• Hand-cutting is a traditional method in low-wage countries but considered impractical for large-scale production. Mechanized harvesting can be done but it is very rough on machinery because hemp easily wraps itself around revolving parts. Development and testing of harvesting technology to Canadian conditions is still on-going with some prototypes only becoming recently available.⁽¹²⁾

• Processing technologies are generally regarded as antiquated and there is a need to adapt current technology from other fibre crops (such as flax) to commercial field production of hemp. Some industry experts opine economical processing infrastructure will be several years in the making.

• No processing facilities are available in the Maritimes even as we approach plant maturity.

• There is limited certifiable (OECD), low-THC seed and fewer seed-bred cultivars are climatized for Canada.⁽¹³⁾ Seed multiplication may help curb this demand but varieties need to be developed for Canadian conditions. Many of the European cultivars are bred for fibre and not oilseed production. Environmental conditions necessary for seed production are said to be more favourable in areas outside of the Maritimes.

• Present members of the Canadian Seed Growers Association are expected to pursue this market. They have the experience, know the regulations and procedures and have the cleaning equipment required. While several hemp growers and processors are positioning themselves for the pedigreed seed market, it can take decades to develop new varieties.

• While a number of well attended Canadian hemp symposiums and published government research have broadened the information base for this new crop, much proprietary management and technological expertise is being developed.⁽¹⁴⁾ Indeed, a number of projects are cloaked under non-disclosure agreements between government and private industry. This will impede growth of the Maritime industry to some degree.

• According to one contact, while partnering arrangements with other key Canadian players can assist in information transfer, the Maritimes needs to be at the forefront of research, development and testing if we are to successfully and economically penetrate the hemp market.

• It is unclear the extent to which biophysical variations in the Maritimes will tend to concentrate production and therefore processing facilities. Given the observed success of at least one grower, we know hemp can be grown, although yields will only become apparent following the harvest.

• A study by Sara Francis entitled, "Hemp (Cannabis sativa L.) as an Alternative Fibre Source for Nova Scotia" suggests Nova Scotia has soils deemed as only fair to poor for hemp growing (based on soil conditions and based on major limitations in slope and depth). This may also contribute to concentrated areas of production and processing.

• Hemp has a number of competing fibre alternatives for major fibre markets. For example, in 1997, farmers in Western Canada seeded 1.8 million acres of oilseed flax and over 200 thousand acres of edible oilseed flax (solin) with a total production of about 1.25 million tonnes of flax straw. Nearly a million tonnes of straw will be sold for $6 to $9 per tonne, burned or simply left in the field. Given the value-added potential and the need to reduce environmentally unfriendly practices, there is pressure to find markets for the flax straw. Given the earlier arguments made for only niche market specialty papers, fibre markets will require considerable development before they can support large-scale commercial production.

• Maritime producers have only just entered a market in which several major players have some lead. Whereas some of the key players have focused on particular markets that do not overlap, Maritime growers are to some degree chasing the same markets in the region and will compete with larger players at the national level. Economics and market positioning will be vital to success.

• Many independent growers are still in the process of developing markets for this year's crop. This suggests primary processors will likely play a key role in developing markets and that at present, the market is not structured for large scale and long-term growth.

• Contrary to many reports, hemp is at present a niche market. Increasing demand for hemp products over the last decade has not yet fueled an increase in world production of fibre and grain. Furthermore, there are limited markets for this year's production, although some key players are said to have markets secured. Expanding the range of value-added industrial products available and fostering the necessary consumer demand will take time.

• Careful product positioning and advertising for consumer awareness will be important to success in the higher-value oil and food markets. To quote one respondent, "the sizzle sells the steaks". Growers must understand that while infrastructure investment tends to be less than that required for fibre markets, considerable working capital is needed to launch a new product into the health market.

• One respondent suggested there is a danger in trying to pursue hemp in too large a scale for the Maritimes. Local uses and niche markets should be the focus initially suggesting a "get there first" situation versus unlimited demand.

• This is considered by many to be blueprint for success in hemp. The fibre market, the primary focus of Maritime growers, is not one where one individual farmer is likely to develop given the volume that is needed to economically sustain processing facilities. For example, HempFlax in the Netherlands complements its large growing base (over 5,500 acres) with two decorticating plants and a recently purchased a paper mill with an annual capacity of 30 thousand tons of paper (25% hemp composition). The company has spent millions developing harvesting and processing machinery.

