs above the county level are responsible for the approval, issuance and supervision of industrial hemp cultivation and processing license. Among them, apply for industrial marijuana permit industrial raw material planting, request to apply for the body is industrial hemp cultivation, processing enterprises, with “industrial hemp seeds by a licensed Fan Zhong planting units or individuals to provide” the planting area of not less than 100 mu(a kind of Chinese unit measurement)” planting from tourism scenic area and the high grade highway 1 km” “standing book management system” the four conditions.

To apply for the processing license of industrial hemp flower and leaf, it is required to have “a registered capital of not less than 20 million yuan”, “a plan of raw material source, raw material use, product type and product processing” and “special testing equipment, storage and processing facilities and places”.

The hardware facilities with high threshold are the key factors that cause the high cost of processing license examination and approval. Zhao lining analysis, comprehensive land costs, equipment costs and labor costs, factory enterprises trying to process need to start tens of millions, a larger scale cost of hundreds of millions of yuan.

In addition, the factory’s production schedule, process plan and processing scale also determine the rate of cost recovery.Su JianGuang believes that many enterprises want to get involved in CBD extraction industry, extraction technology compliance, need to see the drug control department’s final acceptance certification judgment. At the same time, the difference of extraction process in the factory determines the purity of CBD extraction, and the production efficiency is also an important factor affecting the cost.

The government tightly controls processing licenses, which are linked to potential risks in the hemp extraction process. Su JianGuang told China News Weekly that even if the THC content in the raw material of industrial hemp is lower than 0.3 percent, the purity of THC can be extracted when it enters the factory extraction process. “In the production process of CBD extraction, the factory has the possibility to extract THC as the raw material for drugs. Therefore, the entire production process of the factory must be strictly controlled by the public security department, and the production process must be completely transparent.”

As the CBD extraction application market heats up, the new enterprises are mainly pharmaceutical enterprises. According to Su JianGuang, the entry of large pharmaceutical enterprises into the bureau can provide capital support for the industrial hemp industry, but the key is that the mature management system of listed pharmaceutical enterprises can provide important support for CBD extraction, new drug development and sales. “CBD, as a pharmaceutical raw material, is focused on the development of new drugs. The international CBD pharmaceutical is still in its infancy, but the market demand is large. With the development of technology and the acceleration of the lifting of the ban, the market will see explosive growth and the size of the market will reach tens of billions of dollars.” Su JianGuang said.

The surge of local market

With this round of industrial hemp boom, the broad market prospect with CBD as the focus has also become one of the driving forces for local governments to try to deploy industrial hemp.

On April 5, Xiong An science and technology issued a notice, said it has obtained in Hei Long Jiang hemp cultivation, CBD extraction, food, beverage, health products and cosmetics raw materials research and development, production, sales and testing services, commodity import and export services and other business licenses. According to the agreement, Xiong An science and technology will join hands with the government of Fu Yuan city, Hei Long Jiang province, to create the development pattern of the whole industry chain of Chinese hemp planting, research and development, processing and marketing.

From the perspective of local policies, the industrial hemp industry has been included as one of the future key industries in Hei Long Jiang province. In march last year, the three-year special action plan for the Chinese hemp  industry in Hei Long Jiang province was issued. The Chinese hemp  industry was listed as the cultivation object of new growth areas in Hei Long Jiang province, and the plan was to build Hei Long Jiang into the largest Chinese hemp industry base in China or even in the world by 2020.

“At present, Hei Long Jiang is just in the preliminary stage of the policy window, and XiongAn science and technology has chosen to lay out its layout here, with the advantages of policy regulation, and more opportunities and space to explore and make mistakes.” Industrial securities analyst Li YueBo told China News Weekly.

In addition, Jilin province, which has not yet formally liberalized industrial hemp cultivation and processing, has attracted a number of enterprises to invest and cooperate after revealing its intention to liberalize in August last year.

In January this year, Jilin academy of agricultural sciences and Zi Xin pharmaceutical FC of the Netherlands jointly set up Jilin hemp engineering research center, and signed the agreement of industrial hemp cooperative research, in an attempt to make industrial hemp industry a new economic growth point of Jilin province. In April, TongHuaJinMa announced the signing of the industrial hemp cooperation project agreement with Jilin academy of agricultural sciences and the people’s government of ErDaoJiang district of Tong hua city, indicating that it plans to increase the CBD content of cannabis cultivation to more than 10% within three to five years with a research and development expenditure of 38.332 million yuan. After the announcement, has not obtained the industrial hemp cultivation license TongHuaJinMa also quickly ushered in a number of trading limit.

The public security department of Jilin province announced that the “Jilin provincial party committee Jilin provincial people’s government on strengthening the new era of anti-drug work” is being drafted, the industrial hemp management standards will be included as an important content, the next step will refer to the practice of Yunnan province, in the form of the government issued specific regulations on the management of industrial hemp in Jilin province.

“Northeast China has the land advantage to develop industrial hemp, and the broad market prospect is also an important driving force for local development of industrial hemp.” According to zhao, HeiLongJiang and Jilin have flat and extensive land and high degree of agricultural mechanization, which is conducive to large-scale cultivation of marijuana. At the same time, the northeast region in the land, labor costs are lower, enterprises in the policy window period layout can also enjoy more preferential.

In the domestic industrial hemp industry, Yunnan province is the only province in the country that allows and regulates the cultivation of industrial hemp by special laws and regulations, and it is also the first province to get involved in the research and development of CBD extraction.

