Unresolvable issues around value and quality
Northern Cape organic cannabis grower Leaf Botanicals has pulled out of its share deal with JSE-listed Labat Africa and wants out. That’s emerged after Labat, which owns 80% of Leaf Botanicals, posted an announcement on SENS to its shareholders on 17 March 2022 that there was a “quality issue” behind the breakdown.
Both sides seemed equally unhappy with their year-long marriage, with Upington-based Leaf Botanicals pulling the plug because of financial disappointment, and Labat saying the flower was not good enough for its international customers. Labat has gone looking for production elsewhere, picking up 80% of Eastern Cape grow op, Sweetwaters for R10 m – for which it paid cash. Leaf Botanicals’ intentions going forward have not been made public.
The company said the “Leaf Botanicals acquisition was terminated due to Leaf Botanicals no longer wishing to pursue the transaction following the discovery that the product was not up to standard and the inability to find a suitable way forward. Following further discussions, the termination has been accepted by Labat.”
Van der Colff activated suspensive clause after sale value plummeted by 75%
Labat purchased 75% of Leaf Botanicals in May 2021 from award-winning farmer, Johannes van der Colff.
Labat paid R11,25 million for its equity in the SAHPRA-licensed facility and paid the Gog van der Colff Trust by way of 11 250 000 Labat shares, taking a bet that the Labat share price would go up. Well it didn’t. It is currently trading around 25c a share, which means the R11,25 m van der Colff was paid for giving up majority control of his operation is now worth a mere R2,8 m, 75% down on the value of the striking price.
Van der Colff’s got out the deal by activating a suspensive condition in the purchase agreement which allowed him to pull out if Labat was trading below R1.00/share for the 30 days before the first anniversary of the deal, which is imminent. The issuing of his Labat shares is to be cancelled and those shares delisted.
Labat has endured a rocky ride so far, prospects are looking up
Labat has had a rocky ride as the mover with first advantage in the South African cannabis space. It paid for many of its acquisitions with Labat shares valued at R1.00/share. With the price languishing below 30c/share, those who accepted shares in return for giving up equity in their own businesses, have taken a haircut of 75% of the value of their shares. Nonetheless Labat appears to have stabilized, and has again been out shopping.
Hemp in Europe, France, Germany
Hemp cultivation in Europe dates back hundreds of years, and it is estimated that 25% of the world’s hemp is grown in this region. France alone accounts for 40% production in Europe, and there are twenty additional countries that are known for hemp production in bulk. Over the past few years, the hemp cultivation has boosted, and both the consumers and producers are interested in utilizing these resources.
Over time, Europe has seen a sudden growth in the processing infrastructure, and they have finished a good industry where hemp fibers are produced for industrial applications. Hemp can be utilized in paper and pulp industry and is also used in biocomposites, which are used in the automotive industry and for making insulation material. The fiber extraction processes also make use have several commercial uses such as for animal bedding and in the construction industry as well, especially for insulation.
It is has been observed that the last few years have seen an increase in the overall cultivation, and there has been a growth in the seeds and flowers that are grown in the various regions around Europe. Also, the applications of the hemp components are such that it is highly useful. In a study conducted by the European Industrial Hemp Association (EIHA), it was found that Europe produced 11,500 tonnes of seeds in 2015 and imported around 10000 metric tones from China.
In the earlier decades, the hemp seeds were primarily used as animal feed for fishes and birds. EIHA has estimated that around 60% of this crop is used as human food, and the rest 40% for feeding animals. This particular shift is going to continue in Europe as people become more aware of the application of hemp and the amount of omega fatty acid that it holds. Over the last four years, there has been a sudden increase in the harvest of hemp flowers and leaves for food and medical application, which are basically meant for CBD applications.
With the hemp cultivation kicking in, the CBD sales have also increased in some of the European countries despite of the confusion that is prevailing in the European Food Safety Authority. Most of the countries such as the UK and Italy have stopped enforcing guidelines on the CBD production, whereas some others, such as Austria, Spain, and France, have brought down the CBD sales over the course of time.
You will notice that the CBD products have been widely distributed across Europe – right from the vape stores, tobacco shops as well the supplement in the UK, especially in Barrett and Holland. You can also find the CBD material in the supermarkets, with online retailers, as well as the medical stores. However, there has been a restriction on the use of CBD across various countries, and there is a possibility that it might hamper the growth of the hemp plant in several countries. In areas such as Germany and Romania, it is easy to harvest the plant. Moreover, in areas such as the UK, France, and the Netherlands, it is easy to grow seeds and fibers. In recent times, the production of the hemp seeds has gone down to a significant extent, and it is important to build up an industry that is quite strong and diverse when it comes to the growth of hemp seeds.
As hemp is one of the best sources for CBD, it can be extracted for use in a wide variety of food supplements such as cosmetics and pharmaceuticals. As you know, CBD is legal cannabis, its market in Europe is targeted towards the medical consumers, and the consumption of the same is meant for those who want to invest in cosmetics, food supplements, and pharmaceuticals. The legal cannabis market is infused with products that are meant for recreation activities. According to recent research, it was found that the European market is going to make around 450 million out of the CBD market, and after that, North America will have a market share of 40%. Europe is surely going to reign in the cannabis market and will have a profound impact on the CBD market. In Switzerland, the sale of CBD is permitted along with the consumption of legal and recreational CBD, which has high THC content. CBD is also available for use in the tobacco shops.
