ONTARIO HEMP INDUSTRY READY FOR GROWTH

Rising Oil Costs Make Natural Product Viable Alternative

The provincial hemp industry is at a pivotal time, the president of the
Ontario Hemp Alliance says.

"The rapidly increasing cost of oil is putting a lot of industries into a
serious mode of pursuing bio fibres and alternative sources for energy,"
Gordon Scheifele says. "A year or six months ago, it was only curiosity or
interest."

Industrial hemp is an alternative to synthetic materials for products,
including car interior linings, plastics and carpet backing. Hemp is also
used to produce cooking oils and other food products, Scheifele says.

He adds, however, that Ontario's hemp industry is still in its infancy in
terms of growing, processing and commercialization.

The herbaceous annual crop produces strong and versatile fibres and a
highly nutritious grain. Until 1998, it was illegal to grow industrial hemp
because of its association with marijuana.

Scheifele says that while there is substantial research being done in
Ontario for alternative uses of hemp fibre, there are only a few large
commercial players.

Ruth's Hemp Foods in Toronto has an extensive line of food products, and
Cool Hemp in Killaloe processes hemp for an ice-cream dessert used in a
President's Choice health-food product. Hempola in Barrie produces hemp oil
and flour, as well as other food products.

A Chatham-based company, Kenex Ltd., has been running an industrial hemp
research program since 1995 with Ridgetown College and the University of
Guelph. It is developing products, including building materials, automobile
interior parts and animal bedding and feed with other companies, the
company website says.

Manitoba is the largest producer with between 11,000 and 12,000 acres, most
of which is used as low-grade fibre that is added to wood and plastic
mixtures, Scheifele says. Ontario has between 400 and 500 acres devoted to
grain production, while another 100 to 125 acres are used for seed production.

The Ontario Hemp Alliance, which is based in Chatham, has 50 members.

"There's a strong demand for what is called technical fibres, using hemp
fibre as a low-cost, high-performing reinforcement in composites like
plastics," says Geof Kime, president and a co-founder of Hempline Inc. in
Delaware. The London-area company is a leading producer of hemp fibres.

"The automotive industry has adopted the technology of using natural fibres
as reinforcement, particularly in interior trim parts," Kime says.

Kime and Hempline co-founder Joe Strobel were granted the first research
licence in Canada in 1994 and grew the first crop of industrial hemp in
North America since the 1950s. Kime says that before he and Strobel
established the company in 1998, they looked at different varieties of hemp
and growing technologies.

Hempline is a first-stage processor, and Kime - who is an engineer - has
developed equipment that can separate hemp stalks on a large scale, a task
others are doing by hand or experimenting with mechanizing. He says the
company is the only one in Canada that can do this work.

Kime's equipment can process between two and three tonnes of hemp an hour.
The company sells the hemp fibres in the United States to the automotive
industry and to carpet-backing manufacturers, among other users.

Kime says the company hopes to secure funding later this year to expand its
8,000-sq.-ft. pilot plant and buy more equipment. "We are working to expand
our capacity so that we can supply markets that we have established for
hemp fibre."

Scheifele says the industry has received too little help from government.
"We in the hemp industry feel that we have not been adequately supported by
the Ontario government in helping us develop this industry in agriculture
production, as well as on the commercial side."

Kime says the industry still has to educate the public that hemp is not a
drug. Marijuana and industrial hemp share the same leaf shape and are both
derivatives of the cannabis plant, but the similarities stop there, he says.

Tetrahydrocannabinol (THC), which is the psychoactive ingredient in
marijuana, is found only in trace amounts in industrial hemp and there is
not enough to produce a high, Kime says.

As a food product, however, hemp is proving to be a healthy choice, says
Ruth Shamai, who owns Ruth's Hemp Foods. The grain is about 24-per-cent
protein and 30-per-cent oil. The oil is high in essential fatty acids and
also contains anti-oxidants.

Shamai started an environmental mail-order company in 1990s that included a
line of hemp clothing and then shifted into food production. "There are
lots of clothes on the market, but virtually no hemp foods, so it seemed
like a better idea," she says.

The company makes hemp-based foods including Omega Burgers, hemp bars and
hemp salad dressings. The hemp bars, which cost about $1.59 each, are the
most popular items.

Business has doubled from last year, she says, and she expects it will
increase threefold next year. The company began distributing its products
in the United States in September 2004.

"We're already up to 50/50 (Canada-U.S.) after such a short time," says
Shamai, who distributes to health-food stores as well as mainstream stores
including Shoppers Drug Mart and London Drugs.

Shamai has more than 500 acres of hemp production under contract with
farmers in Alberta, Saskatchewan and Manitoba. Co-packers manufacture the
company's products, which are shipped from warehouses in Buffalo and Toronto.

Scheifele says that while people such as Shamai have been successful, the
Ontario industry has some distance to travel and its future lies in working
with others in the Canadian hemp industry.

"Ontario's (production) will always be small - in acreage - relative to
Manitoba and Saskatchewan, simply because of size and other competing crops
we have in Ontario," he says.

"So we have to develop a strong partnership between Ontario and Manitoba.
The fibre demands are going to require a strong orchestrated partnership to
supply that fibre," Scheifele says.