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Hemp acres in recovery

Between market volatility and the fate of new, emerging markets, Canada’s hemp industry has been in a state of flux in recent years

Three years ago hemp was said to be taking off, but then acres started falling.

Three years ago, hemp looked like it was getting set for a rocket ride.

Riding a contact high from the frenzy of attention around cannabis legalization, it looked like new markets ranging from health and wellness nutraceuticals to sustainable building materials were about to take off.

That was good news for a crop that, at least in Manitoba, was at the time being predominantly grown for grain.

Why it matters: Hemp looked on the verge of major diversification three years ago. Since then, some of those opportunities have panned out while others have failed to materialize.

As cannabis legalization loomed, much of the regulatory red tape surrounding industrial hemp suddenly looked unnecessary. Many hoped that would pave the way to using some hemp byproduct in the nutraceutical market.

CBD, or cannabidiol — a chemical found in the leaves and flowers of the hemp plant and marketed as a health and wellness product — was creating enormous excitement in the industry.

CB-Didn’t

While legal doors have, in fact, opened for CBD production in recent years, the reality has proven much more complicated.

The concept of CBD production was a “jolt” to the industry, according to Lyall Bates, president of Hemp Sense.

The Gilbert Plains company, which markets itself as a rare example of a facility seeking to use every bit of the hemp plant, is among those that initially hoped to cash in on CBD. The company holds a laundry list of patents in regards to hemp-processing technologies, among them, a process for pelletizing buds and leaves.

The company, which initially got its start in hemp fibre, built a niche in absorbent products like animal bedding or cat litter, all products produced from less refined hemp coming from the full stalk rather than more expensive decortication, before expanding. Today, the company’s product list includes lawn-care products, animal feed and protein supplement, herbal tea and hemp hearts.

Fall 2018 was technically the first hemp crop that could have been harvested for CBD, following right on the heels of legalization.

By 2019, however, Bates said, misinformation around CBD and the CBD market was rampant. Producers were growing hemp for CBD on contract, and being told they could make ridiculous profit margins on a per-acre basis. Investments were flowing in from companies wanting a piece of the pie. Companies started setting up CBD facilities, only for the majority to run out of money or otherwise fail to launch.

“It was not easy to set up extraction equipment,” Bates said. “Health Canada was very particular that they had to set up right and everything had to be passed, so it took a long time for a lot of companies to set up.”

Lyall Bates and Keith Watson (left to right) display a sample of the hemp fibre produced by Hemp Sense during a 2018 Canadian Hemp Trade Alliance conference in Winnipeg. photo: Alexis Stockford

Meanwhile, on the consumer side, hype was also out in full force, with health and wellness streams pitching CBD oil for everything from anxiety to insomnia to epilepsy and acne.

Bates estimates around 90 per cent of his calls in 2019 oriented around CBD. By mid-2020, however, demand had switched back to fibre products.

At the farm gate, producers also didn’t know how to bale hemp for CBD, he said, and bales were put up with silage wrap or as normal round bales and often lost CBD strength. Added to that, he said, farmers ran into issues with chemical use or pests that rendered the resulting oil unusable.

Processors too, had a learning curve when it came to the best way to harvest, he noted.

“It turned out that people found out the extraction was too expensive, so that biomass was actually not worth extracting,” he said. “A lot of farmers got caught with not getting paid or just the biomass wasn’t worth selling.”

Right now, Bates said, their own CBD operations are on hold.

“It just went from the hottest market to you hardly even hear about it now,” he said. “It’s being done more on a small scale where people are just hand-planting it and hand-picking it. We’re waiting to see where that market’s going to go and how it’s going to work out.”

Bates still maintains, however, that there is a market for CBD.

Fibre frenzy

At the same time, more and more discussion was looking at innovative uses for hemp fibre.

For Hemp Sense, at least, some of the excitement around this segment survives.

As in 2018, there is still strong interest in synergy, in growing a single field of hemp that can then be turned to multiple markets.

Equipment used in the fibre-processing process at Hemp Sense in Gilbert Plains. photo: Hemp Sense

The grain market is well established, Kory Lulashnyk, general manager with the Parkland Industrial Hemp Growers, said, but he argues that there could be more opportunities for synergy with fibre.

“I think we’re still working on it,” he said. “The fibre market is pretty small at this point and not developed far enough yet.”

Bates, meanwhile, says interest in hemp fibre is “as strong as it’s ever been.”

“We have a lot of companies approaching us (for) testing the products for building materials,” he said, noting that, for example, the company is currently working to develop hemp plyboard.

His company is, however, one of the few successful and established hemp fibre plants in Canada, joining facilities like Alberta’s Innotech plant.

“I think that’s the problem,” Bates said. “There are so many startup companies that don’t end up getting up and going. We’re getting calls right across Canada, people wanting to move their bales. We turn down lots of inventory.”

Holding steady

Grain has, by comparison, been the steady heart of the hemp industry.

Clarence Shwaluk, director of farm operations with Fresh Hemp Foods, said the company balanced its inventory shortly after farmer frustration with slow deliveries and price reductions hit the news.

The hemp market over the last three years has been “somewhat stable and managing down some of the surplus that’s out there,” he said, noting that the company has been working closely with its marketing and sales groups to better forecast needs and manage contracted acres.

A look inside the seed room at the Hemp Sense facility in Gilbert Plains. photo: Hemp Sense

The company contracted around 30,000 to 35,000 acres this year, similar to 2020.

Shwaluk does expect some of those acres will be lost to plow-down, due to drought conditions, although hemp plots showed decent drought resilience this year and trials showed aggressive rooting as plants sought out moisture. They are still expecting lower yields, he added, although the extent of that hit is yet to be determined.

“I think we’re in a pretty good balance right now,” he said.

Lulashnyk also says surplus inventory from 2017 and 2018 largely worked its way out by this past spring.

Prices

The depressed prices coming out of hemp’s market volatility have also seen a boost this year, Lulashnyk noted, riding the wave as other commodity prices jumped significantly.

“The industrial hemp is a bit behind that curve,” he said. “It was a bit of a challenge to contract acres. There was a need to contract acres this spring, but growers were getting behind wheat and canola and other crops as their commodity prices were significantly higher.”

Fresh Hemp Foods also had to “chase up the commodity price” for their contracts coming into the season, Shwaluk said.

Given the trend in commodity prices since, he doesn’t expect that to change.

“As a specialty crop, we know that we need to offer a premium to growers to take advantage of our markets and some of the risks that they take on in producing a premium crop,” he said. “We’re looking at making sure that we have pricing that is going to satisfy what growers expect from this crop.”

About the author

Reporter

Alexis Stockford

Alexis Stockford is a journalist and photographer with the Manitoba Co-operator. She previously reported with the Morden Times and was news editor of  campus newspaper, The Omega, at Thompson Rivers University in Kamloops, BC. She grew up on a mixed farm near Miami, Man.

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