Industrial Hemp Enterprise

 
 
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 Industry Highlights

Hemp (Cannabis sativa L) has been grown many centuries for the fibre produced in its stems and for hemp seed, a source of vegetable oil.1

Hemp and marijuana are the same genus and species (Cannabis sativa). Hemp is the fibre producing strain while marijuana is the narcotic strain of Cannabis.

In all cultivars of marijuana and most cultivars of hemp there's a drug known as delta-9 tetrahydrocannabinol (THC) that's produced by the plant. A THC level of 0.3 per cent has been adopted in Canada as the concentration that separates non-narcotic strains from narcotic strains.2

The commercial production of low-THC fibre hemp is permitted in Canada under licenses and permits issued by Health Canada.3

Numerous regulations are in place to ensure that growers grow only low-THC hemp. These provisions restrict the sources of hemp seed and require official testing of THC levels.4

Industrial hemp is low-THC hemp grown for the strong fibres in the stems, the seeds and the oil in the seeds. Hemp fibre and hemp seed are used in the production of a wide range of goods including food products, personal care products, animal bedding, textiles and structural materials.5

The fibres of industrial hemp are made up of the bast fibres. They are strong, woody fibres used in the manufacturing of ropes and fabric. The hurds, which are less fibrous, are used in the manufacturing of paper products and composite building materials.

Hemp was grown on Alberta research plots in 1995, 1996 and 1997. Beginning in 1998, hemp was grown in Alberta under both research and commercial licences.

Table No. 1 presents licenced acres of hemp in Canada for both 1998 and 1999. The actual seeded acres for 1999 may be less than the total licenced acres as many licences were received late in the spring.

Table No. 1 Licenced Acres of Hemp in Canada

19981999
British Columbia178556
Alberta941862
Saskatchewan6507640
Manitoba149721950
Ontario28732523
Quebec59212
New Brunswick52910
Nova Scotia47312
Prince Edward Island010
Canada592735075
Obtained from Special Crops Newsletter, October 1999, AAFRD; original source Health Canada.

World production of hemp fibre and hemp seed declined between 1987 to 1997, largely due to decreased production in the traditional producing countries of Eastern Europe. The 1997 estimates of hemp fibre (96,021 tonnes) and hemp seed (34,677 tonnes) are less than half the production estimates for 1987.6

The majority of hemp production is used domestically. Because only small amounts of hemp are traded between countries, world prices are very sensitive to changes in the supply available to the global market.7

Hemp markets could benefit from increased consumer demands for biodegradable products, health foods, and "tree free" paper. However, at this time, increased consumer interest in purchasing natural products hasn't reversed the decline in world production of hemp.

Hemp can be grown in many areas of Alberta and there's considerable interest in this crop as a diversification opportunity. This interest in hemp has produced considerable attention which may lead to unrealistic expectations for this crop.

Potential hemp growers must carefully assess the viability of their proposed operation and use realistic expectations for markets, prices, yields and costs.

The business potential for commercial hemp production is uncertain due to the following factors:
  • There's limited experience in growing this crop and new growers will have to gain their experience by growing the crop.
  • Hemp hasn't been grown commercially in Canada since the 1930s and there are no established markets for raw hemp material. Development of markets for raw hemp material is expected to take place, but this will be dependent on the acceptance of hemp by consumers and processors.
  • There are many low cost producers including China, India, Hungary, Poland and Romania. These countries dominate world production.
  • Industrial hemp faces competition from other natural fibre (cotton) and oil seeds (soybeans).
  • Currently, Canada lacks a processing infrastructure and competitive processing technology.
Regulatory Basics

Hemp was a popular crop in Eastern and Central Canada in the 1930s. In 1938 the Opium and Narcotics Act made the cultivation of Cannabis sativa L illegal.8

The Controlled Drug and Substances Act (CDSA) came into effect on May 14, 1997. The Industrial Hemp Regulations (to the CDSA) came into effect on March 12, 1998 and permitted the commercial production of industrial (low THC) hemp in Canada under licences and authorizations issued by Health Canada.