Hemp cultivation in Europe surely has a bright future as more and more people are opting for it due to the multiple benefits that it has to offer and the cure that it provides against a lot of issues.
Challenges Crushing the Dreams of American Hemp Farmers
With the word coming down the pike last year about the production of hemp to become legal again in the United States, the struggling American hemp farmers felt as if they just received a stay of execution.
This means that they will not have to nickel and dime themselves by dedicating their exclusive land to traditional crops like wheat and corn. They might also be able to stay in the agriculture field for longer without having to deal with pasture crops.
Cannabis supporters have been preaching from the past few decades about the potentials of industrial hemp in saving the economy of the country. Moreover, this depends on whether the country is willing to accept hemp as a sustainable alternative to substances like cotton, fossil fuels, and cotton.
Mitch McConnel, a Senate Majority leader, and a federal lawmaker, fought against legalizing cannabis since the 1980s and saw the hemp potential first hand while exploring various facilities involved with the pilot program in Kentucky, his home state. Noticing the benefits that hemp could provide the average American farmers and consumers, McConnel took charge of the pressing issue on Capitol Hill during the last year. McConnel was determined to ensure that industrial hemp would become one of the plows and pick collection for the farming community. And he got successful in his plan.
So, now that the production of hemp is legal under the 2018 Farm bill, more and more jurisdictions in the countries are accepting it. As of now, 34 states of the United States have made the production of hemp legal for the farmers since the legislation is signed into law by President Trump.
So, this means that the country is happily accepting the decision to hold down the prohibition of hemp production.
Although the hemp market is predicted to cross the $26 billion mark within the upcoming six years, farmers are not living the high life. There are many challenges and uncertainties in the agricultural sector that are to be sorted off before the crop could take off just like the supporters have predicted it to. However, one thing that is certain in the hemp industry is that only the strong or at least those with better resources will survive. Here are some of the most prevalent issues that hemp farmers have been facing since the crop was legalized.
Hemp Production Generates Poor First Year Yield
The farmers of industrial hemp have accepted this decision of legalizing hemp and regarded this as a sweet spot. But, the poor first-year yields of hemp production have made it difficult for the farmers to be profitable. Due to the delayed planting schedule and heavy rainfall, there is a situation where the initial harvesting of the hemp is looking to be miserable. And, this will certainly make a huge impact on the profits.
The Indiana hemp farmers stated that the plants didn’t grow much taller. Moreover, they never canopied the fields, and this has also led to weed problems for the crop.
Reports might have shown that the production of hemp may bring between $40,000 to $50,000 per acre, in comparison to corn, which is just generating $1000 per acre; the farmers still do not believe that the first harvest of the hemp will bring in any profit for them.
Hemp Farming is mostly done with Hands
Hemp farming may bring big money into the farming community, but for this, they will have to put a huge effort into it. Hemp farming is a laborious task, especially when the farmers are not equipped with the necessary equipment to complete the process from seeding to harvesting efficiently. Although some of the hemp farmers may have been able to use modern equipment and machinery to farm hemp, others may have to invest thousands of dollars to purchase new retrofits and equipment. Moreover, as only certain types of plants need to be seeded into the ground, a lot of work needs to be done with the hands by the farmers for the seedling. Someone will have to it do this work, however dirty it may be.
Back during the time of original Rockstar cropping in the United States, slaves used to work in the hemp fields only because no one, especially white men, wanted to do anything related to it. The book “A history if the Hemp Industry in Kentucky” clearly indicated that slavery only flourished in the Bluegrass State because of Hemp. Let’s hope that things go the other way around this time.
Seeds of Hemp being Sold for CBD rich Plants is a Rip-off
There is a shortage of hemp seeds that can be used for producing high CBD yield plants. Many of the hemp farmers who have just started hemp businesses are focusing on capitalizing on the emerging case of CBD. But, for this, any old hemp will not solve the purpose. Farmers interested in producing hemp for selling it to the CBD processors will require only female plants. Many of the hemp farmers are getting ripped off due to the fact that hemp seeds they purchased recently are male plants of hemp. For the farmers who are expecting to sell their plants for CBD, these plants are completely worthless. Now, they won’t be able to sell their crops to the CBD processors, resulting in huge losses.
However, analysts have predicted that by the year 2023, the industrial hemp market could be worth $22 billion.
Thieves are stealing Hemp mistaking it as Marijuana
As marijuana and hemp are similar in odor and appearance, thieves have been mistaking it into marijuana and sneaking into the hemp fields and stealing the crops with enthusiasm. Many farmers in New York have complained about the lost crop because the pot seeking thieves have been stealing it every night.
Apparently, thieves have been mistakenly stealing hemp plants, and the problem is worsening with time, as reported by the hemp farmers. The stealing of hemp started with 20 plants and then slowly escalated to 100 plants. Moreover, in the beginning, such incidents happened just once a week, but it has now escalated to every night. These plants are completely useless to them, and they can smoke as much as they can without getting the ‘high’ they are looking for.