• Primary processors should consider contracting hemp production to guarantee price and consistency of supply.

• There appears to be opportunities for partnering both within and outside the Maritimes. We are aware Maritime growers have been networking with each other and with major players, to varying degrees of success. Given the level of partnering that is already occurring within the industry, Maritime growers and processors will need to develop a critical mass for production, marketing and distribution channels and partnering may be the key to quickly gaining a leg-hold in the industry.

• Partnering with other key players in the industry will also help to transfer expertise between growers, processors, manufacturers and retailers.

• There is much price uncertainty in thin markets where the volume of trading is low. The degree to which production can increase without affecting prices is not known. Growers and processors need to do their homework on the economics and market potential of hemp. As production comes on line, prices will fall unless growing demand for hemp products outstrips supply.

• It is important to keep in mind that as subsidies in Europe are further reduced and phased out, the true economics of hemp will appear. If they are poor, world production may decline and this could act as a boon for Canadian producers.

• Quality is a key determinant for market success, especially for use in textiles. While quality from some countries can be highly variable, low and medium wage countries tend produce some of the best quality hemp products such as fabrics. Maritime growers must be keenly aware of market specifications and ensure standards are maintained.

• Given the need for economies of scale, growers and processors will need to ensure they provide a consistent and adequate supply of raw and processed hemp if the industry is to attain the necessary critical mass. Key players in the industry have accomplished this through contracting and guaranteed pricing mechanisms.

• The 1998 hemp licensing process was frustrating for many growers and processors. Many were given the go-ahead late in the season but seeded anyway. It is unclear how licensing may change or the extent to which hurdles encountered during the 1998 season may pave the way for next year's licensing procedures. It is imperative interested growers do their homework to ensure a smooth licensing process.

• THC-testing is a mandatory requirement for licensing. A number of testing laboratories are found across Canada but none have been established in the Maritimes. This should be addressed if the industry experiences rapid growth. We understand the Nova Scotia Agriculture College is examining the potential for becoming a licensed testing facility. The PEI Food and Technology Centre may also be a potential candidate.

• World production of hemp fibre and tow and hemp grain has followed a long period of decline. Increased demand for hemp products over the last decade has not yet fuelled an increase in world production of fibre and grain. Volumes of imported hemp raw fibre and manufactured goods into Canada are small.

• It is clear a culture of believers in hemp and its variety of uses has developed in North America. This is reflected in the growth of hemp-based products, all based on imports of hemp fibre, grain and oil. Some individuals within the agricultural community have observed this and believe there is an opportunity to supply this demand with domestically produced hemp fibre and grain.

• The markets for hemp products can best be described as developing. They are primarily a loosely connected set of niche markets. This industry is in its infancy, having lain dormant on the supply-side in North America for 60 years.

• Despite the high degree of interest in hemp, little or no hemp has been sold by Canadian processors to date. The first sales will occur when the approximately 5,300 acres are harvested and processed this year. Only then will the there be a demonstration of the real market potential of various hemp products. By next spring, the potential markets should be substantially better defined.

• This study was aimed at identifying the potential for a Maritime-wide industry. Maritime production is small, made up of only a handful of growers. In the absence of a well-developed distribution system, there appears to exist only niche-market opportunities for a small number of growers. Our research suggests that at this time substantial effort will be required to develop a Maritime industry for many of the markets claimed for hemp products such as textiles, building materials, alcoholic beverages, livestock feed, bedding and biomass fuels. The main reasons include insufficient processing and value-added infrastructure and incomplete research and development results.

• There appears to be some potential for oil production if both the agronomic and economic feasibility can be demonstrated and local cold press crushing facilities are established. The heath food market also offers some potential. However, testing oilseed viability cannot occur before 1999 given limited production and the fibre-focus of Maritime growers this season.

• If the interest reportedly expressed by Minas Basin Pulp & Power Co. in using hemp fibre in its paperboard products is confirmed, this may be the best example of a concrete market in the Maritimes for hemp.

The priorities for the departments of agriculture in the Maritimes appear to be:
• Monitor the production, processing and marketing of fibre, grain and seed across Canada.

• Monitor the regulatory system.

• Acquire and test as many varieties as possible from European, Canadian and plant breeders.

