Declining sales to South Korea prompted calls for acreage reduction, which were only partially heeded
Canada’s hemp industry may have an oversupply of hempseed — again.
Canadian hemp acreage topped 130,000 in 2017, a record for the sector and 30,000 more than the previous high.
Last January, industry leaders were hoping that strong demand from South Korea for hempseed would continue in 2017 and into 2018.
But that didn’t happen.
“From about this time last year in through March, the interest and the orders (from Korea) really started to decline,” said Jeff Kostuik, director of operations for Central Canada with Hemp Production Services, which contracts hemp acres and provides agronomic support.
“That put us into a situation where we went back to our producers and asked if they would reduce some of their acres.”
Some hemp growers heard the message to cut acres but many others didn’t, resulting in the acreage jump last spring.
Yields were average in 2017 and with acres up significantly, Canada likely has an excess of hempseed.
“We’re in a situation where there is more hemp that is available than really what’s in line to be processed,” Kostuik said.
The situation may be similar to 2015, when Canada’s hemp industry was coping with a glut of hempseed. Yields were higher than expected for a couple of years and hempseed was sitting in bins, either on farms or at processing plants.
South Korea saved the day in late 2015 and 2016, becoming a major buyer of Canadian hempseed, seemingly overnight. Hempseed and hemp food were suddenly a hot commodity in the country as Koreans started eating hemp as a replacement for fish oil.
But about a year ago a new player entered the Korean market — China.
“What South Korea did is wake up the sleeping giant of China,” Kostuik said.
China had previously grown hemp almost entirely for the fibre and not the seed. When the market for hempseed boomed in South Korea, the Chinese took advantage of the opportunity.
As well, the Chinese are now selling into the United States, the most important market for Canadian hempseed and hemp food.
The excess of hempseed in Canada, combined with the emergence of China as a competitor in the global market, means Western Canadian acres will likely drop this year.
Prices attached to hemp production contractions may also decline.
Prices were 70 to 80 cents per lb. last year for conventional hempseed.
While prices and acreage could drop, one company may contract as much hempseed as it did in 2017.
Manitoba Harvest operates hemp processing plants in Winnipeg and Ste. Agathe, Man. It produces and sells its own line of hemp foods.
Last winter the company was contracting acres based on robust demand for hempseed but altered those plans when the Korean market collapsed.
“Our own particular system, we pulled back our contracting a year ago and we’re fortunate that we did,” said Clarence Shwaluk, Manitoba Harvest’s director of farm operations.
“(So) our supply is looking OK.”
The company will likely contract about 40,000 acres this year, similar to 2017.
“Maybe slightly less, but still about on par with last year,” Shwaluk said.
Canada’s hemp trade will need to find new markets for last year’s crop.
One possibility is Australia, which legalized the importation of hemp food products last fall.
Kostuik said another possibility is India, which is always looking for new sources of plant protein.