A global perspective and analysis of the potential of hemp’s sustainability
By Robert Ziner
Just as iron ore is a primary commodity, and steel is a secondary product, the seed and CBD outputs from hemp are strictly primary – while only the fiber is secondary. As primary commodities, hemp seed and CBD pricing react swiftly to the world’s quick changing market dynamics, driven by inevitable and often unpredictable pricing fluctuations. For example, in 2018, global hemp seed prices dropped about 25% because China doubled their seed crop. In the same way, the market price of CBD, very high only a year ago, is projected to fall over 70% in 5 years due to a global rush to supply, including the recent introduction of synthetic CBD. Over the long run hemp fiber will become the most relevant part of the hemp plant, and the most valuable of its outputs. It will prove to be the only stable market in the hemp industry.
However, hemp fiber will respond to changing market needs as a secondary “feedstock” product, without being impacted by lower prices for many years. This is because there is a huge gap between the existing supply and potential demand in the global marketplace. As the supply of large volumes of quality-controlled hemp fiber increases, more commercial end-users will learn of hemp’s benefits and choose to pursue hemp for their feedstock needs. These large potential users will learn that the potential benefits of choosing hemp fibers include: • Greater profitability across the Value Chain • Sustainability; environmental friendliness • Lighter weight • Increased rigidity • Lower overall cost of finished products.
There would be a significant additional cost savings if a primary hemp stalk processor would be able to integrate secondary production directly with primary processing. There are many large existing markets available for hemp fiber.
In North America alone these include: Hurd Products (USA$) 1. Animal Bedding $ 250 M 2. Industrial Absorbents / Erosion control $ 450 M 3. Kitty Litter $ 1,300 M 4. Hempcrete $ 1,000 M Bast Products: 1. Engineered Fiber bio-pellets (thermoplastics) $ 7,000 M 2. Engineered pulp/ paper products $ 1,300 M 3. Non-Woven mats and blankets $ 350 M 4. Textiles (woven) $ 3,500 M 5. Nano-materials (to replace graphene $ 350 M 6. Insulation batts $ 1,000 M Total North American market potential $ 16.5.
Given the amazing versatility of both hurd and bast as cost-effective, environmentally friendly building material, the growth of this market alone in North America is expected to reach over $1 billion by 2025.
It’s clear the greater the supply of quality-controlled fiber for the marketplace, the more demand will increase, and in turn, cause a further increase in supply. This is because current large-scale users do not specify hemp because the volumes needed to service large-scale opportunities simply can’t be cost justified today, including: training, marketing and largescale logistics.
Using hemp fiber as feedstock in many existing product applications is an opportunity to achieve meaningful cost savings. Once commercial end-users understand that there is an increasing supply available, they will be encouraged to pursue their opportunity for lower costs and better products. Growing demand will cause growing supply – not lower prices. Of course, this does not mean that fiber prices will never go down. With the environmental problems being addressed today, a supply/ demand equilibrium is unlikely to materialize for at least the next 20 years. A significant area of savings will emerge from integrating the production of high-value secondary products directly into the primary processing of hemp stalk. The opportunity is to integrate the automation using advanced manufacturing technologies such as scanning, artificial intelligence (AI) and Machine Learning (ML).
The fiber market will grow substantially over that time – bringing scale opportunities and financial success to the innovators. Whether from the perspective of a farmer, a large-scale decorticator, or a major end user of fiber, the hemp plant’s fiber will end up being the long-term, dependable and most profitable output of the hemp industry. When the price of hemp seed or CBD retreats, the fiber will always be there to stabilize the opportunity for the farmer. Even before the price of CBD falls in the future, farmers owe it to themselves to look into the new economic opportunity of growing hemp for fiber. (NOTE: All numbers provided are in $CDN = $.74 USA – unless otherwise noted)
Hemp is derived specific varietals of the cannabis sativa family which contain less than .03% THC, a psychoactive ingredient. Hemp caters to 3 of the 4 available market segment opportunities: 1) Marijuana THC .03% – Recreational/ Medicinal 2) Seed/ Oil THC .03% – Nutritional 3) CBD THC .03% – Medicinal and therapeutic 4) Fiber THC <.03% – Industrial Applications and Textiles.
