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Hemp area may stall in 2018

Area saw a big jump last year, but growers are facing more competition from China and Eastern Europe

"I think hemp is well-suited to the organic market in the fact that it is a very fast, aggressive-growing plant that can outcompete weeds. But at the same time, it is a high nutrient user, which can make it a challenge to grow it in a tight rotation.” – Jeff Kostuik, 
Hemp Production Services

Canadian commercial hemp production saw a big jump in 2017. Health Canada, the federal agency which oversees licensing, reports almost 140,000 acres were planted with industrial hemp, an 80 per cent increase from 75,000 acres in 2016.

Kim Shukla, executive director of the Canadian Hemp Trade Alliance, says the increase reflects the growth since hemp production was approved by Canadian regulators in 1998.

“We’ve seen years where there have been some market corrections that have taken place, but overall there’s been a steady upward trend,” Shukla says.

Most of Canada’s industrial hemp is grown in the three Prairie provinces. According to Health Canada figures, Saskatchewan led with more than 56,000 acres in 2017, followed by Alberta with almost 45,000 acres and Manitoba with 30,000.

Elsewhere, under 7,000 acres of industrial hemp were planted in Ontario and Quebec in 2017, while the Maritime provinces planted just over 750 acres, and just under 250 acres in B.C.

Shukla estimates there are now between 300 and 500 farmers growing hemp commercially in Canada. She says one reason for the growth in hemp production in this country is that “more and more farmers are understanding that there’s a good economic return in the crop. It also offers diversity in their planting, another cropping alternative.”

Jeff Kostuik, director of operations for central Canada, the U.S. and international for Saskatoon-based Hemp Production Services, the largest exporter of Canadian hemp food products to Asia, says thanks in part to new crop genetics, Canadian growers have enjoyed rising yields in recent years. “Because there’s been very good economic return on hemp,” Kostuik says, “we now have some of Canada’s best farmers growing it and they’re treating it as a high-value crop.”

Kostuik notes that average hemp yields now range between 800 and 1,000 pounds per acre in dryland farming areas. He adds that in irrigated areas, such as in southern Alberta, hemp yields can rise to almost double that.

Most contracted for seed

Canadian hemp is cultivated almost exclusively for its seed, which is used to produce hulled hemp seeds, hemp oils and hemp protein powders. Currently, only a small fraction goes into the production of hemp fibre used for such things as “hempcrete,” a biocomposite material used for construction and insulation.

“Our business in Canada has been built primarily on hemp as a food product. That’s just the way our industry started from years ago,” says Clarence Shwaluk, director of farm operations for Fresh Hemp Foods Ltd.

Shwaluk says about a dozen Canadian companies process hemp for food products. He says Fresh Hemp Foods, which is the parent company for Manitoba Harvest Hemp Foods and Hemp Oil Canada, is the largest hemp food processor in Canada. It relies solely on contract growers for its raw material.

Fresh Hemp Foods’ Hemp Oil Canada facility in Ste. Agathe, Man. photo: Fresh Hemp Foods Ltd.

“We do go east a little bit but the majority of what we contract is cropped in the Prairies,” Shwaluk says.

Shukla says there is some hemp grown within Canada for the open market. “If I were to guess, I would say about five per cent. There is a risk entailed in that because then the producer needs to find his own end market.”

Kostuik says on-farm contract prices for hemp seed generally ranged from $0.76 to $0.85 per pound in 2017. He notes that contract prices were higher for organically produced hemp seed, which is a growing segment of the market, ranging from $1.80 to $2 per pound in 2017.

Prices seen lower in 2018

Both Kostuik and Shwaluk anticipate on-farm contract prices set by Canadian hemp processors will be down in 2018 after the bumper crop of 2017.

“That was a bit of a surprise to me,” says Shwaluk. “I didn’t expect (acreage) numbers that high, but we are continuing as an industry to try to balance the supply and demand.”

