PGF position on hemp sector investments
What does the existing market look like?
Currently the hemp market is limited by the strict regulations placed on growing it by the
Ministry of Health, as hemp sits at the intersection of medicine and food. However with
legislation change making it legal to sell hemp as food, s 9(2)(g)(i)
Internationally and nationally, demand for hemp as a food and a
fibre is growing, but nationally the growth in production is currently constrained by this
regulation.
What is the sector’s growth potential?
The growth potential is high for the sector. Internationally the demand for hemp as a food
and fibre product is increasing; however there is some concern it could be a ‘gold rush’
bubble which may not lead to the predicted growth. Experts have noted the potential for
hemp planting to triple, however “a lot of market research needs to be finalised before there
is a significant increase in planting.”
Also there is a risk that without proper market research, hemp products may meet the same
fate as honey production in New Zealand, which is now facing a glut on the market and
reduced yields due to over production. This could present an investment risk to the PGF if
the fund invests in projects that have done poor market research.
What other government support is available to applicants?
The MPI Sustainable Food and Fibre Futures Fund supports innovative food and fibre
production projects that wil create more value from these industries. Hemp projects are
eligible for funding which can exceed $5 mil ion for long-term partnerships between firms and
government. Add info on if hemp projects have been received/funded- currently with MPI
What other government initiatives should the application be aware
of?
The Zero Carbon Act and the Emissions Trading Scheme reform wil mean a higher carbon
price, which could incentivise farmers to convert land to hemp production due to its low
emissions.
What sorts of opportunities are there to create more productive
jobs, or a larger number of jobs?
The jobs are more or less equivalent to regular farming jobs on arable land. However due to
the use of combine harvesters to harvest hemp products, these jobs tend to be higher-paid
with lower health and safety risks. There is also a sizable opportunity in hemp value-add
processing, moving up the value chain to create better paid jobs and greater productivity.
What existing comparative advantages would investment in the
sector connect to?
Hemp requires good quality arable land that is likely already growing other crops. Marginal
or poorly drained, stony soils are not suitable. Some crops in Canterbury have been grown
without irrigation, however production normally requires it. There are industry claims the crop
can be grown pesticide-free in New Zealand while there are cases of pesticide-free
production, it is rare and normally not on a commercial scale.
What are the necessary prerequisites for success in the sector (e.g.
infrastructure, access to natural resources)?
Mainly conventional equipment can be used for harvest but certain infrastructure must be
specially imported and importers face difficulties due to the high level of regulation on hemp
processing. Industry growth is constrained by the legal parameters of the crop which are not
set to be relaxed in the short to medium term.
What investments with relevance to the sector as a whole would be
most valuable?
The best investments for the hemp industry would be with well-established firms which have
the capacity to expand. This is because it is stil an emerging industry in New Zealand so the
investment most likely to result in increased jobs and productivity potential is investment in
already profitable firms.
To what extent does or could the sector benefit the wider
community?
The sector has the opportunity to create decent jobs in the regions. Hemp is also a very
high-nutrient product, increased consumption and availability of hemp products could have
wider health benefits. Hemp fibre traps carbon as the plant grows and requires little water to
grow comparative to cotton, as such it is a more sustainable fibre, creating less
environmental damage and contributing less to climate change.
What sorts of, and quality of, jobs does the sector provide?
In hemp farming, jobs are higher-paid, lower health and safety risk. The hemp processing
sector would also have jobs of a similar kind.
What is the sector’s environmental impact?
Hemp requires less water to grow than other crops that are popular in New Zealand and the
plant is a carbon sink if the fibre is processed in to a product. Hemp can be grown without
pesticides if well managed by experienced crop managers, which requires fairly rare
expertise.
What existing or potential Māori involvement in the sector is there?
s 9(2)(b)(ii)
Draft Policy Position
The Provincial Growth Fund (PGF) wil consider investing in hemp projects if they meet the
threshold for investment outlined in the sector position paper. If the project meets these
requirements, applicants must also be able to answer the following questions:
• Do you have the required licenses to grow and/or process hemp? Do you have legal
access to hemp seeds and/or plants to begin production?
• Do you have experience in growing hemp or similar crops? What kind of conditions
do you have experience growing these crops in? What irrigation, pesticide and crop
density levels do you have experience with?
• Do you have or can you easily source all the infrastructure needed for harvest and/or
processing of hemp?
• Have you applied to the MPI Sustainable Food and Fibre Futures fund? If not, why
not? If so, why have you applied to the PGF?
If the applicant can answer all these questions sufficiently, as well as meet the sector
criteria, then the project may be considered for PGF investment. The hemp industry is
growing and internationally, demand for hemp products is rising. The lower than usual
environmental impact of growing hemp means it can contribute to government climate
change and environmental goals. An increase in hemp production wil also lead to more
regional jobs.
As a general rule, hemp investment has the potential to align with PGF objectives and sector
investment principles, in particular with investment principle two: investment with a stronger
focus on increasing the volume of firm activities and associated jobs numbers in a region.
Investment could improve the output of New Zealand’s regions in terms of:
• Increasing the volume of firm activities and associated jobs in a region
• Investing in an industry New Zealand’s regions have a comparative advantage in
• Providing better quality jobs in the regions
However, the sector also faces significant chal enges. The PDU and decision makers need
to be aware of:
• The legislative requirements facing the industry, and ensure the applicants work is
within the legal framework
• The lack of market research and industry coordination in the hemp industry.
Applicants wil need to have a bankable business case, and have given consideration
to their place in the value chain.
• The limited amount of skil ed hemp growers in New Zealand, applicants wil need to
demonstrate they have the necessary skil s or are linked in with industry experts.
Also, projects wil need to demonstrate additionality. As hemp is a growth industry, many
players are looking to invest in the industry; the PGF wil not invest where the project wil go
ahead regardless of PGF investment.