Health Canada, through The Industrial Hemp Regulations, controls the importation, production, processing, possession, sale, transportation, delivery and offering for sale of industrial hemp.9

Detailed information, documents and application forms are available from Health Canada's Internet site.

Specific regulations include:
  • Individuals or companies must be licenced in order to import, grow, export, process, and sell hemp seed or hemp products.
  • Health Canada will not licence cultivation of less than 10 acres except in special circumstances such as breeder seed plots.
  • Growers must give GPS (Global Positioning System) co-ordinates of the location where they plan to grow hemp.10
  • The growing location must not be less than one kilometer from places frequented by persons less than 18 years of age (e.g. schools).
  • Beginning January 1, 2000, only pedigree seeds on the OECD (Organization for Economic Cooperation and Development) list of approved varieties may be planted.
  • Growers will be required to maintain records of production and distribution.
  • Growers are required to have a sample tested by an approved lab or approved sampler to determine the THC content under their conditions.
  • Licences and audit trails will be required for all processing activities.
  • Growers must have a background check completed prior to obtaining a licence.11
  • The regulatory requirements for hemp can be expected to continually evolve as production increases and processing grows. A review of the current regulations is scheduled to take place in 2000.
Marketing Basics

Hemp fibre and hemp seed are used by processors to produce hemp products for numerous niche markets. The viability of hemp as an agricultural crop will be determined by the development of these markets, as well as the development of a processing infrastructure to support these markets.

The markets for hemp products are new and developing. The business potential of commercial hemp production remains uncertain while markets for hemp products evolve. Potential growers of industrial hemp in Alberta need to research the markets for hemp products and the markets for raw hemp.

Hemp growers must be prepared to undertake on-going market research in order to:
  • identify the markets for hemp products
  • assess consumer demand for hemp products
  • assess the growth potential for hemp based products
  • understand the technical requirements for different hemp products
  • forecast the expected size and structure of the markets
  • Industrial hemp can provide a high quality fibre and high quality oil for use in a wide range of applications.
Generally, the demand for hemp products is expected to benefit from a growing demand for products that are environmentally and economically sustainable.

The following new and emerging hemp product markets have been identified in a recent marketing study of industrial hemp.12

Oil and health food markets
Hemp oil provides a balanced source of essential fatty acids. This composition provides benefits and penetrating qualities that are in demand in health food and body-care markets.

Hemp oil products are competitive with other high end products made from natural oils, and may have an advantage in the form of longer shelf life.13

North American consumption of hemp oil products such as health foods, shampoos, cosmetics and skin care products is unknown. Increased demand for these products depends on growing consumer desire for new health products, increased environmental awareness and rising disposable income levels.

Hemp oil is also used to produce industrial oils for the production of paints, wood sealants, inks and lubricating oils. Hemp oil improves the ability of paints, sealant and inks to penetrate surfaces. As well, hemp oil contains 20 per cent linolenic acid. This has strong drying properties and contributes to high quality products.

Linseed oil is the main ingredient in industrial oils that require strong drying properties. Hemp oil would have to be price competitive with linseed oil in order to gain market share.

Most hemp oil originates from the United States where it's pressed from sterilized Asian, Indian or European hemp seed.14 Canadian crushing and processing plants are being considered and some already exist.

Alberta growers would need to develop business relationships with these processors and provide a reliable supply of high quality hemp seed.

Contracts with a processing plant ensure market access to growers who have proven they can produce a quality product and deliver on time.

Organic hemp seed may give certified growers access to processor markets or consumer markets where there's a demand for organic products. Organic hemp will have less competition from hemp seed produced in China and India.

Textiles-woven and knitted such as draperies, carpets, apparel, etc.
Woven and knitted hemp textiles are used in the production of clothing, canvas, rugs and upholstery. Manufacturers claim hemp fibres are strong and wear better than other natural or synthetic fibres.

The production of hemp into textiles and clothing is limited in North America due to a lack of equipment and processing technology. Currently, most production of hemp textiles takes place in China, Romania, Russia and Ukraine,15 where wages are low.

There are few domestic processors of hemp textiles due to the price competition from imported hemp textiles, synthetic fibres and other natural fibres.

