Canada’s hemp industry shrank last year amid slow-moving CBD regulations, USDA says

Canada has a 20-year head start on the United States in growing and processing hemp.

But Canada’s acreage shrank in 2018 as the nation lagged behind its southern neighbor in developing a market for hemp extracts such as CBD, according to a new report from the U.S. Department of Agriculture (USDA) that highlights Canada’s industrial hemp industry.

Canada, which has allowed commercial hemp production since 1998, has established itself as a world leader in production of hemp food products as well as agricultural hempseed for planting, according to the report.

Much of that hemp goes south.

More than 70% of the country’s 5,400 metric tons of hempseed exports last year went to the U.S., with the remainder being sent to European Union-member countries and South Korea.

The six-page USDA report noted that Canada’s hemp regulations changed last October to expand the plant’s legal uses beyond seed and fiber, opening the door for Canadian CBD production from hemp.

But Canada’s hemp industry remains “strictly controlled by the federal government,” with limited access to higher-value cultivars, according to the USDA.

“Although the new hemp regulations are meant to open additional revenue sources and market opportunities by allowing producers to harvest the flowers, leaves and branches of the hemp plant, high-CBD varieties have yet to be registered for use in Canada,” the report concluded.

It did not speculate as to why Canada’s hemp acreage shrank last year.

Meanwhile, Canada is one of the largest buyers of U.S. agricultural products overall, receiving $20.7 billion in U.S. agricultural exports in 2018, according to the USDA’s Foreign Agricultural System.

Michael Bronstein, co-founder of the American Trade Association for Cannabis and Hemp (ATACH), said it’s clear that in developing the report on Canada’s established industrial hemp industry, the United States is looking for guidance – and also keeping an eye on what it needs to do to compete with Canada.

“It’s telling that the USDA is looking to the north at what Canadian regulations look like,” Bronstein told Hemp Industry Daily.

“Canada is a pretty developed hemp market, especially as it relates to their facilities, seed (production), seed certification – things that the United States is looking to develop.”

Canada’s slow start

The USDA report details Canada’s status in various areas of industrial hemp, including regulation, trade and industry development, hemp in animal feed as well as CBD rules.

While Canada legalized hemp production in 1998 and since then has produced hemp primarily for nonviable hempseed used in food products, the industry has grown rather slowly over the past 20 years as producers worked through agronomic issues and a limited number of processors developed hemp products and markets, according to the report.

In 2018, the country planted 77,800 acres of industrial hemp, according to the most recent data from Health Canada.

But that number has actually decreased from a high of roughly 123,000 acres in 2017, according to Hemp Industries Association President Joy Beckerman.

“Canada allowed for federal crop insurance right out of the gate … and that really allowed them to move forward,” Beckerman told Hemp Industry Daily.

“Now, having said that, what have they done with that opportunity? They certainly have at least temporarily made themselves a world leader, but as of 2017, they had only grown up to 123,000 acres, and in 2018, they dropped by several thousand acres.”

Compared to the U.S., which has grown rapidly and licensed up to 250,000 acres of production in 2019 despite not yet having federal crop insurance in place, it’s clear the U.S. hemp industry is set to surpass Canada’s, Beckerman said.

Cannabinoids regulated like all cannabis

Canada has nationwide marijuana but is still working on cannabinoids as an ingredient for human or animal consumption, Marijuana Business Daily International reported.

The 2018 Cannabis Act, which legalized recreational marijuana in Canada, also incorporated new industrial hemp regulations that permitted growers to produce and harvest hemp flower, leaves and branches and sell them to licensed processors for cannabinoid extraction, opening up new opportunities for the industry.

Production and distribution of cannabinoids and products that contain cannabinoids are still regulated as cannabis under the 2018 regulations.

According to the USDA report, any Canadian products containing CBD must be accessed through licensed cannabis retailers or by prescription for medical purposes.

But the sale of natural health products containing cannabinoids, including CBD, remains illegal.

“The Canadian hemp (Canadian Hemp Trade Alliance) and natural products industries continue to advocate for a different regulatory regime for CBD-containing products,” the USDA report notes.

Transporting cannabinoids and all cannabis from Canada internationally also remains illegal without a permit.

Despite the limits, Canadian consumers are buying CBD products outside legal channels, with cannabis products with unauthorized health claims commonly sold in unregulated channels, according to the MJBizDaily International report.

Hemp and CBD for animals

Another similarity to the U.S. is that Canadian hemp products are not currently approved for livestock feed ingredients, the USDA noted in its report.

However, Canada has a process in place for companies to apply for approval of each ingredient.

There is also currently no legal pathway for veterinarians in Canada to prescribe CBD or other cannabis-based medicine or for companies to produce pet products containing cannabis.

The Canadian Veterinary Medical Association submitted proposals last year to Health Canada to request that cannabinoids such as CBD be approved as an ingredient for animal food and veterinary products.

However, only one company is approved for research trials, and no approved pet products containing cannabis are on the market in Canada.

U.S. market gaining investment from Canada

Based on the United States’ exponentially larger population size – 329 million compared with Canada’s 37 million – and the clear consumer demand driving the marketplace, Bronstein said the U.S. hemp industry’s rapid growth has captured its northern neighbor’s attention.

While the country may ramp up its efforts to compete, investment from Canadian marijuana companies into U.S. hemp opportunities is telling.

“A lot of the Canadian hemp industry believes that the Americans don’t know what they don’t know yet around hemp, but a lot of companies have acquired the knowledge,” Bronstein said.

“We’re seeing a lot of the more mainstream cannabis companies in Canada dip their toes into what they believe will be a lucrative United States market … because it’s just a huge market relative to where Canada could be, so the United States is looking to increase supply as that demand is clearly there.”

Laura Drotleff can be reached at [email protected]