CNS Canada — An explosion in demand for Canadian hemp out of South Korea is welcome news for the industry, but strict regulations may hamper just how much of that demand will be met this year.
“The doors have blown off the market in Korea for hemp,” said Kim Shukla, executive director of the Canadian Hemp Trade Alliance at Steinbach, Man.
Six months ago, South Korea was unknown as a market for Canadian hemp; now, “that market requirement is outstripping the requirements for the U.S.,” said Shukla. A promotion on a home shopping channel in South Korea led to sales of 40,000 pounds of hempseed in one hour, according to reports.
Before South Korea materialized with an appetite for Canadian hemp, Canada had been sitting on ample old-crop supplies and contracted acres were down “as this was going to be a clean-up year,” said Shukla.
“Now, we’re beginning to think that we will need to plant more seed to meet the market demand,” she said.
However, the regulations in place for growing hemp are hampering a quick increase in acres, as farmers are unable to get licensed in time.
Due to industrial hemp’s association with its cousin marijuana, farmers need to be licensed through Health Canada and pass a criminal record check in order to grow the crop. Testing is also required to confirm levels of THC, the psychoactive ingredient in marijuana, are below the allowable 0.3 per cent.
After growing about 85,000 acres of hemp in 2015, Shukla estimated that acres may be down to only 30,000 in 2016.
“We could turn around on a dime, and get a whole bunch of guys to put hemp in the ground if we didn’t have that issue,” said Shukla, adding that planted area could easily have topped 100,000 acres given the changes on the demand front.
The CHTA has been working to reduce some of the red tape surrounding hemp production, but has so far not made much headway with Health Canada.
“We went from zero to 100 miles per hour,” said Craig Goodwin, CEO, director and co-founder of B.C.-based hemp company Natural Splendid Enterprises (NSE), on the demand from Korea.
NSE originally expected to be selling about 100 tonnes of product to South Korea during the year, but are now averaging that every five weeks, said Goodwin.
He reiterated the concerns over Canada’s reduced acres in 2016, noting that he “wish(ed) Korea had taken off six weeks before it did.”
Goodwin said customers in Korea prefer Canadian hemp products for their quality, but will buy from China if they can’t get enough from Canada.
With the risk of tightening Canadian supplies and the potential loss of market share, “let’s hope for a bumper crop,” said Goodwin.
While the Canadian industry will be working hard to fulfill commitments, he said, “it will be close.”
Goodwin recently returned from a trade trip to Seoul and foresaw continued growth from Korea through 2016. However, he said Korean demand could see a pullback in 2017, as smaller players exit the market and the initial excitement subsides.
While Korean demand may eventually top out, Goodwin said other Asian countries — including Japan and Thailand — are expected to see growth and will more than make up for any adjustments in the Korean market.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.