THE 'SNICKER FACTOR' ASIDE, HEMP IS SERIOUS BUSINESS

Hemp is fast becoming a staple of daytime TV as Oprah, Dr. Oz and
others extol the health virtues of hemp oil, protein powders and
pasta. At the same time, industrial interests tout it as a potential
base for products ranging from textiles to car parts. As a result,
demand is surging in the United States, Germany and Japan.

But American farmers are prohibited from growing hemp. That leaves
farmers in Canada - where it's been a legal crop since 1998 - free to
tap the growing U.S. interest in hemp-based products.

First, though, they must navigate the shifting sands of public
opinion - or, as one Alberta report called it, "the snicker factor."

According to an Alberta Agriculture Department report on industrial
hemp production in Canada, the plant's cultivation evokes chuckles
"largely because of its hippy-dippy image and close association with
marijuana, its consciousness-altering cousin."

Nevertheless, this is serious stuff. The North American market for
industrial hemp - which has only a minuscule amount of the chemical
that gives marijuana its punch - is booming.

For centuries, hemp had been ubiquitous in global commerce - from
paper making to the rope used on sailing vessels - until synthetic
fibres usurped its naval role and global anti-drug sentiment put paid
to the rest.

Now the market, while still small, is growing by about 10 per cent a
year, with annual sales estimated between $350-million and
$400-million, according to some estimates.

Mike Fata, co-founder and chief executive officer of Winnipeg-based
Manitoba Harvest Hemp Foods & Oils, believes Canada's hemp industry
has a golden opportunity to turn lingering taboos on their heads -
especially south of the border. Hemp-based foods, he notes, are rich
sources of protein and essential fatty acids like Omega-3 and Omega-6.

"The great thing about marketing hemp is that hemp is in everyone's
psyche - whether they think that hemp is marijuana or they think that
hemp is clothing or rope or they already know that hemp is a food
product ." Mr. Fata said. "It is easy when you have their attention
to educate them about what hemp really is and all the great things
that it can offer."

Canadian hemp exports have increased by 500 per cent over the past
four years. Even so, total exports were worth just $10.38-million in 2010.

The industry's goal is to generate more than $100-million for the
Canadian economy by 2015, partly by boosting production from 10,855
hectares to 40,000 hectares over that time.

Eager to capitalize on that burgeoning potential, the federal
government recently boosted its investment in the industry. In
December, 2010, Agriculture Canada announced an investment of more
than $728,000 to help the industry boost production capacity and to
increase exports to the United States. That amount was split among
three funding streams - including some repayable contributions.
Ottawa is also handing out more licences to grow the value-added crop
and has increased the number of approved varieties for the 2011 growing season.

Canada's hemp industry, though, is also grappling with some serious
growing pains after years of boom-and-bust production. The high
Canadian dollar is eroding the value of exports, and celebrity
endorsements notwithstanding, hemp has yet to fully shake its "ditch
weed" image with U.S. consumers and regulators.

Toward that end, Canadian hemp food products have yet to overcome a
key regulatory hurdle with the U.S. Food and Drug Administration by
achieving "GRAS" status, an acronym for Generally Recognized As Safe.

Without that certification, Canadian companies are prevented from
selling hemp to big multinationals like General Mills and Kellogg's,
and another three years' worth of costly study is required before the
Canadian industry can even apply, says the Canadian Hemp Trade Alliance.

Mr. Fata of Manitoba Harvest says he recognizes those obstacles but
is optimistic about the industry's long-term potential.

Manitoba Harvest is now one of the world's largest hemp food
manufacturers. Its sales growth has averaged about 50 per cent every
year since 1998. It currently makes 68 per cent of its sales in the
United States, 30 per cent in Canada and 2 per cent in Europe and Asia.

In addition to health food stores, it is penetrating mainstream
grocery chains in the United States and collaborating with Maple Leaf
Foods Inc. on hemp-based research and development in Canada. Manitoba
Harvest has provided product and technical support to Maple Leaf's
majority-owned subsidiary Canada Bread as it experiments with hemp
bakery products, Mr. Fata said.

While hemp foods continue to represent the bulk of the Canadian
industry's exports, there is also a growing appetite for hemp fibre
for industrial uses. German auto maker Mercedes-Benz, for instance,
has been using natural fibre such as hemp, flax, sisal and abaca for
many years in various components. One example is the Mercedes-Benz
CLS, where hemp is used in the door panels.

"A typical example is the application as a base for car interior
lining parts. In these parts, the natural fibres replace mineral
fibres such as fibreglass," said Matthias Brock, spokesman for parent
company Daimler AG. "As reinforcing material, natural fibres have the
same characteristics like mineral fibres but they are much lighter."

With the price of cotton still high, albeit down from its peak,
garment makers are also eyeing hemp as a substitute textile as
manufacturers increasingly experiment with new blended fabrics to
contain costs.

Vancouver-based Naturally Advanced Technologies Inc., established in
1998 as Hemptown Clothing Inc., is developing alternative fibres made
out of flax and hemp. Its Crailar technology uses an enzyme process
to remove lignin, which is the natural glue that binds fibres like
flax and hemp. Doing so gives those fibres a smoother texture and
allows them to be processed in new blended fabrics that can result in
savings for clothing makers because they require less cotton and are
less prone to shrinkage.

Earlier this year, Naturally Advanced signed purchasing and
development agreements for its Crailar flax fibre product with
apparel giants Hanes and Levi Strauss & Co., along with
pulp-and-paper manufacturer Georgia-Pacific LLC and
specialized-products manufacturer Cintas Corp.

Flax is currently much cheaper for Naturally Advanced to process than
hemp partly because it contains less lignin and also because it can
be grown in the United States, where both its pilot facility and
major partners are based.

"We're not giving up on hemp. Hemp is just going to follow in or feed
in after we lead off with flax," chief executive officer Ken Barker
said. "None of our agreements preclude us from having hemp being part of them."

Moreover, the company is also fielding enquires about its hemp fibre
product from a range of other industries, including mattress makers
and the medical sector.

Still, Mr. Barker recognizes that there remains a marketing challenge
for hemp: "That's just the reality of the U.S. consumer."