Jul 6, 2012
What if someone told you that there is natural, renewable resource that is easy and inexpensive to harvest, environmentally friendly, yields more biomass tonnage per hectare per year than almost any other crop, usable in a wide variety of practical product applications, from health food to textiles construction materials?
What if you were then told that this abundant resource was off limits because it’s illegal in the U.S.?
This month was the 3rd annual Hemp History Week, a celebration of hemp and a showcase of its many uses and applications, with over 800 different events happening in every state across the country. The purpose of the event was to raise awareness of the uses and benefits of hemp and hopefully change some attitudes in the hope that this untapped and potentially lucrative resource can be unlocked.
Currently the United States is the only industrialized nation in the world that does not allow the production of industrial hemp. The US does, however, permit the import of hemp for the manufacture of products that are include hemp in their manufacture.
Prohibition or Innovation
According to Hemp Industries Association (HIA), a non-profit trade group representing hemp companies, researchers and supporters, sales of hemp products exceeded $419 million in 2010. But because hemp farming in the United States is banned, raw materials must be imported, depriving American farmers of a potentially massive new source of revenue. Meanwhile Canadian farmers are already struggling to meet the demand, doubling the acreage devoted to hemp cultivation between 2011 and 2012. Currently ten U.S. states have already passed legislation allowing hemp cultivation, but farmers run the risk of prosecution under federal narcotics laws, creating a significant deterrent to those who might consider getting into the hemp business.
The medical uses of cannabis have been known for some time, offering a variety of health and pain-alleviating benefits. Recently Merck Pharmaceuticals (NYSE: MRK) discovered a way to process hemp that is beneficial to people suffering from glaucoma. The treatment is pending FDA review. US biotech company Cannabis Science (OTCBB: CBIS) develops cannabis-based pharmaceutical products for the treatment of HIV-related symptoms as well as certain topical cancer treatments.
Justin Gover, managing director of GW Pharmaceuticals touts the health and medicinal benefits of cannabis-based pharmaceuticals to treat certain chronic illnesses as well as alleviate pain and discomfort. Novartis (NYSE: NVS) has licensed the commercial rights to Sativex, a cannabis-derived pain treatment for cancer and MS patients for sale in markets in Asia, the Middle East and Africa. According to analysts this is a market potentially worth in excess of $500 million annually.
Spreading Like a Weed
Despite draconian prohibition laws, some companies are in the hemp business in the United States.
Hempcrete, made from a mixture of hemp, lime, and water, is an energy-efficient, non toxic derivative of hemp used in building construction materials. It is resistant to fire and mold, and is a carbon-negative material as more CO2 is locked in the material than is used in the production of the binding agent. While not a structural material in that it cannot support the vertical load of the roof, its used along with other methods to fill in and surround the wall creating the interior and exterior surface and providing excellent moisture transfer and insulation per unit thickness.
Nutiva makes a variety of health and food products from hemp, which are sold in Whole Foods (NASDAQ: WFM) and GNC (NYSE: GNC) as well as on Amazon.com. Whole Foods already offers a wide variety of products made from hemp, from hemp seed muesli to soap to hemp oil, granola bars and hemp seeds. Amazon.com also carries a wide variety of hemp-based products, from food to footwear.
Spins, an industry research firm, reports that the hemp-based food market in 2010 was roughly $40 million, making it "one of the fastest-growing trends" in natural food products according to Whole Foods’ global grocery coordinator, Errol Schweizer.
If not food and construction materials, how about a hemp sports car? The Lotus ‘Eco Elise’, released at the British Motor Show in 2008, is made in large part from hemp components, including the body, hemp ‘eco wool’ trim and hemp water-based paint. This harkens back to Henry Ford’s (NYSE:F) hemp-plastic car for the masses he built in prototype back in the 1930’s before hemp prohibition. Today a number of car manufacturers use hemp and other bast producing fibers in their mixtures to produce plastic body panels.
Looking at the production statistics from Canada, which legalized hemp in the 1990’s we see a very unstable market, with acreages varying wildly from year to year.
What this is suggesting is that hemp has yet to find its way back into the regular economy. Since I started working on this article I kept thinking if hemp is so great the U.S. ban on it would not have an effect on the rest of the world so why is the market for it so infantile?
Is the U.S. Drug War policy so pervasive that it limits the potential use of this super plant?
Moving from Superstition to Cultivation
Hemp has been cultivated around the world for thousands of years, the earliest recorded use was in China over 5,000 years ago. And China produces the lion’s share of hemp with nearly 2 million acres under cultivation. Data is hard to come by, but in 2010 products derives from hemp like fabric and foods represented 4.6 billion Yuan ($718 million USD), and was growing at ~25% year over year pace. This is encouraging, as is the 2007-2010 data from Canada.
This leads me to believe that while hemp has a number of attractive qualities, especially as a productive form of crop rotator, i.e. planting hemp on fallow fields leads to less need for herbicide at the next planting; it has not found its killer app yet. Yes, more paper can be produced per acre than pulp woods but paper usage is decreasing. Just ask H-P, whose printing and imaging division is getting creamed with the rise of mobile computing. Yes, biodiesel can be made from hemp oil, but soybeans and rapeseed create better yields in similar climates. And we don’t even want to compare the economics of hemp oil to palm oil, because there isn’t any.
The prohibition on marijuana in the 1930’s, regardless of what one may believe and the reasons behind the propaganda that circulated at the time, has destroyed the hemp industry in the U.S. and further restricted the research that may have been performed to find uses for it over other legal fibers. It has forever altered the course of the industry.
On June 7, 2012, Senator Ron Wyden (D-OR) proposed an amendment to the Farm Bill, the Agriculture Reform, Food, and Jobs Act of 2012, which seeks to change the classification of hemp and disassociate it from marijuana. The idea is to remove the stigma from hemp, allowing American farmers to sow the crop without running afoul of the authorities, and reap the rewards that they can develop from it. The issue is that hemp is nearly indistinguishable from marijuana from the air so the DEA and Justice Dept. are resistant not b/c of hemp per se but because it would make their job harder to find marijuana fields.
The question now lies in seeing if this nascent momentum in hemp-based products in the U.S. can be translated to other emerging middle classes around the world. The hemp industry in the past 10 years or so looks like more hype than hope. But, that may be solely due to the increased cost of importation back into the U.S. stifling demand. With manufacturing and research now no longer concentrated in the U.S. and Europe continued uses and growth prospects for hemp may emerge.