Starting in 2015, legal Canadian “cannabis” companies – focused on medical marijuana – began to emerge. They were all focused on the growth and large-scale opportunity they already knew had existed in the previously illegal, underground black market for “weed”. There were many long -time buyers “out there”. This meant a large platform already existed on which to build scale. However, the impact of aggregating and making supply more transparent has reduced market prices by about 15%. The early entrants made a fortune on their investments because they recognized there was a proven history of large-scale demand. Over the last 25 years many countries have chosen to re-legalize hemp’s psychoactive cousin, marijuana: That is, any cannabis varietal containing more than .03% of the cannabis plant’s psychoactive element, THC. Some countries have made “pot” legal for medicinal purposes and many have already made it legal also for recreational purposes. The countries having legalized THC cannabis to date include: Argentina Australia Canada Costa Rica Czech Republic Ecuador Israel Jamaica Mexico Netherland Peru Portugal South Africa South Korea Uruguay Although the federal government in the USA has not yet made THC products legal, on Dec. 28, 2018, the federal government voted to allow industrial hemp to be legalized. To date, over 40 States have legalized marijuana to be sold, for either medical or recreational use. It is expected that due to the proven large tax revenue opportunity in “pot”, the USA will very soon join this list.
Hemp is a natural fiber, “similar” to cotton, wood, jute, kenaf, bamboo and other grasses. Compared to other natural fibers, hemp’s benefits are its ability to add strength and durability, as well as its lighter weight. Hemp and a few other grasses are high in cellulose, the natural form of rayon – traditionally synthesized from wood fiber. Cellulose adds structure and strength to objects: It was what nature uses generally, to keep a plant standing up. Cellulose from hemp fiber can be isolated and added to other products to make them stronger; and because it is hemp, the finished product will be lighter in weight.
Two kinds of fibers are derived from the hemp plant’s stalk: The exterior “bast” fibers, and the inner (core) “hurd” fibers. Bast fibers are strong and similar in length to softwood fibers. They are very low in lignin, the natural glue that binds plant fibers together, making them more rigid, stuck together and difficult to separate. Hurd is more similar to hardwood “chips”, higher in lignin than bast. Hemp, unlike some other grasses like bamboo and sisal, does not need to be processed chemically for the fiber to be utilized. Bast is an ideal natural fiber already proven to be an ideal, cost-effective feedstock for thermoplastic production, across Europe and Asia. In 2018, these markets generated over $US 600M in hemp fiber revenue.
Fiber processing is a relatively new industry in North America but it is in fact an established, thriving business, with markets already proven in Europe and Asia. It will very quickly generate valuable new financial opportunities across North America – just as marijuana did in 2016. Compared to growing hemp for seed or CBD there are up to 6 times the number of plants / acre when growing for fiber.
The intention is to crowd the plants, minimizing branches and having as much as possible of the sun’s life-force go into the stalk. The stalk in these plants grow up to 14 feet and thereby generate more stalk volume, as well as better quality stalk. The dense, fast growing hemp plants lock out weeds, significantly reducing the need for herbicides. Hemp fiber as a commercial feedstock currently has two basic, well-understood problems: • A lack of consistent, large-scale supply to ensure availability • A lack of consistent quality bast fiber The need in the market is to provide a scalable supply of quality-controlled hemp fiber. This will give large-volume commercial end-users the confidence to specify hemp as a reliable feedstock. Availability and quality are the biggest issues in hemp fiber.
The market recognizes the fundamental benefits of hemp and is willing to pay for these benefits: It simply wants to know it will be there when they need it.
Global Hemp Production: Seed
In 1998, Canada re-legalized the growth and sale of industrial hemp – cannabis varietals which have less than .03% content of its psychoactive component, THC. The world has quickly accelerated its acceptance, and in 2021 the countries where hemp is legal to be grown include: Belgium , China, Denmark ,Finland, France, Germany, Great Britain, Hungary, India. Italy, Israel, Japan, Netherlands, Poland , Romania, Russia, Spain, USA , Lithuania, Poland and Thailand.
Hemp seed is well known, as is the oil which is pressed from the seed. It is a highly nutritious food product and delivers the highest concentration of a vegetable-based protein for human consumption. It is also tasty and delivers a perfect balance of Omega 3 and 6 vitamins. In 2020 Hemp seed (non-organic) generated about $380 / acre net to the farmer.
Hemp oil is made from the seed. Both products are very well received by the market with very versatile applications in both consumer and industrial markets. Organic seed will generate about $800 / acre net, but it is very difficult to get the organic nitrogen fertilizer – manure – in large quantities, for large acreages. Seed is a commodity: Its price is determined by supply and demand. Canada became a major hemp seed grower by 2017, harvesting over 125,000 acres. The largest customer was South Korea. Meanwhile, China, intent on reducing its cotton industry started doubling its hemp crop each year since 2015 – when it grew 250,000 acres.
In 2018 they increased planting by 250,000 acres for seed, as well as 250,000 for fiber. China made a deal with South Korea and global prices fell 22%. One can expect that as China continues their move away from cotton and plants more hemp for seed, prices will continue to be eroded globally. Economics: supply and demand. 2) CBD – emerged as the next big cannabis frontier around 2016. The market was already thriving in Europe and Asia, delivering huge profits for the early adapters. The news spread quickly of the “huge” financial returns being generated and very quickly outdoor hemp CBD farming quickly began to appear. The Industry has recognized that CBD will be a huge industry, but it will be shared with world-wide growers , as well as synthetic CBD formulations which are expected to disrupt the CBD market.