In the early years, Yunnan province was rich in wild hemp resources. The local minorities had the habit of planting hemp, and hemp was widely cultivated as a cash crop. It is difficult for the government to regulate, and there is a widespread situation of drug marijuana, and marijuana smokers can be seen everywhere on the roadside, so it is difficult for the government to control and completely eradicate it. Therefore, it is transformed by planting industrial marijuana. “The concept of Yunnan province first, legislation first, the development of the domestic industrial hemp industry has a demonstration role.” “Yunnan has been implementing standardized control for more than a decade, the public awareness is well established, and the legal and policy conditions for the cannabis industry are the most mature,” Su said.

Since 2010, Yunnan province has implemented the regulations on the cultivation and processing of industrial hemp in Yunnan province, covering an annual planting area of more than 100,000 mu, covering 38 counties (cities and districts) in 13 states (cities) including Kunming, Yuxi, Lijiang and XiShuangBanna. Today, there are more than 30 industrial hemp cultivation enterprises and units in Yunnan province, and the first four enterprises that have obtained the industrial hemp processing license and can realize the mass production of CBD are all in Yunnan.

Over the years, industrial hemp, which has grown rapidly to a 100-million-yuan industry, has played a positive role in Yunnan’s local economy. According to Yang Ming, chief scientist and researcher of the hemp research center of the economic crop research institute of Yunnan academy of agricultural sciences, only a few cash crops such as corn and buckwheat can be planted in Yunnan, especially in the mountainous areas with high altitude of 24-30 degrees (1500-2500 meters). The cultivation of industrial hemp can bring farmers more than 2,000 yuan per mu, far higher than other crops.

In addition, the rise of CBD market will bring more profit space. Zhao Li-ning calculated an account to China News Weekly : at present, the global market price of CBD, according to the purity, varies from 40000 to 70000 yuan/kg, is used to extract varieties of hemp CBD of CBD content at 0.7% ~ 1%, a acres marijuana plants of 120 ~ 200 kilogram, CBD extraction yield by 0.5% ~ 0.7% computation, an acre of land at low 0.6 ~ 0.84 kg, can extract the CBD is high when can reach 1 ~ 1.4 kg. In other words, the production value of industrial hemp land used for CBD extraction can reach at least 24,000 yuan per mu.

“In the next 5 to 10 years, the output value of industrial hemp (including cultivation and industrial extraction) in Yunnan province will grow from the current value of around 100 million yuan to a sunrise industry with an output value of over 10 billion yuan.” Yang said.

By the beginning of this year, 41 countries had legalized medical marijuana, and more than 50 had legalized CBD. The international lifting of the ban accelerated, the concept of industrial hemp continues to ferment, has become the capital to enter the hit.

According to euromonitor international, the global legal marijuana market was worth about $12 billion in 2018. According to Canopy Growth, the potential global industrial cannabis market is $500 billion. A new report by yahoo finance UK and Bright field Group also suggests that the European cannabis and cannabinol (CBD) market will grow exponentially over the next few years, with the cannabis industry growing over 2,400% and CBD growing over 400% by 2023.

In February, Shun Hao Inc. Which was the first one entering the market with a planting area of 1000 mu in the first phase, aiming to take hemp + e-cigarette as a new breakthrough point. The seed purchase agreement has been signed and the planting land has been turned over and the preparation for planting has been made. Longjin pharmaceutical, which entered the market in March, announced plans to plant more than 10,000 mu in 2019. Conbe, the one which invest the largest part, has announced that three of its companies had received licenses to grow 24,000 acres of industrial hemp.

Because they all focused on CBD, The seeds chosen by these three enterprises are “yunma 7”. Sujian Guang told China News Weekly,

The CBD content of yunma no.7 is between 0.8% and 0.9%, which is also the main CBD extraction hemp variety.

“Yunma no.7 has been supplied this year.” According to Yang Ming, a professor at the economic crop research institute of Yunnan academy of agricultural sciences, the area planned to plant this year has increased hugely, and the seeds are in short supply. Given the limited capacity of downstream factory of the whole chain to extract CBD, the government is already looking to rein in this year’s proposal of industrial hemp cultivation.

The booming CBD market has also accelerated the iteration of hemp seeds used for CBD extraction. “Currently, Yunnan province has 1.33 percent of the CBD variety ready for production.” According to Su JianGuang, “the hemp research institute of the Chinese academy of agricultural sciences cooperated with Han Ma investment group have developed various hemp seeds with different CBD content such as 3.6%, 6%, or even 8% to 10%.

In fact, the domestic market, which has just set off a planting craze, still lags far behind the international market in seed resources.

“The CBD content of industrial hemp mainly grown in China is within 0.9 percent, while the CBD content of the high-content kinds in the United States is close to 16 percent.” Su told China News Weekly, which means that enterprises need to pay more on cultivation/ processing and sewage disposal.

This situation leads to the poor economic benefits of domestic CBD and the lack of competitive force of domestic hemp enterprises. The only solution is to rely on domestic technology in many fields, enlarge investment in scientific research, joint on breeding research.

© 2019-2020 VAPEBIZ.NET All Rights Reserved. Content Can Not Be Translated or Reproduced without Authorization.
Jane Yang, master of TCSOL, editor of VAPEBIZ.NET.

Related Articles

0 0 vote
Article Rating
Notify of
Your Name
Your Email
Inline Feedbacks
View all comments