The demand for hemp textiles and clothing is limited by its high price. Currently, the production of hemp apparel in Canada is a cottage scale industry.

Increased consumer demand for hemp textiles and clothing would require a greater number of consumers willing to pay the higher price for hemp apparel. Significantly increased demand for hemp textiles and clothing could provide manufacturers with an incentive to use new, specialized equipment.

Hemp fibre may have greater potential in the production of canvas, rugs and upholstery as the fibre is compatible with the high-speed equipment used in these industries. Growers seeking access to this market need to ensure long fibres by preventing the breaking of stalks and retting off the outside tissue (bark) that binds the fibre portion of the plant and the non-fibre portion.

Textiles-molded or pressed
Molded or pressed hemp textiles are used to make a wide range of automotive parts and accessories. This includes headliners, rear window shelving, door panels, trunk liners and air bag parts. These hemp products are lighter, more fire resistant and recyclable.

The market for molded or pressed hemp automotive products may present a significant opportunity to the industrial hemp industry. The processing technology is available, but needs to be located close to automobile plants. This location factor will limit Alberta growers from taking advantage of this opportunity.

Pulp and paper
A wide range of paper products can be made from industrial hemp. Hemp fibres have superior strength and length to wood fibres, but higher processing costs for hemp result in hemp pulp that is considerably higher priced than wood pulp. This cost differential, together with technical obstacles, limits the use of industrial hemp in Canadian pulp and paper mills.

The fibre characteristics of hemp are suited for use in specialty papers such as food wrapping, cigarette papers, tea bags, coffee filters and currencies. These fibre characteristics are similar to flax straw, which has the largest share of the specialty paper market. In order to gain a greater share of this market, industrial hemp has to compete with flax straw and jute.

Industrial hemp is also used in the production of specialty paper sold in high value niche markets. This specialty paper may benefit from consumer demand for "tree-free" paper and new technology in pulp making.

Building materials
Industrial hemp can be used in the production of a number of composite building materials. This market is at the developmental stage, but Alberta is well positioned as it has invested in research to study the manufacturing and use of panel boards made from industrial hemp.

A number of fiberboard plants have recently been established in Alberta and other parts of Western Canada. If price allows, these plants may consider using hemp stalk as an ingredient in their production.

Alcoholic beverages
Hemp seed has been used in the production of beer by small specialty breweries. The market for hemp beer is expected to remain a small specialty market, with limited growth potential.

Livestock feed
Hemp seed can be processed as a livestock feed, but before a feed market can develop extensive research and feeding trials are required. Hemp seed would also have to be price competitive with other livestock feed.

Livestock bedding
Hemp hurds can be processed into livestock bedding that's both absorbent and biodegradable. It's also reported to be price competitive with other bedding materials such as wood chips and wheat straw. The hurds can be produced as a by-product of other higher value products. This can contribute to the economic viability of growing the crop.

In addition to the cattle industry, Alberta's large horse population may offer some market potential for hemp livestock bedding. However, in order for livestock producers to consider and use hemp bedding, it must be readily available at a price competitive with sawdust and straw.

Marketing factors
The existing markets for hemp product tend to be small scale (niche markets), offering limited amounts of high valued goods. Marketing is a continuous activity and growers need to make their own assessment of whether these markets will remain the same or grow over time. Key factors to monitor are:
  • changes in the level of consumer demand for the hemp product
  • the profitability and scale of processing required to serve these markets
  • the potential for growth through an increase in the number of domestic processors.
  • competition from alternative crops, imported hemp fibre and hemp seed
Price information for hemp isn't readily available and may be difficult to collect. Growers need to qualify all price information as either prices for actual transactions, asking prices or bid prices. Actual transaction prices are the most meaningful information, but also be the most difficult to come by.

The price a grower receives for his/her crop in a particular year is influenced by the following factors:
  • changes in consumer demand for hemp products
  • the supply and demand of raw hemp to processors as hemp markets tend to be limited in size and new production could increase supply to the point where it exceeds demand, resulting in drastic price declines
  • the level of imports and exports of hemp products or partially processed hemp products
  • the quality of the hemp product as buyers have specific requirements and price is the most effective tool for expressing those requirements
There is no existing market infrastructure for hemp and growers need to develop their own marketing channels to gain access to markets. Generally, providing a reliable supply of high quality hemp is the best way to gain access to a market.