In 2020, CBD prices dropped almost 75% in North America, from their highs in 2019 and there are concerns that they could continue to be reduced, especially with the confused “regulations” caused by governments around the world – and potentially, by synthetic formulations. Nobody goes into a store and asks for natural Willow Bark Extract when they have a headache; they ask for “aspirin” – the synthetic version. The US federal government’s legalization of hemp in December, 2018, created a new opportunity for farmers to harvest hemp’s leaves and flowers for CBD extraction.
In 2019, in those States allowing hemp to be grown to extract the CBD from the flowers and leaves, farmers earned over $3,500/ acre.
The price per acre dropped in 2020 to about $1,500/ acre due to farmers across the USA growing large volumes of hemp for CBD resulting in increased supply. The fast growth in CBD supply also resulted in a great deal of government confusion regarding regulations. In the future, it is expected that CBD will be a very large, lower-priced, market. It must be noted that the cost to plant, maintain and harvest the flowers used for CBD are also EXTREMELY high. This is because the flower is extremely fragile and the trichomes which house the valuable pollens are easily lost in harvest. As well, the flowers must be quickly taken from the harvest to be stored in a very careful – and relatively expensive manner.
Hemp fiber has been used for textile and building product applications for over ten thousand years. It was the source of the rope used in all Viking ships, as well as all their sails. Until the early 20th century when hemp was made illegal across North America, over 95% of the paper produced was made of hemp. As a textile, hemp was always known to be strong, durable and comfortable, with an extraordinary benefit of being naturally anti-bacterial. It is also environmentally friendly and sustainable. CIHC projects that growing hemp for fiber could reasonably pay farmers a NET return in the range of $800 to $1,800 per acre.
Hemp fiber is extremely versatile. Construction applications offer a broad spectrum of opportunities for hemp, with some applications transforming fiber into a product stronger than concrete. Other large-scale existing applications include the production of bio-pellets, made from hemp and a low concentration of a compounding polymer. These bio-pellets are sold to thermoplastic producers and compounded at their premises to produce bio-composite products, which allows them to use their preferred polymers. There are many other innovative proven products. This includes replacing the glass fibers in fiberglass batt insulation with bast fibers.
Bast is lighter in weight, healthier to live with and considerably lower cost. Another is the utilization of hurd to provide the best alternative to clay for kitty litter: It is lighter in weight, cost competitive, and healthier for both you and your cat because it contains no crystalline silica which can cause irreversible lung disease. Significantly, unlike clay, hemp disposal does not create environmental problems. Hemp fiber is “the last frontier” of the hemp plant. Processing the stalk into fiber to be used in a wide variety of consumer and industrial products has been practiced globally for almost 3,000 years. Although the industry is already well-established in other geographic areas where it had never been made illegal, it has experienced very slow growth in Canada since 1998 – primarily because of: • High equipment capex • Low scale production limits the supply chain’s efficiencies • Low margins restrict investment in process engineering and automated quality control • The high labour component associated with the low volume, slow production capabilities of conventional hemp processing. In fact, to address these realities the larger existing companies in Europe have been building their new conventional processing facilities outside of Germany, Holland and France – the original European hemp processing zone – to Romania, the Czech Republic, all areas of relatively low labour cost. In this regard, North American producers will have no choice but to develop and implement advanced manufacturing capabilities to help them lower their labour input costs.
Growing for Seed crop
Harvesting takes place at 16 weeks when the seed has matured. This process requires the utilization of a combine harvester. This sophisticated, large and very expensive piece of equipment effectively tears the pods of seeds off the stalk, often resulting in fiber ripped from stalk getting wrapped around moving parts of the harvester – causing problems, and even fires. The stalk is left lying on the ground, fanned out in a steady row where it fell when released by the harvester. This method results in damage to a significant portion of the bast fibers in each stalk and restricts the fibers application in high value and textile quality outputs. As a crop grown for seed, the average amount of stalk generated per acre is 1.25 tonnes.
Currently in Canada, almost all of the processing of hemp stalk into fiber is being performed on crop being grown for seed. This is important for the following reasons: • It is estimated that over 93% of the stalk created in Canada is burned by the farmers in their fields. • Grown for seed, the plants are kept wide apart to encourage more sunlight into the seed pods. This encourages their growth and increases the seed output. This also tends to restrict the height of the stalk and encourages more branches – with more pods – to be formed. • Seed is usually harvested using a combine, which creates operational issues: The fiber is so strong that if stalk wraps around the moving parts of the combine harvester, the fiber will not break. Rather, it will end up damaging the combine itself, and in some cases set it on fire. • Harvesting seed through a combine is an aggressive mechanical process which often damages, and thus degrades the value of the resultant fibers.
