Analysts predict global market opportunities ahead for Canadian hemp growers who produce the crop for CBD oil
Canada’s hemp industry has changed.
Not overnight, but close.
For years, hemp farmers have grown the crop for grain and partly for hemp fibres.
This summer the majority of Canadian farmers are growing hemp to produce CBD.
“I think with the CBD acreage, I think we might exceed that 170,000 (acres) this year,” said Jeff Kostuik, director of operations in central Canada and the U.S. with Hemp Production Services.
In the past, Hemp Production Services contracted farmers to produce hemp grain and sold hemp varieties to growers, for grain production.
This year they have no production contracts for grain and most of Kostuik’s clients are growing hemp for CBD.
Studies suggest that cannabidiol (CBD), a compound found in the leaves and flowers of industrial hemp plants, can provide pain relief, has anti-inflammatory properties and may help combat anxiety.
The Canadian Hemp Trade Alliance (CHTA) has been promoting the potential of CBD and the massive global opportunity in the health and wellness industry. Some analysts believe the global CBD market could grow to US $17 billion by 2026, up from $1.5 billion in 2018.
Farmers must have seen those dollar signs. A huge number of producers applied to the federal government to grow hemp – which remains a regulated crop in Canada.
“I don’t know the exact numbers, but Health Canada is indicating to us that they’ve had a record number of applications,” said Russ Crawford, CHTA president.
In 2018 Health Canada approved about 70,000 acres of hemp production. Perhaps 20,000 acres were dedicated to the harvest of flowers and leaves for CBD.
Hemp grain production will be tiny this year because Canada produced an excessive amount of hemp grain in 2017. Hemp food companies are still working through the supply of stored grain. So, this year, the bulk of hemp production in Canada is for CBD.
“I think Jeff’s number (170,000) is right and maybe low,” Crawford said. “(But) we won’t know until Health Canada puts out a number on that.”
The shift from hemp grain to hemp for CBD is mostly because of economics. A 30 ml bottle of CBD oil, the size of a bottle of eye drops, can retail for $40 to $200.
Growers can sell their hemp flowers and leaves to a licensed producer of CBD, but it’s not clear how farmers will be paid. Will they be paid per pound of flowers and leaves? For the amount of CBD that can be extracted from the hemp?
“I’ve probably heard a dozen different approaches (for price),” Crawford said
“Some guys (companies)… are paying so much per acre. (Say) $600 or $700 an acre for all of the production…. Some are even coming in and custom combining the entire crop… Others are paying for a biomass quantity.”
Adding to the confusion, there isn’t a standardized way to harvest hemp flowers, leaves and plant tissue.
Some growers are cutting the full plant with a swather and baling the crop. Other companies are doing custom harvesting with a machine that resembles a stripper header – harvesting the top 25 cm of the hemp plant.
“There are a couple of these (stripper header) units in Manitoba, specifically for CBD and hemp production,” Kostuik said, noting the specialized machinery could be double the price of a combine.
“Some of that equipment… is extremely expensive.”
Some hemp growers may not find a buyer for their flowers and leaves because a percentage of farmers are producing the crop on speculation.
More than 100 companies are Licensed Producers (LPs) and they will be buying hemp biomass from growers. But it’s nearly impossible to guess how much product they will need.
“Our recommendation, from the CHTA… is to make sure you have a contract before you produce it and harvest it,” Crawford said. “I think a lot of people are growing it on spec…. The problem is they really don’t know what they’re going to get…. (If) there’s a buyer out there (great). If not, well, lesson learned.”