Hemp growers should apply a global perspective to the management of their business, particularly in marketing. Many of the hemp product markets discussed are commercially viable industries in Europe. As the North American markets develop, producers have to be competitive in the world market in terms of price and product quality.

New hemp growers must avoid focusing on production and ignoring the marketing side of the business. Individuals considering investing in hemp production need to ask themselves whether they are prepared to do all the tasks necessary to market their product.

The critical marketing activities for the manager of a hemp enterprise are to monitor the development of markets for hemp products and determine how they impact on the market for raw hemp.

Production Basics

New entrants to hemp production in Alberta will need to carefully assess:
  • the risks associated with producing the crop
  • their ability to produce a product that meets the requirements of buyers
  • the processing requirements needed to meet the requirements of buyers
  • their ability to achieve a cost of production that is competitive as the industry evolves
  • their willingness to deal with the regulatory requirements of growing hemp
Growers may have difficulty getting answers to specific production questions at this time, but hemp production in Alberta is being researched on an ongoing basis. Growers also need to do their own on-farm research to determine the growing techniques that give desired results.

The Cultivation of Hemp, by Dr. I. Bosca and M. Karus published by Hemptech and Hemp Horizons, by John W. Roulac published by Chelsea Green Publishing provide detailed production information for growers.

Production practices, particularly harvesting and processing, are dependent on the market the grower is producing for. Generally, growers can focus on:
  • long fibres
  • seed
  • seed and fibre
The primary production objective is to know the requirements of the target market and provide the market with the specified product. Key production management issues in achieving this objective are variety selection, seeding, fertilization, weed control, disease control, harvesting and processing.

The agronomic characteristics of hemp determine the production practices and factors to be considered when establishing a commercial hemp operation. Some important agronomic factors are:
  • Although hemp can grow in a wide range of climates, optimal growth occurs in a mild humid climate.
  • Three months free of killing frosts are needed to produce good quality fibre, but four to five months are needed for seed production.
  • Both seedlings and mature plants can endure mild frosts to -5 C.
  • Hemp requires ample moisture until the plant is well rooted, but then it can endure drier conditions.
  • Hemp can grow in a wide range of soils, but it's intolerant of poorly drained conditions. Well-drained loam soils are best suited for producing high yields of good quality hemp.
  • Hemp will not grow well on acidic soils. A soil pH over 6.0 is recommended with 7.0 to 7.5 preferred.
  • Hemp is very sensitive to soil compaction.
  • The "best" fibre is obtained at the flowering stage.
  • Hemp is generally a dioecious plant, having separate male and female plants. The result is that the male plant is the best fibre producer and the female plant is the seed producer. They would have different maturation times.
  • Monoecious cultivars have been developed which overcome the problem of different maturation times.
  • Hemp can out compete weeds if it germinates prior to the weeds, is grown in a relatively clean field and spring growing conditions are good.
  • Hemp has been photoperiod sensitive, meaning it tends to flower at the same calendar date no matter when it is planted. New varieties are available that are not photoperiod sensitive.

The Health Canada website provides a current list of approved hemp varieties. Variety trials have been completed in Alberta and Manitoba to assess total biomass, seed weight, plant weight, seeding densities, the application of herbicides and fertilizer response.16 17

The following factors need to be considered with respect to seeding.
  • Hemp can be seeded using conventional seeding equipment. Good depth control and packing after seeding, to ensure good soil contact, are important considerations in seedbed preparation and equipment selection. Direct seeding into stubble has had only moderate success.
  • Little research information is available on hemp seeding dates in Alberta. Generally, earlier seeding dates will result in higher yields.
  • Seeding depth is recommended at two to four centimetres. Deeper seeding may result in delayed and reduced emergence.
  • Dense stands (200 to 750 plants per square metre) are preferred when growing hemp as a fibre crop. Less dense stands (5 to 120 plants per square metre) are sought when growing hemp as a seed crop.
  • Seeding rates for a fibre crop would be higher (60 to 80 pounds per acre) than rates for a seed crop (10 to 15 pounds per acre).
  • Seed costs have ranged between $1.25 and $3.00 per pound.18

