Pubdate: Sat, 29 Aug 1998 Source: Financial Post Contact: letters@finpost.com Author: Ian McKinnon

BRINGING IN THE HEMP

First there was hemp, hope and hype -- now comes the harvest.

Canada's first legal reaping of non-hallucinogenic cannabis in 60 years is just underway and will continue through September.

However, it will be a couple of years before the agricultural community finds out whether hemp is the canola of its generation, reshaping the fundamentals of the industry.

It's almost a chicken-and-egg propositions for true believers trying to develop hemp as a legitimate alternative crop to oilseeds and cereals, says Peter Brown, senior manager of agriculture for Bank of Montreal.

Farmers won't grow the crop unless they are confident of demand, and buyers won't alter manufacturing processes and equipment unless they are assured of supply and quality. "I think there will be a tug and pull for two, three of four years until volumes get up to a point that people will commit to that fibre," he says.

If supply and demand cna be balanced, hemp should provide a reasonable return and be competitive with other alternative crops, including canary seed, peas and lentils, says Brown from his Toronto office.

Far from Bay Street, in the picturesque valley that cradles Dauphin, Man., Don Dewar hopes farmers will gamble on hemp -- and use his seeds. The owner of Dewar Seed Farms Ltd. has dedicated 16 hectares to hemp because all of the seed growing in Canada today is imported from Europe. However, generous European Union subsidies for growing hemp have driven up the price there. That and rising transportation costs are creating a niche for Dewar, who raises a variety of seeds on his 1,400 ha farm.

Dewar, who was convinced by his son Mark to try the crop, has encountered a few obstacles leading up to this virgin harvest: a late and time-consuming process to obtain a licence, poor germination and slow initial growth.

His leafy two-metre-tall plants form a canopy and scent the air with a fragrence some describe as minty and others liken to that of its illegal cousin.

The next few weeks will be a challenge as the tries to use conventional equipment to harvest a distinctly unconventional crop. For instance, hemp stalks gum up the works in a regular combine. Alternative settings and extra sharp blades are being tested.

Drought and grasshoppers are reducing the prospects for Jerome Scory, who works 880 ha with his father, Ivan, near Oyen in east-central Alberta. He planted 4 ha to gain experience collecting seed and fibre, but a losing basttle with Mother Nature wiped out the seed side of the trial. He intends to try again next year.

The experiment, partially funded by the Alberta Department of Agriculture, attracted a fair bit of attention in the small town.

"It was quite a deal, quite the snicker factor," Scory relates with a laugh. "There was a well beaten path to the field. If it wasn't for the signs (describing the test and its sponsors), I'm sure people would have walked off with leaves stuffed in their pockets."

Showing a farmer's typical tenacity, he is holding off on his harvest, hoping additional rain will prompt renewed growth.

There are still many unknowns when it comes to raising hemp, says Stan Blade, a scientist with Alberta's agriculture department.

This is the fourth year he and his colleagues have conducted trials on planting density, fertilizer and varietal suitability for Canadian conditions. This work, which he calls standard agronomic research, hasn't solved the key issue: how to ease the tradeoff between seed and fibre production.

Farmers interested in seed, for growing or for crushing into vegetable oil with an attractive essential fatty acid profile, have different timetables from fibre seekers. The best fibre comes about six weeks before optimal seed production. "Farmers are still hoping they can get a dual-purpose seed where they can get bothe seed and fibre." says Blade. "I think the data indicates the fibre quality declines as you wait."

Despite the uncertainties, interest behind the farm gate is high. Health Canada has issued 262 licences to individuals, companies and co-operatives to plant 2,500 ha. Commercial cultivation is taking place in every province except Prince Edward Island and Newfoundland, with Manitoba and Ontario receiving 96 and 98 permits respectively.

Hemp is a strain of cannabis low in delta 9-tetrahydrocannabinol, the chemical that gives marijuana its high. To keep out drug traffickers, licence holders have to provide geographic co-ordinates of their fields, which can be used by police and government officials for inspection. Mandatory testing is required and hemp that contains more than 0.3% THC is subject to seizure and destruction.

