By Erica McBride

Background

In 1994, Canada started issuing research licenses to grow industrial hemp on an experimental basis. Prompted by field results and lobbying by the agriculture and business communities, Canada passed legislation in 1998 that allowed for the full production of hemp for seed and seed oil. That first year, there were approximately 6,000 acres planted. Year two that number jumped to 35,000 driven by the promise of large-scale fiber plants; those plants didn’t materialize leaving many farmers to absorb the losses. To this day, you can drive through the plains of Manitoba and see bales of hemp straw sitting in some of the fields.

It took another six years for Canadian farmers to find enthusiasm for hemp again. Acres planted in 2005 were 24,000 and double that in 2006. It was 2006 when I started working in the hemp industry and over the next two years, I watched the farmer’s enthusiasm for hemp wane once again as the glut of seed produced that year sat in their bins. In 2006, the seed price was CAD$.65 and three years later, many were still selling off their inventory at the discounted price of CAD$.50/lb.

U.S. REALITY

U.S. farmers will benefit from the efforts of our neighbors to the north. Canadians have weathered the ups and downs as the seed market developed. They’ve bred new varietals, discovered the benefits of cold-milling protein powder, and perfected the dehulling process. Much of the seed produced in Canada is sold into the U.S.; as a result, U.S. farmers will be positioned to take advantage of the developing market but there’s more to it than putting the seed in the ground. Here are some of the realities:

Legality – although there are many who are hopeful of the Industrial Hemp Farming ACT (H.R.3530) passage this congressional session, until then industrial hemp is still illegal unless grown under an approved State authorized pilot research program. This provides a number of challenges for growers and buyers. There is a lack of clarity about the legality of interstate commerce. Corporations are slow to switch over to US-grown, concerned about the repercussions and long-term availability. If contracting, make sure your buyer knows what is and isn’t lawful.

Pricing – early U.S. growers are being paid a premium for their novelty crop. To be competitive with our neighbors to the north, seed prices will need to be in the $.65 – $.75/lb range. Using North Dakota as an example, this would result in an average profit per acre of approximately $400 vs. soybeans that are about breakeven and corn that is currently generating a loss.

Demand – there are a small number of companies that use large quantities of hemp seed at a time; the largest are Canadian. U.S. growers should expect to store their seed for some time and sell it in increments.

Processing capacity – this has been a limiting factor for the U.S. hemp seed market. Investors have been leery of establishing processing plants because of the uncertainty of seed availability and growers have been leery of growing without the infrastructure in place to process the seed. It’s a chicken-and-egg scenario.

Contracting acres – many Canadian growers will only grow on contract. In some cases this may mean taking a slightly discounted price however, it can also mean earning more if there ends up being a glut of seed on the market that drives prices down. A few things to consider if contracting – 1) establish an end date for taking delivery. Hemp isn’t like other commodity crops; it can take a considerable amount of time for it to be consumed – even years; 2) negotiate a higher price the longer it’s stored (e.g; increase a couple of cents per quarter); 3) discuss what happens if the seed is not taken by the delivery deadline and micro counts make the seed unusable.

Varietals – all varietals are not created equal. Besides the height of the plant, seed sizes and flavor vary. Finola is a popular varietal in Canada as it is short in stature, making it easier to harvest, and produces high yields. The problems with Finola are the small seed size, making it difficult to produce a clean hemp nut, and a bitter aftertaste. Customers are beginning to reject this seed as an option. Make sure you understand the market you want to sell into before you select the varietal to grow.

Gluten – hemp is naturally gluten-free but a recent crack-down on product claims has resulted in the removal of “gluten-free” on a number of hemp products due to wheat contamination. It takes just a couple of kernels of wheat in a pound of hemp seed to exceed the <20ppm limit. The protocol for gluten testing can easily miss the wheat during sampling and produce an erroneous test result. Customers are looking for gluten-free hemp; hemp seed growers need to keep wheat out of their fields.

Storage – because hemp has a high oil content, sitting in hot bins for long periods of time will result in rancidity and discoloration of the seed. On the flipside, hemp loves a good freeze. It’s best to clean the seed before it’s stored to keep moisture and microbial counts down; we prefer moisture between 5% and 8%. Buyers will likely test the seed prior to purchase for standard plate count, yeast, mold, salmonella, and e Coli. If you need to rent space for storage, the owner of the bin(s) must be licensed for hemp.

Cleaning – hemp seed should be cleaned to 99.9% pure. If your acres are contracted, find out how your seed will be utilized. If pressed for oil, sizing will not be necessary during the cleaning process but likely required if being used for hemp nut. Sizing will reduce the net yield.

Cathy Hearn
Vice Chair, National Hemp Association

Owner/President
Healthy Seeds & Nuts, LLC

www.healthyseedsandnuts.com
www.hemp-connect.net

Read this full story…..: Hemp Seed Market in the U.S: The Challenges and Realities