At this time there is insufficient research to allow specific recommendations for fertilizer applications. However, the high yields and rapid growth of industrial hemp requires considerable fertilizer. Soil testing and analysis are generally recommended. Suggested rates based on European experience are:19
  • nitrogen - 120 pounds per acre
  • phosphorous - 100 pounds per acre
  • potassium - 150 pounds per acre The levels of fertilizer that can be placed with the seed are not known.
Hemp is competitive with most weeds as long as there are good growing conditions that allow a uniform stand to emerge ahead of weeds. Then, the dense shade created by hemp plants can choke out most weed problems.

Sclerotinia sclerotium and Botrytis cinerea are known diseases. Management practices include rotation with non-susceptible crops, disease free seed and management of hosts such as volunteer canola.

Bertha armyworm and grasshoppers have caused considerable damage to hemp crops in Manitoba and Alberta.

Harvest management must focus on achieving the most desirable products for the target market. The following management factors need to be considered with respect to harvesting.

The highest quality fibre is available at early flowering. Harvesting hemp for the long bast fibres used in the textile industry means these stalks cannot be damaged, chopped or broken in the harvest process. Specialized equipment and new harvesting technology is required to harvest high quality hemp fibre.

Seed crops can be harvested using a combine with the cutter bar four to five feet above ground.

Dual-purpose crops of hemp harvest both seed and fibre that's suitable for paper and fiberboard production. After the seed heads are cut off, the remaining stalk is harvested with traditional equipment such as mowers/conditioners, discbines and round balers.

Drying, storage and processing techniques are largely determined by the market being served. The following management factors should be considered with respect to this aspect of production.

Guidelines for the harvest and storage of hemp seed are not available. Recommendations from Manitoba are to store at less than 12 per cent.

Hemp seed needs to be cleaned to rigorous standards, removing all foreign material and weed seeds, if it's destined for health food markets.

THC is not present in hemp seed so it's necessary to remove all leaf and flower fragments from the seed before processing.

Retting is a requirement of markets for high quality fibres and short fibre. The basic process of retting is to break down the bark so that the long bast fibres are more easily separated by machine. Field retting or dew retting relies on rain or dew to produce the micro-organisms that break down the bark tissue that bind the fibre and nonfibre portions of the stem. Other retting techniques are available, but may not be commercially feasible.

The focus of production management is to achieve the precise product required by the market at an acceptable price. Generally, this means the manager must achieve good performance in the areas of production, harvesting, drying and cleaning.

Economic/Finance Basics

Hemp production on the Canadian Prairies is a highly uncertain undertaking. New entrants must be prepared to carefully assess the profitability and cash flow implications of their proposed operation.

Since little hemp has been harvested in Alberta, cost information for hemp production is difficult to obtain. Potential growers must be prepared to research and carefully estimate prices, costs and operating requirements for their proposed hemp operation.

The following budget information is presented to illustrate the basic expenditures required to establish and operate a 50 acre industrial hemp operation in Alberta. It's important to recognize that the following budgets are estimates and are included to provide growers with a framework that identifies the type of information required and the type of analysis they should undertake.

The budgets presented indicate that the key determinants of profitability in an industrial hemp enterprise are prices received for hemp seed, yields, operating costs and fixed costs.

Table No. 2 provides estimates of the capital investment required for establishing an industrial hemp operation.

The operation size of 50 acres reflects the need to start small but also operate at a size that gains some economies of scale. Machinery requirements for this scenario are obtained through custom operators and are included as operating costs.

