DRUG LAWS HIT HEMP

It was a good news-bad news year for the fledgling hemp industry.

On the plus side, acreage is down to a more reasonable level.

On the negative side, one of the primary markets for hemp oil has dried up.

Arthur Hanks, editor of an on-line magazine called Hemp Report, told 60
producers who attended the hemp session during Crop Production Week, held
Jan. 8-11 in Saskatoon, that Canadian farmers seeded 3,200 acres of the
oilseed in 2001.

This was the fourth year the crop has been legally cultivated in Canada.
Acreage has plummeted since 1999 when growers seeded 34,000 acres of hemp
and flooded the North American market with far more seed and fibre than
could be sold.

A Manitoba company that contracted a lot of that production went out of
business, creating a surplus of hemp seed. Hanks said 3,200 acres is a much
more realistic production base considering current demand.

"This is about where we should be at, really."

Hemp seed doesn't store well so some of the surplus from 1999 is gone, but
there is still a lot of seed out there.

The seed produces flour and an edible oil, which are used in a variety of
health foods and nutraceutical products. There is also a growing market for
oil in cosmetics and body care products.

Canada produces 2.5 million pounds of seed a year, half of which is sold
into the United States, which doesn't produce any hemp, said Hanks. But the
food portion of that market is in trouble.

The U.S. Drug Enforcement Agency published regulations in October that
place an absolute ban on hemp food products that contain even trace amounts
of the narcotic tetrahydrocannabinol, or THC.

Canadian regulatory standards limit THC content to 10 parts per million,
but that is too high for the drug agency.

"America has a drug war and hemp is just caught in the crossfire there,"
said Hanks.

He said it's frustrating because people can sell poppy seed bagels in the
U.S., which contain trace amounts of opiates, but they can't sell products
made from hemp oil or hemp flour.

"We're not pushing liquid marijuana down people's throats in hemp oil,"
said Hanks.

The DEA gave retailers time to take product off their shelves but that
grace period ends Feb. 6, when an absolute ban will be implemented. Hanks
said the regulations shouldn't affect shipments of hemp oil destined for
use in cosmetics or seed and fibre used in other non-food related products.

Hanks also said the future is not all doom and gloom in the U.S. Americans
are beginning to express interest in hemp products.

"It's got a real buzz there."

Those potential consumers could be important allies in the political fight
to get hemp food products back on store shelves.

Hemp-based food and cosmetics are an estimated $20 million industry.

But Hanks said it's time to start exploring industrial uses of hemp such as
biofuels and to exploit the demand for certified organic products rather
than relying so heavily on food and cosmetics, which use small amounts of
the oil.

Some good things are happening on the fibre side of the business. A couple
of Canadian companies are making erosion control blankets out of hemp. But
people who are counting on the hemp textile industry taking off should
forget about it, said Hanks.

Current contract prices are running in the 20 to 25 cents a pound range for
conventional seed, while organic seed is fetching about 60 cents.