As of early December, Fresh Hemp Foods had not yet set its contract prices for 2018. According to Shwaluk, the company was still assessing a number of recent trends, including low-priced whole hemp seed offered by China.

Harvested hemp grain. photo: Canadian Hemp Trade Alliance

“We are also seeing production in the United States under the Industrial Hemp Pilot Program with prices well below what our Canadian industry prices have been,” he says. “Although Fresh Hemp Foods has no intentions of sourcing production outside of our Canadian contracts, the lower international prices are making customers consider their options for supply. The Canadian industry is in a long supply position in general, so the combination of supply and price factors will have an impact on our local markets. It is very likely that contract prices will drop, but to what extent is still uncertain.”

Kostuik notes that the emergence of new players in the global hemp market is having a substantial impact on prices. He says China and some Eastern European countries traditionally focused on the hemp fibre market but are now turning their attention to hemp food. They can charge lower prices due to lower costs of production, Kostuik adds, and that’s “put a lot of pressure on the Canadian price also.”

Shukla says Canada’s hemp industry relies heavily on exports, with only about 10 per cent of Canadian hemp utilized domestically. “Exports are absolutely integral to the market. Currently, the United States is our largest importer and we’re reliant on that marketplace,” she says.

Statistics Canada figures show that of the approximately 64 million kilograms of Canadian hemp products exported in 2016, more than 36 million went to the U.S.

Shukla notes that a key objective of the Canadian Hemp Trade Alliance is to help broaden Canada’s export markets. Encouraging developments include the recent approvals of hemp food products in Australia and New Zealand. “So that’s a new market opportunity for us.”

The industry also sees untapped potential in the organic hemp food market. Kostuik, who estimates that organic accounts for around eight to 10 per cent of hemp food production in Canada, sees plenty of room for growth.

“I think hemp is well-suited to the organic market in the fact that it is a very fast, aggressive-growing plant that can outcompete weeds. But at the same time, it is a high nutrient user, which can make it a challenge to grow it in a tight rotation,” Kostuik says.

Fibre future

The hemp fibre market is another area that holds some promise. Shukla says some dual-purpose varieties, which can be used to produce both hemp food grain and hemp fibre for commercial purposes, are being grown in Canada, “but that’s a very niche and experimental market at this point in time.”

Kostuik points to the recent openings of two hemp-fibre processing facilities in the Parkland region of Manitoba as a sign that things are changing. Both the Plains Hemp and Hemp Sense plants are located near Gilbert Plains, Man.

Shwaluk feels hemp fibre production will be an important part of Canada’s hemp industry in the future. “We don’t have a large fibre-processing industry yet (but) I think that will come with time.”

Shwaluk and Kostuik both say that a strong hemp fibre market would enable Canadian hemp producers to get more value from their crop.

Hemp hurds like these are created from the woody inner portion of the hemp stalk and are used in hemp fibre applications. photo: Canadian Hemp Trade Alliance

“The grain has been moving the industry forward, but as fibre becomes more evident across the Prairies or across Canada, that’s going to provide another revenue stream,” says Kostuik.

Another potential revenue source for Canadian hemp producers is a cannabinoid known as CBD. The chemical is being studied as a treatment for numerous medical conditions and does not contain THC, which produces the mentally intoxicating effects associated with cannabis.

Shukla says right now, it is illegal for CBD to be harvested or extracted from industrial hemp in Canada. But she says this could change when the federal government unveils new regulations for industrial hemp (which contain very low concentrations of THC) as part of its rollout of Bill C-45, Canada’s new cannabis law.

Shukla says the legalization of CBD extraction from hemp would provide growers with an excellent opportunity to utilize their entire crop.

Shawluk agrees. “I’ve seen some of the research on what CBD can potentially do, and it does show some promise of being a very good market.”

“Having whole plant usage will create more opportunities for farms to harvest and collect parts of the plants that were previously prohibited,” Shawluk says.“It creates some new uses for industrial hemp, and I think it would only be good for our growers.”

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