Some of the farmers' interest sprouted from the missionary zeal of hemp enthusiasts, who tout the crop as a miracle plant that grows like a weed, dosn't need costly herbicide and fertilizer inputs, and has almost as many end uses as duct tape.

Gordon Scheifele is quashing some of these claims. The University of Guelph researcher is spending $200,000 this year, with much of the money coming from the provincial government, to study the suitability of hemp for Northern Ontario. From his station in Thunder Bay, he supervises 28 plots, of 2 ha each, on farms in six distinct micro-climates scattered across the province.

A well-prepared, moist and fertilized seed bed is required by the plant, which doesn't fare well in compacted or poorly drained soil, he says. Comparing hemp to a young child who hasn't learned to hide emotions, he says farmers learn quickly how their plants are doing. "It's an extremely sensitive and unforgiving crop."

Grasshoppers love hemp, which is also susceptible to sclerotinia, a disease that effects canola and soybeans, he says.

Another big obstacle to hemp commercialization is the cost of transportation. Brown says shipping the light, but bulky, fibres further than 80 km is uneconomic. A series of small processing plants across Canada is one possible solution.

He says hemp needs to capture only a small portion of existing markets - -- such as clothing, carpet or pressed board -- to create strong, sustainable demand. The wealth of opportunities is attracting entrepreneurs and should alleviate concerns about finding buyers, he says.

California-based Consolidated Growers & Processors Inc. is eager to fill the gap between growers and users. the two-year-old public company, with offices in Winnipeg, the U.S. and Europe, intends to build at least one plant in Canada, perhaps as many as three, each worth $10 million to $20 million and employing 30 or more people.

General manager Douglas Campbell says CGP's committment to help farmers master the new crop is evident from the more than $250,000 it spent to import a specialized Dutch combine.

While not wishing to hype hemp, he says major players in the automotive, pulp and building sectors have serious interest in incorporating it into their products.

Global competition means everyone is looking for an edge, he says. "And in a whole series of areas, hemp looks like it could be lighter, or stronger, or cheaper than existing parts of the manufacturing chain."

The Canadian hemp industry is in its infancy, but he predicts over the next few years it will make increasingly confident steps toward becoming and established option for farmers.

"This kid is standing up and just left the coffee table and is going somewhere," says Campbell. "It's not going in a straight line, but it's moving."

Producers seeking to develop markets should look locally first, says Jean Laprise, president of Kenex Ltd., near Chatham, Ont. The private firm is pouring millions of dollars into developing diversified hemp seed, grain and fibre operations. Laprise says co-operation between growers and processors is essential to ensure the yield coming off the land is of the quality and and form to suit users.

"We're at the birth of a new industry and there has to be some very close relationships between growers and processing plants," he says. "Buyers, like in any other industry, are very concerned with quality, consistency and the continuity of supply."

Kenex has contracted to buy about 800 ha of hemp from southern Alberta farmers this year with hopes of doubling that in 1999. It has a seed division that researches, grows and imports seed, a press operation to extract oil, a hulling line so the hemp nut can be sold for cooking and several fibre enterprises, including a material that can be used by automotive makers for door panels. Building on its proximity to the manufacturing might of Detroit and a huge portion of the U.S. and Canadian population, Kenex is conducting research on value-added products to stay ahead of the competition.

As well as being president, Laprise is also a contract grower for Kenex on his 600 ha Laprise farms Ltd. and therefore understands both sides of the new industry. Like many others, he would like to see federal regulations streamlined to ease cultivation. But generally, he is optimistic hemp is here to stay.

"I think if there are enough people doing a good job on marketing, there will be good opportunities for people in the agricultural community. Is it a get-rich-quick for every farmer in Canada? No way, it doesn't work like that."

For farmers hard pressed by the slump in commodity prices, a reasonable return will be reward enough.