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. The first year approximately 6000 acres were 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. In 2005, 24,000 acres were planted and that number doubled in 2006. In 2006 I started working in the hemp industry and, over the next two years, I watched the farmers’ 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.
US farmers will benefit from the efforts of their 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 US market; as a result, US farmers will be positioned to take advantage of the developing market—but there’s more to it than putting seed in the ground. Here are some of the realities:
Legality—Although many are hopeful for 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. The legality of interstate commerce is still unclear. Corporations are slow to switch over to US-grown hemp, concerned about the repercussions and long-term availability. Those who are contracting need to make sure their buyer knows what is and isn’t lawful.
Pricing—Early US growers are being paid a premium for their novelty crop. To be competitive with 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. that of soybeans, which about break even and corn, which is currently generating a loss.
Demand—A small number of companies use large quantities of hemp seed at a time; the largest are Canadian. US 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 US 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.
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 flip side, 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.
After years of working with growers and seeing what can happen, I have a few tips for growers:
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 a glut of seed on the market 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 to be consumed—even years; 2) negotiate a higher price if it’s stored longer (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—Not all varietals are created equal. Besides the height of the plant, seed sizes and flavor vary. Finola is a popular varietal in Canada because it is short in stature, making it easier to harvest, and it produces high yields. The problems with Finola are small seed size, which makes 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 <20 ppm limit. The protocol for gluten testing can easily miss the wheat during sampling and lead to an erroneous test result. Customers are looking for gluten-free hemp; hemp seed growers need to keep wheat out of their fields.
Storage—Because the seed may be held in storage for a while, make sure you have a storage plan. When renting space for storage, the owner of the bin(s) must be licensed for hemp.
Cleaning—Hemp seed should be cleaned to 99.9% pure. Farmers contracting their acres for growing hemp need to find out how your seed will be used. 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.