Work is under way to convert the former Mataura paper mill to support up to 500 hectares of hemp production in Southland over the next 10 years.
Southern Medicinal Limited, a partnership between Natural Horticulture Limited and Dunedin-based medicinal cannabis company SOMA Group, has begun converting the former mill buildings into a non-THC medicinal cannabis and hemp growing, testing and processing facility.
Southern Medicinal executive director Greg Marshall says trials have shown hemp is a good crop to plant in wet areas of farms and could fit with famers’ riparian plans.
“It sucks up nutrients, it becomes a barrier to strop nitrate flowing into the waterways, it sucks up carbon and it reduces pollution,” Marshall said.
Planting is from October to December for an April harvest with potential to return $50,000 a hectare from 500 kilograms a hectare yield at $100/kg.
The initial fit-out of indoor grow rooms within the old mill complex is complete and growing has commenced on site.
Expansion plans will grow the facility’s capacity for production of 4000kgs of medicinal cannabis flower and processing of 500 tonnes of hemp flowers a year.
“NZ’s medicinal cannabis market is forecast to be worth at least $1 billion by 2025, with considerable export potential,” he said.
“The mill gives us several competitive advantages in the industry, from the sheer scale of its floor space to its onsite hydropower plant.
“This allows us to operate from a very low-cost base and address the serious bottlenecks in processing and manufacturing capacity, which are likely to constrain the medicinal cannabis industry when production begins in full-scale over the next two years.”
Southern Medicinal’s business model includes a plan to partner with the Southland farming industry through co-planting of non-THC hemp on farms.
The harvested hemp will be processed into CBD products and low-emission pelletised stock feed that studies show can reduce greenhouse gas emissions from cows by up to 20%.
Southern Medicinal has worked with agribusiness science and technology consultancy AbacusBio to model the potential benefits of integrating hemp into Southland farms.
This research shows hemp has the potential to become a valuable income source and environmental mitigation.
“Farmers could see benefits from lower nitrate levels in waterways, lower emissions, new revenue streams and the ability to lower stocking rates while preserving returns,” he said.
“It is estimated that Southland’s economy faces a $265m bill to meet new emissions and freshwater regulations by 2025 and we are planning on being part of the solution.”
Marshall developed the business model following his experience in the North American market where the commodification of supply created price volatility and made profitability difficult for some early entrants.
“Our business model is built differently to achieve optimal economic, environmental and community outcomes across a broad sweep of Southland and to mitigate against the price fluctuations, which frequently occur in newly deregulated markets,” he said.
Another driver of the business is to bring the safest and most affordable medicinal cannabis to an estimated 425,000 NZ users.
“The market is currently being supplied with imported products, most of which are of untested quality and efficacy, as well as the unregulated local black market,” he said.
“Our approach puts safety, testing and knowledge first to produce high-quality cultivars, medicinal cannabis and services to an industry that can and must be based on trust.
“We’re backed by science from NZ’s leading plant geneticists from AbacusBio and pharmacologists from the University of Otago.
“We also have access to one of the most extensive breeding programmes in the country as part of the SOMA science programme.
“We are licensed to cultivate, and we’re licensed to have possession for manufacture.”
Hemp plants growing hydroponically at the mill will be used to propagate seedlings with the first crop planned for planting this spring.
Ideally, this would be in two 50ha blocks but to spread the environmental benefit across the region and financial benefit as widely as possible, smaller units of 2-5ha will be allotted to several farms.
“The idea is to provide the seedlings to the farmer, who then plants and cultivates them and brings them back to us to be processed,” he said.