The farmers also fear that this significant loss of crops even before reaching the harvesting time could badly cripple them before they even start. The problem of theft is forcing the farmers to either assemble an independent team or invest in increased security to keep a look at their crop.
A farmer in New York reported that he is in big problem as he is sleep deprived because of spending countless nights watching out for his property. He said his family had spent many nights for the same reason.
Along with this, the hemp farmers are facing challenges with crop insurance, banking, and a shortage of sufficient pesticides and herbicides. In other words, it will be some time before the hemp production can get back to normal in the United States, and the farmers can enjoy farming without any issues. Moreover, considering the duration for which the crop was out of circulation, the country may never see a rise in the hemp production like expected.
Black Unemployment Rate Stays Higher, African-Americans Get Less Jobs
In May 2020, the black unemployment rate stood at 16.8% compared to 12.4% among white Americans. While the economic recovery brought down the all-American average from Aprils’ record 14.7% to 13.3%, it ticked 0.1% for African Americans. The ongoing protests over George Floyd’s death due to police brutality, and high rate of joblessness for blacks highlights the glaring social and economic disparity in a country viewed as the torchbearer of the world’s democratic values.
Many blame the coronavirus pandemic for unemployment among blacks, who predominantly work in state and local sectors that have witnessed major layoffs. However, it is the disparate racial mindset that makes black Americans subject to economic and social injustice. While white Americans are mostly businessmen and white-collar workers, blacks struggle to get jobs.
The data on black unemployment rate understates the bigger problem of disfavoring in the United States. African Americans face inequalities in access to healthcare, education, housing and means of prosperity. Their wages, income, health status and economic condition continue to suffer due to persistent racial discrimination visible socially, economically and physically.
The Deep-Rooted Economic Disparity
Historically African Americans are at the receiving end of economic development in the United States. In August 2019, when joblessness was its lowest in the country in decades, the black unemployment rate was still 2% above the 3.4% whites without a job. Whenever a recession hits the US market, African Americans are more vulnerable due to the fragile economic safety net they rely on. As the economy rebounds, their recovery is again slower compared to the white population.
Much blame for the high black unemployment rate and their economic backwardness goes to racial discrimination that continues since the US came into existence. African Americans were enslaved, and brought to the country to work for the prosperity of white farmers. Despite their support in the War of Independence, their enslavement continues, and they were denied economic advancement. Black people were excluded from the political process, and forced to serve the white men.
The abolition of slavery in 1863 failed to restore their property rights completely and White Americans continued to enjoy privileges in job and commerce. The sustained racial segregation and discrimination of black people by whites led to the Civil Rights Movement in the 1960s. Though it resulted in social, economic, and political reforms in favor of African Americans contributing to Barack Obama’s elevation as the first black US President, blacks continue to face systemic injustices. The absence of equal opportunities, wages, and education keeps them disadvantaged and the black unemployment rate remains higher than that of white Americans.
Why the Black Unemployment Rate Stays Higher
The foremost reason for the high black employment rate in the United States is “historical and systemic educational and economic disadvantages” meted out to them. For centuries, white Americans are “patronized” to maintain a “disproportionate economic edge” at the workplace. African Americans struggle to get better and quality jobs as they have too many hurdles, including lower pay, higher job insecurity, reduced benefits and fewer opportunities, compared to white people.
Systemic barriers also put obstacles for black Americans. They are victims of occupational segregation making them vulnerable to wage discrimination at the workplace. Blacks are viewed as fit for lower-paid jobs, and employers prefer whites over them for stable, well-paying offers. Whether it is a slowdown or economic recovery, they are “last hired, first fired.” About 55% of them have private health insurance compared to 75% among white workers.
The lack of entrepreneurship and fewer African American-owned businesses also contribute to the higher black unemployment rate. They lack the wealth to support their education, start a business, or move to a particular place and access better jobs. They face monetary barriers preventing their education, and end up with higher debt than white Americans. However, this has more to do with racial profiling in jobs than the absence of qualification among black people. Their systemic economic exclusion is as old as the US history.
Even after slavery was abolished, the offices created to resettle formerly enslaved people encouraged them to enter into a contract with their former masters, and continue to do the same occupation. States, such as Carolina, made laws barring African Americans from doing any job other than farming or domestic servitude. White-dominated legislatures approved acts that prevented the relocation of blacks, or their hiring for distant job openings.
Unfavorable agriculture policies and Ku Klux Klan terror in the South drove African Americans to the North during the 20th century. However, the lack of good education and employment discrimination forced them to accept lower-wage domestic and service vocations. The trend continues despite technological advancements leading to high-paying jobs in the country.
Intentional government inactions are also to blame for the higher black unemployment rate. Federal and state statutes enforcing non-discrimination at the workplace are never strictly implemented. Many of the agencies, including the US Equal Employment Opportunity Commission, remain only largely symbolic, while social discrimination perpetuates economic inequality. This, in turn, has forced African American workers to endure lower-income, fewer jobs and exclusion from better opportunities.