The EU has an increasingly active hemp market with production in Romania, France, Lithuania and the Netherlands.  Production has increased by more than 50% since 2016 with the seed and fibre used in an increasing range of construction material, animal bedding, furniture, textiles and the pulp and paper industry.  Hemp is also an excellent source of CBD which can be extracted and used in pharmaceuticals to treat chronic diseases, cosmetics and food supplements.

A number of EU countries lifted their bans on production in the 1990’s and certain European countries have a long tradition of growing hemp including Romania, France and Finland

CBD market Growth

Whilst the legal cannabis market in Europe is strictly targeted to medical consumers, the consumption of CBD infused products for recreational purposes is now legally permitted across much of Europe.  It is the growth of the CBD market in Europe which is attracting attention as whilst it is currently estimated at c. Euro 450m, it is estimated it will grow to Euro 1.5 billion by 2023.

Hemp oil and CBD oil are two separate products which can both be sourced from a cannabis plant. Hemp oil is typically processed via cold pressing seeds, containing low volumes of cannabinoids. Hemp oil often does not contain CBD but does possess a mix of nutrients, protein and fats. CBD oil is extracted from the foliage of cannabis plants using solvents and should contain pure CBD and no other cannabinoids.

Romania Opportunity

Much of the product fuelling the European boom in cannabidiol (CBD) stems from Romanian hemp plantations, but the country itself makes little use of the plant. Medicinal marijuana is legal in Romania, but there are no cannabis-based medicines on the domestic market, and there appears minimal interest to kickstart the market. The law allows for the cultivation of a select few varieties certified as having a THC level under 0.2%. The strains of industrial hemp Jubileu, Dacia, Diana, Zenit and Denise are Romanian varieties developed by the Secuieni Institute, an agricultural research and development group. Most of the crop is exported to Hungary for processing, alongside other countries in western Europe. However, with one of the cheapest land markets in the EU, Romania represents an interesting opportunity to combine lowest cost of production with high value and/ or niche crops. 

The Romanian land market continues to develop from a very low starting point.  Productivity gains in terms of improved seed, fertiliser and crop protection plus improvements in Management/ access to capital are all driving returns.The country still represents one of the lowest freehold land values in the EU with land prices ranging from Euro 2,500 – 8,000/ ha depending on parcel size, quality and location.  Land values are continuing to demonstrate an upward growth curve year on year, creating an interesting land market in which to further explore.Brown & Co’s recent detailed research on land transactions revealed an annual land appreciation of 16% – but with huge variations according to plot size. 

Summary

The projected growth in the Industrial hemp and CBD market combined with further interest in sustainable, renewable materials to be used in such a wide range of products from packaging to cars to construction materials – means the hemp market is likely to attract further interest going forward.  Combining a limited number of higher value/ niche crops within a balanced rotation, and overlaying this on top of an early stage EU land market that is currently growing at 16% per annum potentially provides the platform for an interesting strategy.

Author: Charles Fowler – c.fowler@brown-co.pl

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