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The Dawn of a New Industry: Cannabis and Hemp in Saskatchewan

Cannabis

On October 17, 2018, the federal government fulfilled an election promise and legalized cannabis in Canada. Previously illegal under the federal Controlled Drugs and Substances Act, the new legislation:

  • allows adults to possess up to 30 grams of legally-produced cannabis
  • allows adults to grow up to four cannabis plants per household
  • sets the minimum age for purchase and use at 18 years of age, with the option for provinces to increase the age limit
  • enables a regulatory regime for the licensed production of cannabis, which would be controlled by the federal government
  • enables a regulatory regime for the distribution and sale of cannabis, which would be controlled by the provincial government and
  • establishes new provisions to address drug-impaired driving, as well as making several changes to the overall legal framework to address alcohol impaired driving.1

While this is federal legislation, provinces and municipalities have a variety of responsibilities and issues to address including impaired driving, public health, education, taxation, workplace safety, distribution and wholesaling, retail model, retail location and rules, regulatory compliance and public consumption.2

Canada is the first country amongst the G20 countries to implement full legalization of cannabis for recreational consumption as well as sale and distribution to both domestic and international markets.3 Looking at through the lens of the ‘War on Drugs’, enforcement practices have dominated the way most countries have dealt with the illicit drug trade. This is slowly changing as certain jurisdictions dabble with decriminalization or even full or partial legalization, including Portugal, The Netherlands and several U.S. states.

Cannabis legalization is still an incredibly politicized issue, but Canada is moving forward on the legislation. Many proactive steps are being taken to address keeping cannabis away from minors, public health concerns, impaired driving and removing illegal markets.

As Canada leads the world in legalization, the country has an unprecedented economic opportunity and most importantly, so does Saskatchewan.

Regardless of where you stand on the legalization of cannabis, it is our new reality. Full stop. It goes without saying that public safety is of paramount importance and so is the way that we develop this emerging industry. Saskatchewan has been weathering an economic slump for several years with the downturn in oil and other of key natural resources. A new sector that has international market potential is a welcome addition for our economic health.

Lance Donison, Vice President at Hill+Knowlton Strategies, points out the unique opportunity Saskatchewan is in due to the provincial government’s decision to create a fully private arena for those in the cannabis business. “The legislation in Saskatchewan allows for a true private model. It is the only jurisdiction in the country like this and it demonstrates the proactive approach the government has taken because they understand that the industry players are the experts and need a flexible platform in order to maximize the benefits that the industry has to offer,” says Donison.

From production to distribution, it is a fully private system. Producers will be free to market their products, not only in Canada, but throughout the world. By contrast, a producer in Ontario would have to go through the Ontario Cannabis Store.4 As such, producers are reliant on the various government-run systems to get their product to market.

The Saskatchewan model is more advantageous for entrepreneurs. Government does not know the industry or understand its dynamics the way that producers do. Therefore, in the interests of the industry, the producers are best equipped to undertake the initial market expansion nationally and internationally.

It is said that the cannabis sector in Canada is laden with opportunities for licensed producers (LPs) and affiliated companies.5 There has been a lot of speculation on how production will pan out across the country in order to meet demand. “Nobody really knows how the larger cannabis industry will develop. The major problem will be supply and in the initial stages it will be difficult to meet demand. The likelihood is that larger producers will dominate the market, but even so, due to our legislative framework in Saskatchewan, craft producers will have an important advantage,” says Donison.

The potential for this industry is more than just local retail stores. There is significant opportunity in agriculture. Considering our core provincial competency to grow and sell crops, it is time to dominate the cannabis industry and all its related subsectors including CBD products, hemp, cannabis seeds, clones and much more.

Research and development for the industry is key to its future success. With federal legalization, institutions now have unencumbered access to produce research that will maximize Canada’s ability to benefit from this resource. This is one of the major gains for Canada and its national legalization. It creates a head start on developing the industry to foster long-term growth and entrench us as the international authority on cannabis. For example, the University of Saskatchewan already has initiatives underway like the Cannabinoid Research Initiative of Saskatchewan (CRIS).6

Hemp production is another important part in cannabis legalization. Since 1998, Canada has grown industrial hemp for its seeds and fibre.6 The plant has a long history in Canada. In 1606, the French botanist Louis Hebert planted the first hemp crop in North America in Port Royal, Acadia (present-day Nova Scotia).7  In the early 1800s, the Lieutenant Governor of Upper Canada, on behalf of the King of England, distributed hemp seed free to Canadian farmers.8 For most of the past century though, the plant has been outlawed due to its close association with cannabis. It was not until 1998 that hemp cultivation was allowed back onto the Canadian landscape.

With the full implementation of the federal Cannabis Act on October 17, many positive changes will play out for the industrial hemp sector. In anticipation of the legislative change, Health Canada took a pre-emptive first step and provided a harvest exemption to farmers on August 10. This allowed growers to harvest not only seeds and stocks, but the flowering heads, stems, and leaves. These are the CBD or cannabinoid containing tissues from the plant.

“This was a great common-sense action taken by Health Canada at the request of CHTA. It allowed producers to harvest these additional parts of the plant and store them in anticipation of the legislative change on October 17,” explains Ted Haney, executive director of the Canadian Hemp Trade Alliance (CHTA). “CBD extraction is the next big thing in the sector and letting hemp farmers harvest the chaff (the flower heads, stems, and leaves) is a major boost to the crop’s profitability.” As of October 17, hemp farmers will be able to sell the chaff to LPs for extraction and later sale through the authorized provincial channels.

From a broader perspective, the Cannabis Act affects hemp production of food, feed, fibre and fractions. The legislative change will bring a streamlined process for anybody seeking to become a licensed hemp producer. Producers will still be required to use approved varieties of certified seed that has been purchased from a member of the Canadian Seed Growers Association.9

Industrial hemp is an agricultural product and should be regulated as such. The plant produces no more than 0.3% THC in its flowering heads, unlike its cannabis plant cousin. It is important to define the regulations accordingly between the two crops. Doing so will allow for a great deal of innovation in the industry as industrial hemp has a plethora of uses. This sector holds great promise in Canada.

Haney points out that, “As of 2017, some 138,000 acres of Canadian farmland was producing hemp. This represented annual farm gate sales of $160 million. The industry goal to be reached by 2023 is 450,000 to 500,00 hemp producing acres yielding annual revenues of $1 billion.” These projections are very exciting for anybody interested in the viability of this sector. Haney has advice to anyone interested in entering the hemp industry. “Focus on where you are going to sell your product and seek contracts with food producers. If you can secure this, you will be able to confidently move ahead with planting your crops,” says Haney.

Saskatchewan excels at agricultural production and there has never been a better time to capitalize on our expertise and embrace this new industry. Cannabis and hemp are offering growers and investors an excellent opportunity to reap the rewards that await.

References

1,2https://www.alberta.ca/cannabis-legalization-in-canada.aspx
3How do you define your future in an undefined market? Insights and perspectives from Canada’s cannabis industry leaders (www.ey.com)
4http://www.ccsa.ca/Resource%20Library/CCSA-Canadian-Provincial-Territorial-Cannabis-Regulations-Summary-2018-en.pdf
5How do you define your future in an undefined market? Insights and perspectives from Canada’s cannabis industry leaders (www.ey.com)
6https://research-groups.usask.ca/cris/
7,8http://www.hemptrade.ca/
9 https://seedgrowers.ca/