HEMP - SOUTHWESTERN FARMERS PONDER ECONOMICS OF HEMP CONTRACTS

40 To 50 Farmers Will Be Getting Fibre Or Grain Contracts To Grow The New
Crop This Year

PAINCOURT—David Anderson said, “I think I can make a buck on it.”

Kenex director of operations, Jean Laprise, said, “Show me the money.”

In fact, it was all about money when more than 300 farmers gathered here on
Wednesday to hear what the Paincourt hemp processing company Kenex expects
to pay for hemp this year.

Anderson is a Belle River farmer who hopes to grow hemp, and Laprise is
director of the company poised to contract the growing of 2,000 acres of
hemp this spring.

Laprise started off by telling farmers his company has spent money for
three years. “We haven’t seen any money,” Laprise said. Instead he said the
venture has been a money pit. “The pit is a little deeper than I thought.”

But that wasn’t to say Laprise or his partners, including Claude
Pinsonneault who got him into the hemp business, are about to throw in the
towel.

In fact, Laprise asked farmers who want to grow the crop to get into the
pit with him. “We had to look long-term and we are going to ask you to look
long-term,” he said before laying out the content of contracts Kenex will
let to 40 or 50 growers this spring.

Among the hurdles, every grower will have to get a license from Health
Canada. No license, no seed because that all comes from Kenex.

The other thing farmers will have to do is provide storage for the crop. If
it is stored long-term, they will get money from April through August for
every month when hemp is stored on their farms. If they don’t have storage,
they will be less attractive to Kenex but the company is putting up some of
its own storage to take some of the crop.

Expenses will include combining for those with grain contracts. Those costs
haven’t been worked out yet but the low end being speculated was CN$50 an
acre. Cutting and turning will go on top of that and trucking costs will
depend on yield but could run more than CN$90 an acre for those with fibre
contracts who achieve the expected yield of 3.5 tons per acre.

People with grain and fibre contracts can expect about two tons of fibre
and grain yields of about 1,100 pounds per acre. Kenex expects contracts
will be divided 60 per cent for grain and fibre and 40 per cent for fibre
alone.

Bottom-line expectations are that growers with fibre contracts who get
three tons per acre will net CN$235 an acre after expenses of CN$590 an
acre. Those who get 3.5 tons per acre should net CN$337 after CN$626 in
expenses and those who get four tonnes per acre can expect to net CN$437 an
acre after expenses of CN$663 an acre.

Those farmers with grain and fibre contracts will receive CN$200 a ton for
their fibre, or CN$75 less than those who grow for fibre alone, but they
are expected to gross CN$950 an acre for grain and fibre and net CN$420.50
an acre.

This year, Kenex is providing all the seed and carrying those costs until
growers receive their first payments. Kenex promises to pay growers CN$275
a ton “for baled hemp delivered at 15 per cent moisture or less.”

Farmers will get CN$400 an acre on or before October 31st with the
remainder being paid in one-third increments January 15th, April 15th and
August 15th.

Growers of grain and fibre can expect to get 25 bushels per acre of grain a
44 pounds per bushel. Kenex will pay CN$0.50 cents a pound “for clean grain
a 10 percent moisture.” Kenex will pay drying costs this year.

Those grain and fibre growers will get CN$450 an acre on or before November
30th, with the rest paid in thirds February 15th, May 15th and August 15th.

This year, Kenex expects 60 per cent of its growers to be in Kent with the
remaining growers in Essex and Lambton. One grower will be in the
Tillsonburg area.

Laprise said the company is overseeing all the cutting and combining this
year and therefore the grain and fibre growers will be as close as possible
to the Paincourt plant. All fields will have to constantly open for
inspection and GPS located. Kenex will pay for the GPS locating this year.

A number of questions were raised by farmers after the session. One farmer
asked if no till works for hemp and Laprise said it does. The best soils
are clay loams and sandy loams. Heavy clay and wet, poorly drained ground
is not recommended.

Laprise said they have planted hemp after soybeans, corn, peas and hemp
with good results. He also said they haven’t experienced problems with
sprayed rift.

Recommended row widths are not more than ten inches. Most seeds will be
drilled in seven-inch widths.

While farmers say their reasons for looking at the crop are economic, most
also say they wanted to add something new to their rotation and the idea of
not having to spray for weed control was also appealing.

Laprise said they hope to be able to offer seed contracts to farmers in two
years. The company is current paying up to CN$3.75 a pound for seed from
Europe.

Pinsonneault said it will be at least a month before contracts will be let
because they have to wait for grower licenses to be available from Health
Canada.