Table No. 2 Industrial Hemp Operation Capital Investment Requirements
ItemAcres$/AcreInvestmentUseful LifeDepreciation
$/Year
Opportunity Cost
$/Year
Land
Cropland
50
$1,000
$50,000
$2,500
Total Land Costs
$50,000
$2,500
CostShareInvestmentLifeDepreciationOpportunity Cost
Improvements and Facilities
Storage buildings
$40,000
25.00%
$10,000
20
$500
$250
Total Improvement Costs
$10,000
$500
$250
Equipment
Pick-up truck
$25,000
2.50%
$625
5
$125
$16
Total Equipment Costs
$625
$125
$165
Total Capital Investment
$60,625
$625
$2,766
Opportunity costs are the cost of using capital estimated at 5 per cent

Financing a hemp operation is a separate, but related issue. Conventional lenders, such as banks, are likely to see hemp enterprises as high-risk ventures. In order to acquire the capital needed to develop an enterprise, individual managers are required to:
  • have a solid business plan
  • have high levels of equity capital to put into the venture
  • have a proven and reliable market for their production
  • have a sound production process
Table No. 3 presents the production parameters for the hemp operation. These parameters are based on a dual product (hemp seed and residual fibre) operation. As well, estimates for inputs and yields are felt to be achievable in an Alberta enterprise. However, each individual needs to estimate these parameters when planning for their specific operation. The most significant costs are for custom machinery charges. Producers with existing operations and existing lines of equipment may be able to lower these costs and add to the viability of the operation.

Table No. 3 Industrial Hemp Production Parameters - 50 Acres
UnitsQuantity per AcreTotal QuantityPrice per UnitTotal Revenues
RevenuesHemp seedlbs.
500
25,000
$0.50
$12,500
Residual stalkstonnes
3.00
150.00
$30.00
$4,500
UnitsQuantity/AcreTotal QuantityPrice/UnitTotal Cost
Seed ($1.25 - $3.00)lbs.
20
1,000
$1.25
$1,250
Fertilizer
Nitrogenlbs.
120
6,000
$0.40
$2,400
Phosphoruslbs.
100
5,000
$0.50
$2,500
Potassiumlbs.
150
7,500
$0.20
$1,500
Total Fertilizer Costs
$6,400
Rounduplitres
1
50
$10.00
$500
Custom Machinery
Chemical applicationacre
1
50
$4.00
$200
Cultivationacre
1
50
$5.00
$250
Fertilizer applicationacre
1
50
$4.00
$200
Air seederacre
1
50
$7.00
$350
Harrowingacre
1
50
$2.00
$100
Combineacre
1
50
$16.00
$800
Discbineacre
1
50
$10.00
$500
Roundbalerbale
5.51
275.57
$6.00
$1,653
Bale hauling (up to 100 miles)bale
5.51
275.57
$3.00
$827
Hauling seed (up to 100 miles)lbs
500
25,000
$0.15
$3,750
Seed dryinglbs
500
25,000
$0.08
$2,000
Seed cleaning for food gradelbs
500
25,000
$0.10
$2,500
Total Custom Machinery Costs
$13,130
Licencing feeacre
1
50
$20.00
$1,000
Sampling and analysis feesacre
1
50
$20.00
$1,000

Table No. 4 presents projected revenues and expenses for the industrial hemp operation. The projected net income indicates that the proposed enterprise (based on production parameters presented) will incur losses. Yields, prices and high operating costs particularly for machinery custom charges contribute to this result. It is important to note that individual operators may be able to beat these numbers particularly if they have their own low cost machinery investment.

Yields and prices received for product(s) are likely to have the greatest impact on the economic performance of a hemp enterprise. Since this is a relatively new industry, there's considerable uncertainty concerning achievable yields and market prices. Interested growers must consider the profit performance under a range of price and yield scenarios in order to assess the situation they might be entering into.

Table No. 4 Projected Revenues and Expenses for Industrial Hemp Enterprise - Dual Production on 50 Acres
UnitsQuantityPrice per UnitTotal
Projected revenuesHemp seedlbs.25,000$0.60$15,000
Stalkstonnes150.00$30.00$4,500
Total Sales Revenues$19,500
Operating Costs
Seed$1,250
Fertilizer costs$6,400
Herbicide cost$500
Machinery custom charges$13,130
Licencing fee$1,000
Sampling and analysis fee$1,000
Interest on operating$500
Total Operating Expenses$23,780
Fixed Costs
Land taxes$500
Annual depreciation costs$625
Opportunity cost on capital investment$2,766
Total Fixed Costs$3,891
Total Operating Costs$27,171
Net Operating Income-$8,171

Table No. 5 presents a sensitivity analysis, which shows the changes to net operating income over a range of price combinations (for hemp seed) and a range of yield combinations (for hemp seed). In this sensitivity analysis, the residual fibre is kept at a constant yield of three tonnes per acre and a constant price of $30 per tonne.

