CANADIANS ARE FINDING SUCCESS WITH HEMP

While the debate over industrial hemp picks up steam in South Dakota
and other states, farmers in Canada are planting the crop for the third year.

Like the United States, Canada banned industrial hemp in the late
1930s. Unlike the United States, Canada decided in 1998 to legalize
its production again, recognizing the crop's potential as a new cash
crop for farmers as well as its uses as a renewable source of fiber
and oil.

As a young and emerging industry, hemp production in Canada has been
something of a mystery, bringing rumors of failure and few markets to
people south of the border. But, according to one Canadian official,
growing hemp has been a success in that country and it is seen as a
crop with a variety of uses.

"It is a good alternative crop for farmers and it also looks like it
has a good future for fiber and oil uses," said Charles Tremblay, a
market development advisor for Agriculture and Agrifoods Canada, the
Canadian equivalent of USDA.

Tremblay said that, much like the ethanol industry in South Dakota,
hemp producers are trying to position themselves to take advantage of
new opportunities, forming cooperatives and building their own
processing plants.

Tremblay said, because of its various uses, processing becomes very
specialized, focusing on manufacturing either the fiber or oil
byproducts produced from hemp.

Since its legalization 1998, Tremblay estimates 500 farmers have grown
hemp in Canada each year, mainly in Ontario, Manitoba and
Saskatchewan, although he said more growers are establishing the crop
in other provinces as well.

In 2000, Canadian farmers planted about 33,500 acres of industrial
hemp, producing 23.86 million pounds of raw hemp.

>From each hectare (2.47 acres) planted, they were able to extract 47
gallons of hemp oil, 1,320 pounds of meal and six metric tons of straw
which was transformed into 1.5 metric tons of fiber.

"Hemp oil is pretty popular in Canada because of its nutritional
value," said Tremblay.

Contrary to some reports, Tremblay said that hemp oil does have a
shelf life that allows its sale commercially and makes it attractive
because of its high fatty acid content.

Because hemp production is relatively new, Tremblay said tracking its
sale and use in manufacturing has not been accurately established yet.
That goes for the export market as well, where he said he is unsure
the amount of hemp or its products that had been exported to the U.S.
on an annual basis.

"The actual revenue from hemp varies year to year," he said. "People
are really looking at the potential markets for hemp and they are
building (processing) facilities near the main production areas.

"It is seen as a bio-economy, environmentally-friendly and a renewable
source for food substances. "

Tremblay said only a few processing plants, such as crushing
facilities, have been completed and are up and running. One plant in
northern Manitoba is currently going through a financial
reorganization after closing its doors a few months ago. Tremblay said
the main problem for that plant was not researching its markets before
start-up.

"It was designed to make a fiber board, like plywood," he said. "That
is not the most lucrative use for hemp or flax. They (processors) have
to be realistic.

"It's a completely new and different concept when you use (hemp) fiber
to generate biomass. There is a tremendous potential."

As far as the legal aspects of growing hemp, Tremblay said the general
public has not had a hard time separating the industrial hemp from the
still-illegal marijuana. Growers are all licensed through the a
program administered by Health Canada including strict regulations on
THC content, the illegal drug that gives marijuana its high.

"The industry is all strictly controlled by Health Canada, they have a
good handle on that," Tremblay said. "It's really not an issue
anymore. It's very controlled and people are very confident."

Tremblay said the licensing limits the amount of THC in hemp to .3
percent. By contrast, marijuana contains 5 percent or more of the
drug. He said researchers have developed varieties of industrial hemp
now that contain .1 percent or less of the drug.

"It can also make a difference to our exports," Tremblay said. "We
don't want it to become an issue."

Domestically, Tremblay said market development has also continued and
more studies are being done on how best to proceed with new processing
plants.

"There is a tendency (in Canada) to replace traditional fibers with
natural fibers," he said.

He also said growers and processors are finding an array of
applications for both the fiber and the oil of the hemp plant.

"As acceptance increases, the markets are increasing," he said. "We
now have hemp beer, coffee creamer, drapes, jeans and even car panels."

Tremblay said BMW is using hemp fiber for certain parts on a series of
vehicles.

"It is an old crop that has been around for a long time," he said. "It
is taking time for the products to reach the market and become
established."

When it comes to the industry expanding, Tremblay said that, much like
other commodities or value-added projects, it has to grow slowly,
although he indicated he feels the hemp industry will be successful in
that country.

"We need to have a greater partnership between the growers and the
processors," he said. "That seems to be the way it is developing for
the security of both parties."