Top Crop Manager

Hemp, hemp, hooray?

Western Canada's hemp industry could be ready for lift off.

November 19, 2007  By Carolyn King

Since hemp production was legalized in Canada in 1998, the industry has had
some ups and downs. Now, as hemp processing and marketing grow stronger, hemp
looks set to provide a good option for farmers interested in new crop opportunities.

"Over the last five years, we've seen an increasing consumer demand for
products from hemp seed. The number of hemp food products and body care products
available in stores just keeps on expanding. That's led to an increase in the
acreage and in processing," says Arthur Hanks of the Canadian Hemp Trade
Alliance (CHTA). The CHTA is a non-profit group of hemp processors, marketers,
farmers and information specialists.

Initially, Canadian hemp production grew very rapidly (see Table 1), due particularly
to one company that contracted many farmers to grow hemp in 1999. After the
company went into receivership, many farmers were left with nowhere to sell
their product. So hemp acres plummeted in 2000. Since then the situation has
gradually improved as prairie-based processing operations began to grow.

Table 1. Acres licensed to grow industrial hemp in the
prairie provinces.
Year Alberta Saskatchewan Manitoba Canada
1998 94 650 1497 5927
1999 1862 7640 21,950 35,075
2000 25 5 77 161
2001 279 968 1165 3250
2002 304 1110 1474 3780
2003 379 1661 3625 6750
2004 1577 2480 4089 8721
Source: Health Canada, adapted by Alberta Agriculture,
Food and Rural Development.

Most of Canada's hemp production is in Manitoba, Saskatchewan and Alberta.
For example, in 2004, 93 percent of all the acres licensed to grow hemp were
on the prairies. Health Canada licenses production and all other aspects of
the industry, based on strict regulations, because of the close relationship
between hemp and marijuana. They belong to the same plant species, but hemp
has only very small amounts of delta-9 tetrahydrocannabinol (THC), the psychoactive
component of marijuana.

Hemp can be used for both its seed and fibre but, so far, production and processing
in western Canada are focussed on the seed. According to Hanks, insufficient
seed supplies, especially certified organic seed, have recently slowed the growth
of the seed processing industry. However, he says Health Canada's preliminary
data for 2005 show the area licensed to grow hemp has more than doubled from
2004 to 2005. That increase could open the door to more seed processing, new
product development and greater sales.

Hemp seed products: a growing demand
Western Canada's hemp seed processing industry is made up of both large and
small operations. One of the largest is Hemp Oil Canada based in Ste. Agathe,
Manitoba, about 25 miles south of Winnipeg.

Shaun Crew started Hemp Oil Canada in 1998. After some early lean years, the
company's situation gradually turned around. As of the fall of 2005, it is starting
a million dollar expansion and relocation of its facilities.

"Our company, along with most of the hemp industry has been developing
a market that has a growing, insatiable demand," says Crew. "I think
most of the companies in existence right now, particularly the ones that have
been around for three or more years, are experiencing double-digit growth."

Today, Hemp Oil Canada produces a wide variety of wholesale and retail hemp
products, such as oil, hulled seeds, protein powder, flour, shampoos, creams
and lip balms. "We've had to develop new products using new processes and
then sell those into new markets. We didn't have a blueprint to follow; we had
to basically start from scratch," says Crew. Certified organic products
have been a major growth area for the company.

Crew believes the market potential for hemp seed products is excellent, especially
as health-conscious consumers learn more about hemp. According to Agriculture
and Agri-Food Canada's web site, hemp seed's nutritional characteristics include:
easily digestible complete protein, more essential fatty acids than any other
source, and a host of vitamins and minerals. Crew notes that hemp products are
already in salad dressings, spreads, ice cream, nutrition bars, cereal, spices,
beer, coffee and body care products. He says, "The opportunities are endless."

The US is a key market. "In Canada, we have an excellent opportunity with
the world's largest hemp market right beside us. They can buy all of our products,
but they can't grow it," says Crew, who is president of the CHTA and also
vice-president of the Hemp Industries Association in the US. He explains that
the US Drug Enforcement Agency does not distinguish between hemp and marijuana,
so hemp is not grown in the US. However, a US court ruled in February 2004 that
hemp seed, oil and fibre are exempt under the US Controlled Substances Act,
so Canada can export to the US.

If the US legalizes hemp production, western Canada could still have a competitive
edge. Crew says, "We are becoming known as a producer of quality hemp products.
That's because we've got excellent growing conditions and world-class farm producers
who can grow the seed, and we've paid a lot of attention to product development,
process development, quality and all those good things."

Hurdles for fibre processing
Hemp fibre has many qualities, like strength, durability and absorbency, that
make it very desirable for use in products ranging from textiles, paper and
animal bedding to insulation and car parts. However, fibre processing faces
some significant start-up hurdles.

Hanks explains, "Hemp has two kinds of fibre in it: a long, outer fibre
called the bast fibre, and a core fibre, which is more wood-like. For most advanced
applications you want to separate those two fibres. Doing that cheaply and effectively
is a real challenge. We don't have many technicians or scientists who are really
used to (processing hemp fibres or other agricultural fibre), and a lot of the
machinery is in Europe, so it has to be adapted and tried under Canadian conditions."

Another hurdle is the initial cost. Hanks says, "I could buy an oil press
and put it in my barn for maybe $10,000. A fibre processing plant might be several
million dollars."

No hemp fibre processing facilities are yet up and running on the prairies,
but Hanks says three companies are currently planning facilities, two in Manitoba
and one in Saskatchewan. Parkland Industrial Hemp Growers (PIHG) Co-operative
is the driving force behind a facility planned for Dauphin, about 150 kilometres
north of Brandon, in Manitoba's Parkland Area.

Joe Federowich, chairman of PIHG Co-operative, sees the long-term potential
for hemp fibre products as "absolutely huge. People don't realize how important
fibre is in our economy and as we all know, wood fibre is becoming a scarce
commodity worldwide."

PIHG Co-operative believes hemp could become a cash crop for the Parkland Area,
a region that is not suitable for growing high value crops like beans, corn
and soybeans. Federowich says, "The grain end of it has developed nicely.
It's getting larger and there seems to be some good value." A fibre processing
facility would allow farmers to also reap returns from the fibre.

So PIHG Co-operative took on the long, difficult task of raising funds and
tapping into technological expertise to develop the facility. The group's goal
is to raise $11 million, and so far it has raised about $6 million from governments
and private partners. The total cost is expected to be $15 million.

The facility will have a moderate capacity that can be met by farms within
about 100 miles of the plant because it is too costly to transport bulky hemp
fibres for longer distances. The facility's first product will likely be matting
for horticultural uses, but the long-range plan is to produce various items
including an alternative to fibreglass insulation.

Along with developing a new facility and new processes, PIHG Co-operative also
has an innovative business vision. It hopes to create a Canada-wide partnership
of these facilities that will share marketing and keep the crop's economic benefits
in the local community. Federowich says, "Farmers are used to simply combining
a crop and putting it on a truck to ship it. We can't afford to do that anymore.
I always thought my job was to feed people, but I'll starve to death trying
to feed people. We need to find other avenues." -30-



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