Table No. 5 Sensitivity Analysis - Net Operating Returns for Various Yields and Prices of Hemp Seed
Seed PricesSeed Yields (lbs. per acre)
($/lb.)700600500400300
$1.00$11,829$6,829$1,829($3,171)($8,171)
$0.80$4,829$829($3,171)($7,171)($11,171)
$0.60($2,171)($5,171)($8,171)($11,171)($14,171)
$0.50($5,671)($8,171)($10,671)($13,171)($15,671)
$0.40($9,171)($11,171)($13,171)($15,171)($17,171)

Many operators are able to reduce machinery operating costs through the use of their existing line of machinery, instead of relying on custom operators. Table No. 6 shows net operating income for a range of seed yields and prices when machinery operating costs are reduced by 50 per cent.

Table No. 6 Sensitivity Analysis - Net Operating Returns for Various Seed Yields and Prices with Reduced Machinery Costs
Seed PricesSeed Yields (lbs. per acre)
($/lb.)700600500400300
$1.00$18,394$13,394$8,394$3,394($1,606)
$0.80$11,394$7,394$3,394($606)($4,606)
$0.60$4,394$1,394($1,606)($4,606)($7,606)
$0.50$894($1,606)($4,106)($6,606)($9,106)
$0.40($2,606)($4,606)($6,606)($8,606)($10,606)

The critical economic issues for hemp producers are to carefully evaluate the economics of production before investing and to develop strategies for achieving low cost production. Individual producers need to achieve all of the following factors for their enterprise to be profitable.

Producing the product that meets the buyer's specifications means:
  • ensuring they have access to the market
  • achieving a good market price for the product
  • achieving effective production, harvest, drying and marketing performance at a cost that is below the market price for their product
Footnotes

1 Although there is no written history, it's generally believed that hemp originated in Central Asia where it was used for both fibre and food as much as 6,500 years ago.
2 Stanford F. Blade. (1998). Industrial Hemp in Alberta; Alberta Hemp Symposia Proceedings, p. 2.
3The Controlled Substances and Drugs Act 1997.
4The Industrial Hemp Regulations
5 Hemp was so important to the Navies of England and the American colonies that farmers were legislated to dedicate a portion of their land to this crop each year.
6Nicole Charest. (1998) Industrial Hemp: Markets, the Next Challenge; Alberta Hemp Symposia Proceedings.
7Nicole Charest. (1998) Industrial Hemp: Markets, the Next Challenge; Alberta Hemp Symposia Proceedings.
8 A small amount of production was allowed during the war period of 1939 to 1945.
9The regulations define hemp as the plant and parts of the Cannabis plant whose leaves and flowering heads do not contain more than 0.30 per cent THC as well as derivatives of the seeds such as oil and seedcake.
10Co-ordinates will be used by drug enforcement agencies to distinguish licenced crops from illegal crops.
11Previous drug charges will prevent a grower from obtaining a licence.
12Gardner Pinfold Consulting Economists Ltd. and Dr. Jim White. (1998) A Maritime Industrial Hemp Marketing Study. Prepared For Nova Scotia Department of Agriculture and New Brunswick Department of Agriculture and Rural Development
13Eric C. Thompson, Mark C. Berger, Steven N. Allen. (1998).The Economic Impact of Industrial Hemp in Kentucky; Center for Business and Economic Research, University of Kentucky; p.7.
14Tony Marshall. (1998). Is There a Market For Hemp Oil?; Alberta Hemp Symposia Proceedings, p.64.
15Eric C. Thompson, Mark C. Berger, Steven N. Allen. (1998).The Economic Impact of Industrial Hemp in Kentucky; Center for Business and Economic Research, University of Kentucky; p.5.
16Stanford F. Blade. (1998). Industrial Hemp in Alberta; Alberta Hemp Symposia Proceedings, p. 2.
17Industrial Hemp For Manitoba, 1996 Hemp Evaluation.
18Seed prices are expected to drop with increased Canadian production.
19Stanford F. Blade. (1998). Industrial Hemp in Alberta; Alberta Hemp Symposia Proceedings, p. 16.

