What you need to know
Early this month, the world moved past a tipping point in the global legalisation of cannabis. Exporting legal cannabis could drive Cambodia’s export revenues up and keep rural unrest down, but only if Cambodia acts quickly.
The continuing collapse of global agricultural commodity prices is a disaster for Cambodia’s farmers. But Cambodia could minimize the damage — and create a profitable new industry — by facilitating the legal export of a traditional Cambodian cash crop: cannabis sativa, also known as marijuana, ganja, and in Khmer, ថ្នាំញៀន.
The international trade in cannabis has been unmentionable in polite society ever since 1971, when then U.S. president, Richard Nixon, launched the international “War On Drugs.” The U.S' “war” ensured that cannabis was prohibited internationally by the UN’s Single Convention on Narcotics. As a condition of foreign aid, the U.S. required other nations, such as Cambodia, to criminalize cannabis, too.
However, early this month, the tide turned.
After the November elections in the U.S., a majority of the U.S. 50 states have legalized cannabis for medical use. Seven states have also legalized it for recreational use. Cannabis legalization by the U.S.'s federal government is now widely seen as being inevitable, followed by international legalization and trade.
Cannabis legalisation is, in fact, a global trend, in which Australia, Bangladesh, Canada, Chile, Colombia, Costa Rica, the Czech Republic, Germany, India, Jamaica, Mexico, the Netherlands, Portugal, Spain, and Uruguay have all legalized cannabis (more or less). Just two months ago, the UN’s World Health Organization officially concluded that “the continued prohibition of cannabis appears completely illegitimate.”
In short: this month, for the first time, the world moved beyond the tipping point towards full legalization of cannabis. What was unthinkable a month ago is a huge market opportunity today.
Legal cannabis is now the fastest-growing industry in the U.S., expected to reach sales of US$30 billion (plus or minus US$10 billion) by 2020, just four years from now. That’s more than the value of all rice exported globally. It’s 100-times the value of the half-million tons of rice exported from Cambodia in 2015 (if we assume that the average price was US$600 a ton, which is generous).
According to CannabisBenchmarks.com — a credible source of data on legal cannabis sales in the U.S. — the average price for legal cannabis flower (bud) in the U.S. last week was US$3.79 a gram (in transactions averaging 8.1 kilos). That’s US$3,790 a kilo, which is approximately four thousand times the retail price of jasmine rice.
With flower yields of approximately 2,000 kg/ha/crop (outdoors, irrigated, in California; see also this study’s figures for “our contact”), that’s US$7.58 million a hectare, per crop (at retail in the U.S.). Whereas a farmer in California’s temperate climate can only harvest one outdoor crop per year, a farmer in Cambodia’s tropical climate could grow many more, multiplying this per-crop cash yield many times over. (Continuous crops can be grown indoors, but at much higher costs.)
Even if a Cambodian farmer received only 10 percent of the retail price, it amounts to a whopping million dollars per hectare per year.
Again, that is for cannabis that is as legal as tobacco and alcohol — that is, 100 percent legal.
In addition, the cannabis plant has many by-products that could also be exported or processed domestically. Hemp seed is a superfood, and hemp seed oil is widely used in cosmetics. Hemp fibre could be used in Cambodia’s garment industry, thereby creating synergies with Cambodia’s largest export industry.
How profitable is cannabis? One US grower’s calculations show that legal cannabis is “the most profitable cash crop ever,” based on the value of the flowers alone. Another calculated that he could earn more from half a hectare of legal cannabis than from 4,000 hectares of vegetables.
The profit potential is so huge that last year, the U.S.’ business-oriented Forbes magazine called it “2015’s best startup opportunity,” saying: “Every entrepreneur dreams of discovering an untapped market where they could start with a low investment and build a huge business. If that’s you, consider the developing legal marijuana [that is, cannabis] industry.”
Things have changed, and this change creates a huge opportunity for Cambodia to seize an international competitive advantage — if it acts quickly.
With every passing day, Cambodia’s potential competitive advantage is weakened. This massive profit opportunity will attract many suppliers. Eventually, the market for legal cannabis will become oversupplied, and prices will collapse, as with every other commodity. Only by entering the market early can Cambodia earn the high profits that are needed to fund the establishment of a high-value brand that can withstand the global cannabis industry’s inevitable subsequent commoditisation. The time to act is now.
The first steps towards global market leadership are obvious: declare cannabis to be exactly as legal in Cambodia as tobacco. Stop eradication. Declare amnesty. Form a Cambodia Cannabis Federation, modelled on the Cambodia Rice Federation. Send Federation representatives to the International Cannabis Business Conference (just five months from now) in Germany. Host a similar conference in Siem Reap in 2018, focused on tropical production. Help the Federation seek investment from China (which owns half the world’s cannabis-related patents). Learn to grow, process, export, and market the world’s best legal tropical cannabis; to promote it to international tourists in Cambodia; and to export it to the world. Become the world’s leading R&D center for tropical cannabis.
Cambodia can’t afford to wait.
Seventy percent of Cambodia’s population is employed in agriculture, and the prices of their cash crops are collapsing (for example, rice, cassava, and corn). This economic stress is already causing rural unrest, which could get worse as global commodity prices continue to fall. Such unrest, during the lead-up to Cambodia’s 2017 commune elections and 2018 general election, could fuel a rural backlash as seen in Britain’s “Brexit” and the U.S.' election of Donald Trump. Returning cannabis to its traditional legal status, and moving aggressively to develop it as a legal export crop could nip rural unrest in the bud, increase stability, and create a high-volume, high-profit, world-leading export industry right here in Cambodia.
The only risk is in moving too slowly.
This article was first published at New Mandala – a specialist website on Southeast Asian affairs based at the Australian National University’s Coral Bell School of Asia Pacific Affairs.
The News Lens has been authorized to republish this article. The original can be found here.
TNL Editor: Edward White