• As market opportunities become clearer, the direction for testing, whether it be for fibre or grain varieties, will become evident as will the need to maximize yields under Maritime conditions and management schemes.

• Prepare and provide to growers and processors a summary of the information in this report and include any agronomic reports completed over this fall and winter. The information should be provided no later than the spring of 1999.

• Research and information dissemination should be supported rather than investment into infrastructure, given the immaturity and uncertainty of the markets for hemp.

1.
Industrial Hemp: Global Operations, Local Implications, July 1998, Valerie L. Vantreese, Department of Agricultural Economics, University of Kentucky.

2.
Hemp Entrepreneurs and U.S. Public Policy: The 1996 Hemp Business Survey, July, 1996, John Gettman.

3.
Kenex Ltd. is attempting to secure long-term growing contracts from farmers while pursuing long-term market contracts with buyers such as General Motors of Canada. They deduct the costs of management, harvesting, retting, baling, etc., from this price unless the grower assures responsibility for these activities.

4.
In comparison, 1995 estimates for growing costs for hemp for fibre and hurds ranged from $268 to $285 per acre. Growing hemp for seed was estimated to cost $238 per acre. Source: Gordon Reichert, Market Analysis Division, Agriculture and Agri-Food Canada, 1996 Crop Budgets 1995, Publication #60, OMAFRA.

5.
The net returns from growing hemp for fibre are estimated to be between $100 and $300/acre, depending on the growing region and the management practices. More accurate data is expected by January, 1999. Source: Mike Columbus, OMAFRA.

6.
The Bank of Montreal has recently announced a Sponsored Advertising Program whereby they pay for advertising costs in Commercial Hemp Magazine. Companies must be in the start-up phase (less than one year). For more information, requests can be faxed to 604-662-8621 or e-mailed to wisesale@wisenoble.com (the publisher of the magazine).

7.
Source: G. N. Chaudhary, Special Products Team of Alberta Agriculture, Food and Rural Development in Alberta Hemp Symposium Proceedings in Red Deer, (March 10) and Edmonton (April 8, 1998).

8.
In 1996, Alcell Technologies, a subsidiary of Repap Enterprises, experimented with pulping both wheat straw and whole hemp stalks. Alcell Technologies Inc. is a patented process that pulps hardwood, annual fibres and agriculture residues. The process is said to result in product yields of 76% to 86%, compared with conventional pulping processes yielding 51%. Sale of the company put the project on hold. A news release posted March 2, 1998 at the Pacific Rim website indicated Malaspina Capital Ltd. was at the time negotiating with Repap Enterprises Ltd. to purchase shares in Alcell Technologies Inc. and stated there is enormous potential for the technology in Asia and other international markets. Currently, there is an idle demonstration plant at Atholville, New Brunswick.

9.
We have been unable to confirm these reports with the company.

10.
It is important to note corrugated cardboard does not require the same level of processing as that of higher grade papers produced by many of the other Maritime mills.

11.
As found on the website for the Washington Hemp Education Network (WHEN) located at HTTP://www.olywa.net/when/secto1.html.

12.
Tilby Systems Ltd., of Victoria, BC has a long history in sugarcane, kanaf and sweet sorghum fibre separation techniques. They are awaiting green hemp stalk to test the viability of using existing equipment to determine what modifications, if any, are needed for hemp. Another piece of machinery, The Tornado, marketed by Bolton-Emerson Americas Inc. of Massachusetts, has been developed to process non-wood fibres into papermaking material. While there are conflicting reports as to its effectiveness, the non-plugging machine is said to accommodate plants directly from the field and processes them into a homogenized fibre slurry by subjecting the fibre to repeated scissors-lime action thereby cutting the fibres into shorter lengths. Another piece of machinery, the Chaflin, then refines the pumpable slurry into papermaking stock. This has potential to eliminate the need to cook the slurry. For more information, visit their website at HTTP://www.papermaking.com/tpmc/addeck/bolteme.htm.

13.
There are 26 approved cultivars in Canada for 1998. Kenex Ltd. has reported there is seed left over from this season as orders were reduced due to delays in licensing. Furthermore, seed prices are expected to fall by 10-15% in 1999.

14.
For example, the following statement can be found on the Kenex Ltd. website: We have compiled a great deal of knowledge, expertise and technology at a very high cost over the last several years. Much of the information has been provided to the public at no charge but we hope you understand we must maintain some proprietary information in order to create a sustainable business.