Resources

Industry associations
Canadian Hemp Growers Association
5811 - 156 Street
Surrey, British Columbia V3S 8E7
Phone: (604) 506-2357
Fax: (604) 574-5258
E-mail: delta3@whidbey.com

Canadian Industrial Hemp Council
58 - 27th Avenue SW
Calgary, Alberta T2S 2X8
Phone: (403) 232-8576
Fax: (403) 262-1263
E-mail: hiphemp@tcel.com

Saskatchewan Hemp Association
P.O. Box 24007
Regina, Saskatchewan S4P 4J8
Phone: (306) 757-HEMP
Fax: (306) 757-4367
E-mail: saskhemp@sk.sympatico.ca

Publications
The Cultivation of Hemp
Dr. I Bosca & M. Karus
Hemptech
Box 1716
Sebastol, CA
95473
USA
Phone: (800) 265-HEMP
E-mail: orders@hemptech.com

Hemp Horizons
John W. Roulac
Chelsea Publishing
Box 428
White River Junction, VT
05001
USA

Alberta Hemp Symposia Proceedings
Alberta Agriculture and Food Phone: 1-800-292-5697

Low-THC Hemp Research in the Black and Brown Soil Zones of Alberta Canada
S.F. Blade , R.G. Gaudiel and N. Kerr

An article in Perspectives on New Crops and New Uses (1999) ASHA Press, Alexandria VA

Assessment of Fodder Potential for Field Pea/Barley, Fenugreek and Low-THC Hemp
S.F. Blade, Ken J. Lopetinsky, Curtis H. Weeks and Paul La Flamme

Additional Websites
Alberta Agriculture and Rural Development
1999 Alberta Organic Producers and Processors Directory
The Industrial Hemp Network

Government Resources

Production
Pulse and Special Crops Specialists.

Dr. Stan Blade
New Crop Development Unit
Crop Diversification Centre North
Phone: (780) 415-2681
Phone: (780) 415-2311
Fax: (780) 422-6096

Manjula Bandara
Research Agronomist (Special Crops)
Crop Diversification Centre South
Phone: (403) 362-1356
Fax: (403) 362-1311

Economics
Farm Management Specialists; contact your local Alberta Agriculture and Food office.

Business Planning
Rural Development Specialists - Business; contact your local Alberta Agriculture and Food office.

Key Management Issues
  • Growing hemp in Alberta is a relatively new venture. Since there's limited industry experience, new entrants must carefully assess the viability of their proposed enterprise before investing capital.
  • If you continue to investigate this agricultural business opportunity, it's essential that you are able to answer the following questions concerning the production, marketing and management of such a hemp enterprise.
  • Are you prepared to learn all you can about hemp production and marketing, visit existing operations, join the industry associations, attend workshops and read all you can about production and marketing?
  • Have you clearly defined the market(s) and the buyers that you will be marketing to?
  • Have you clearly defined the production practices needed to implement in order to produce the quality of product required by your markets? .
  • Are you aware of the amount of time you have to devote to continuously market your product and improve your production performance? .
  • Are you prepared to take the risk associated with hemp production?
Compiled by:
Dennis Dey - Farm Management Consultant

Technical Advisors:
Dr. Stanford Blade, Director - Crop Diversification Centre North; Alberta Agriculture and Food
Nabi Chaudhary, Senior Economic Analyst - Crops; Alberta Agriculture and Food
Donna Fleury, Rural Development Specialist - Business; Alberta Agriculture and Food
Curtis Weeks, Crops Specialist - Cereals/Oilseeds; Alberta Agriculture and Food
This profile was developed with co-operation from the Alberta Agriculture Special Crops Product Team.

Source: Agdex 153/830-1. Revised June 2000.
 
 
 
 
For more information about the content of this document, contact Duke.
This information published to the web on June 1, 2000.
Last Reviewed/Revised on December 4, 2014.