HEMP GROWS WITH TECHNOLOGICAL ADVANCEs

Plant Replacing Petroleum-Based Products for Varied Industrial Uses

The production of hemp doubled this year in Canada, with the grain
moving from a niche product into the foodstuff mainstream as consumers
developed their taste for hemp oil, hemp protein and seed.

Now producers of hemp-fibre products are poised for exponential
growth, too, with the worldwide increase in consumer demand for
sustainable goods.

"We've had a massive increase in acreage nationally to 45,000 acres
from 22,000 in 2005," says Arthur Hanks, executive director of the
Canadian Hemp Trade Alliance, which is based in Saskatchewan.

"We've had strong markets," he notes, adding that some of the crop was
produced on speculation because "hemp pays well" - about $38 per bushel.

Virtually all the hemp grown in Canada is now processed into
comestible products - hemp oil, hemp nut seed and hemp protein, all
lauded for their high protein content and superior essential fatty
acid and amino acid profile.

The market has enjoyed strong growth since 1998, when hemp production
was legalized in Canada.

Manitoba Harvest, which provides hemp oil, hemp nut seed, a non-dairy
beverage, protein powder and hemp butter to more than 3,000 natural-
food retailers in North America, Japan and Europe, has been growing at
a rate of 50 per cent per year. Sales have reached $3 million this
year alone.

In 2006, the company quadrupled the amount of land contracted for seed
production. Organic, non-GMO seed is supplied by 25 farmers (also
shareholders in the company) who have a total of 6,000 acres in production.

"They're leaders," says Hanks, "but by no means an anomaly in the
industry."

Canadian nutritional hemp producers have enjoyed a competitive
advantage.

Industrial hemp production is still illegal in the United States,
where it's feared illicit drug dealers could hide plants high in THC,
the psychoactive chemical found in hashish and marijuana, among the
industrial plants, which have no psychoactive effect.

While U.S. producers work to change the law south of the border,
Canada has had time to set up its own hemp industry just in time to
capitalize on two worldwide changes: Exploration of alternatives to
pricey and depleting petroleum, and development of crops with smaller
ecological footprints.

Technological advances have allowed hemp to replace petroleum-based
products for a variety of industrial uses.

New technology uses hemp to manufacture mouldable plastic and
biocomposite material, is now being used by automobile companies such
as Mercedes-Benz for interior panels in vehicles.

Hemp is also being used to produce biofuels, as well as countertops,
insulation and straw building bales.

And hemp is an alternative for cotton in the natural-clothing
market.

Aside from its nutritive value, hemp is touted as healthy for crops
and the environment.

Pesticide, herbicide and fertilizer use goes down with hemp because it
is naturally pest-resistant and the plants grow quickly and so close
together that weeds are crowded out.

Successive planting behind nitrogen-fixing cover crops, such as
alfalfa, goes a long way to meeting the plant's fertilizer
requirement.

It's also billed as a good crop for rotation because it has deep
roots, which prevent erosion and return nitrogen to the soil, and it
doesn't require heavy irrigation. As well, almost all the plant can be
used.

More than 600,000 acres of hemp is grown in about three dozen
countries around the world, with China the major producer.

In Canada, half the hemp crop is grown in Manitoba, a third in
Saskatchewan.

Global hemp sales were estimated at US$250 billion in 2002 - before
petroleum prices skyrocketed. The North American market is now about
$40 million, says Hanks, and demand is expected to continue climbing.

Canada's exports of nutritional and industrial hemp and byproducts
will continue to grow steadily as long as the U.S. is not growing the
crop, says Gordon Scheifele, president of the Ontario Hemp Alliance in
Tavistock, about an hour east of London.

"The food market is going to keep growing," says Hanks. "It's no
longer a fad, now it's a trend."

Across the country, entrepreneurs, researchers and investors are
building a hemp-fibre industry, he adds.

"We feel looking at it, scientifically and objectively, it's where it
should be for development of a new crop in Canada," says Scheifele,
who worked for legalization of hemp as a crop in the 1990s.

"But it's certainly nowhere near where we thought it would be.
Critical mass has not yet been reached."

Much of the reason is that the whole industry had to be built from the
ground up, from having the crop legalized, to developing varieties to
suit the varied climate, soil and water conditions in Canada's
different regions, to researching and developing nutritional and
industrial products, to building production facilities and educating
the consumer.

Producers and entrepreneurs in dozens of companies across the country
are now working with both senior levels of government and investors to
fund research, product development and construction of processing facilities.

Leaders include:

* Hempline, in Delaware, Ont., extracts and refines hemp fibres for
use in reinforcing composites (in automobiles, for instance) and
spongy material for animal bedding, garden mulch and fillers.

* Calgary-based Avanti Polymers produces lightweight durable furniture
such as countertops at its manufacturing facilities in Gretna, south
of Winnipeg near the U.S. border. It is currently developing wall-
panel systems for recreational and commercial vehicles.

* Manitoba's Parkland Industrial Hemp Growers Co-op Ltd. produces hemp
grain, birdseed and seed stock, and has a plant-breeding program.

The associated Parkland BioFibre Ltd. received $3 million from
Sustainable Development Technology Canada in July toward construction
of a processing facility in Dauphin, about 300 km northwest of
Winnipeg, that will use European technology to produce biofibre
insulation, plus animal bedding and non-woven horticultural matting.

* The Composite Innovation Centre at the University of Manitoba's
Smart Park has received a $750,000 grant from Agriculture and
Agri-Food Canada for bio-material research and commercialization.

* B.C.'s Naturally Advanced Technologies (formerly Hemptown) is
investigating construction of a $20- to $30-million fabric processing
plant in Alberta.

Naturally Advanced Technologies has its sights set on the $25-billion
cotton industry, says Jerry Kroll, chairman of the company's board.

"The cotton industry is responsible for a large portion of the
chemicals and insecticides used on the planet," Kroll notes.

As well, cotton crops need intense irrigation. "Each cotton T-shirt
represents 1,740 gallons (6,587 litres) of water" and is a terrific
burden on water-starved economies such as those in East Africa, he
adds.

Thanks to new Canadian technology, Kroll says, it will make economic
sense to switch from cotton to hemp fabric.

Earlier this month, Naturally Advanced Technologies acquired rights to
an enzyme technology that greatly reduces the cost and time needed to
turn hemp into cloth.

Until now, it has taken about 60 days to transform hemp fibre into
useable cloth.

But with the enzyme, it takes about five hours to produce Crailar, a
trademarked soft white cloth four times as strong as cotton.

A pound of Crailar can be produced for 42 cents, versus 62 cents for
cotton.

The company plans to begin limited distribution of both cloth and
Crailar garments in 2007, backed by a marketing campaign aimed at
high-end fashion and environmentally conscious consumers.

"We could easily have a break-out year in 2007," says
Kroll.

Sales in 2006 are expected to top $1 million compared to $958,238 in
2005 - which was up 15 per cent from 2004.

"Hemp could be one of the biggest export crops Canada has ever come
across," says Kroll. "It's approaching the tipping point."