Hempseed acre increase may lead to excess supply

Chinese production threatens Canada’s export market to South Korea

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Producer.com by  

Hempseed may top 140,000 acres in Western Canada this year, a significant increase from recent levels of 70,000 to 100,000 acres.

If acreage does jump and yields are decent, Canada could produce an excess of hempseed in 2017, says an industry leader from Saskatchewan.

“We are probably going to end up with way more than we need. I’ve been sounding the warning bell, since early January about issues in the marketplace,” said Garry Meier, president of Hemp Genetics International, which contracts hempseed production and provides agronomic advice for growers.

Meier is worried about too many hempseed acres in Canada be-cause foreign competitors, mostly Chinese producers, are grabbing market share in key locations like South Korea and North America.

In 2016, Canadian exports of hempseed to South Korea exploded, to the surprise of many in the trade.

“From $600,000 of exports to $45 million (in 2016),” said Russ Crawford, Canadian Hemp Trade Alliance president, earlier this year.

South Koreans became interested in hempseed after it appeared on a home shopping channel in the country. Suddenly, Koreans began buying huge quantities of hempseed as a replacement for fish oil.

However, China and other countries quickly entered the fray, creating more competition in South Korea and pushing prices lower. Canadian exporters are now selling hempseed at discounted prices into Korea.

“There was some hope that the Korean market would continue at the same pace that it was,” Crawford said. “We’re definitely getting signals now that’s not going to be the case.”

If exports to South Korea are softer in 2017 and 2018, it could affect Canadian hempseed growers and processors because sales to that country were critical to the industry in 2016.

The sector was coping with a glut of hempseed in 2014 and 2015, mostly because of strong yields in Western Canada.

Exports to South Korea helped eat through that glut and stabilized the supply-demand situation.

Meier is concerned that another glut is possible because the North American market is also becoming more competitive.

For years, Canadian hempseed and hemp food products had a stronghold in the U.S. But now, cheap Chinese hempseed, some of it with an organic label, is weighing on the market.

“There is a huge influx of supply, from non-Canadian sources showing up on our shores at discounted prices,” he said.

“There is Chinese (organic) hemp on the west coast of the United States being offered at less than the cost of production of Canadian organic hemp.”

On the positive side, there’s still huge potential for sales growth in North America. Industry data indicates that one U.S. household in 100 has a hemp food product in the pantry, such as hempseed oil or protein. In Canada, the number is three in 100 households.

If the U.S. figure rises to three, five or seven households, it would dramatically boost demand and subdue concerns about 40,000 additional acres swamping the market.

Such demand growth may be possible because hemp is now grown in the U.S. and public perceptions of the oilseed, sometimes associated with marijuana, are changing.

In the shorter run, Meier is still worried about excessive production this year. But the wet spring could cut into the acreage total.

“There’s a sizable chunk of hemp acres that are at risk of being unplanted because of flooding,” he said. “Primarily in northeast Saskatchewan and northern Alberta.”

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