Growing for CBD
Harvesting takes place at around 13 weeks when the flower and its CBD are at their prime, (3 weeks before the seed matures) and before the lignin in the plant starts to take the plant into seed maturation. The harvesting of CBD requires a careful process designed to salvage much of the hemp plant’s crystalline CBD, before it is shaken off the flower into the field. Currently, swathers are used to cut the stalks at the ground level allowing them to fall over onto the field – where they are manually handled.
The process needs to be relatively slow, and gentle. New equipment is being developed globally at this time, to enhance the productivity – including the development of autonomous vehicles operated by sensors. As a crop grown for CBD, the average amount of stalk generated per acre is estimated at a minimum of 1.25 tonnes.
The huge global growth in the hemp-based cannabinoid (CBD) market over the last 2 years has resulted in a growing demand and opportunity for growing hemp outdoors. Globally, this has resulted in tens of thousands of acres being directed to hemp for CBD crops. There are large crops being pursued everywhere – and in large numbers. As a commodity, the price of CBD is expected to erode as the supply grows. Another risk is synthetic CBD: Will people care – or maybe even prefer the consistent quality of synthetic CBD
Growing for Fiber
Harvesting fiber crop takes place at around 13 weeks, at the same time as the flower and CBD mature. That is, three weeks before the seed matures. Harvesting these stalks, grown for fiber, 3 weeks before the seed matures will generate a greater quantity and better quality of more valuable fiber, less stress for a farmer to harvest all their crops, in cases of an early autumn frost It Is much easier harvesting for fiber as it does not require the use a combine harvester, unlike seed – which does.
Combines damage the stalk when they separate the seed, often causing individual fibers to be ripped away off the stalk which then wrap around moving parts of the harvester – causing mechanical problems, and even igniting fires. Instead, a swather is used to cut the stalks at the ground level which results in them falling to the field where they are left to begin a natural biological degradation process (“retting”) which separates the external bast from the inner, core hurd.
As a crop grown for fiber, the statistical amount of stalk generated per acre is 3.6 to 12 tonnes. There is a greater volume of quality fiber produced because the fiber-oriented varietals generate a greater percentage of high-value bast fibers, due to the larger diameter and length of the stalk they produce, and the fact that there are 4 times the number of plants / acre, when hemp is grown for fiber only. A fiber-focused approach increases the decorticator’s revenue as well as the farmers because it generates better quality fibers which can be easily sold into higher-priced textile markets.
Processing fiber crop
Takes place when the fiber matures around 13 weeks, around the same time as the CBD matures. That is, 3 weeks earlier than seed. These 3 weeks are very important in northern growing areas, where the summer brings longer days of sunshine making the plant grow faster and taller, but in these areas the growing season is shorter and winter can come early and unexpectedly: 3 weeks additional time makes a considerable difference in reducing harvest risk and allowing farmers more time to harvest their other crops.
The average amount of stalk generated from crop grown for seed is 1.25 tonnes / acre. However, when grown for fiber, CIHC is projecting 5 tonnes per acre. This takes into account that there is more stalk volume per plant due to the increased diameter and length of the stalk, as well as there being more than 4 times as many plants per acre. This added volume plays a considerable role in the overall economics of both hemp farming as well as decortication production. Hemp grown for fiber alone is expected to generate NET revenues to farmers between $800 and $1800 per acre – the highest, largevolume crop revenue opportunity in the Prairies.
Dual crops Seed and Fiber
Traditionally, most dual cropping was for seed and fiber. It is still done this way today in Europe and Asia. The idea is to get revenue from both crops. The problem is that the fiber produced is of secondary quality, over-matured because it is harvested only after the seed has matured – at least 3 weeks after it matured. The fiber is degraded and has a lower market value.
The combined economics of a Seed / Fiber crop are still lower than for growing premium-quality fiber (only) varietals, to be harvested at 13 weeks. Dual crop harvesting costs are obviously higher than a single crop, especially when a combine is involved – as it is with Seed / Fiber crop. Seed and CBD: The considerations and economics are the same as dual cropping for a Seed / Fiber • conflicting maturity dates • seed necessitates a combine to be used for harvesting • the difficulty of running a combine o to collect the seed without destroying most of the flower and losing most of the CBD. CBD and Fiber crop: This is the most practical combination of dual crop farming – PROVIDED that the plants are not dwarfed purposely to facilitate flower harvesting; which is often the case. • Same maturation for fiber and CBD o both crops have the same maturation time, 13 weeks o before natural lignin formation causes brittleness of fiber and reduces its strength • no combine required to harvest • highest market opportunity of all dual crops with a reduced risk profile – until CBD prices fall further. o “fuller” utilization of plant o the risk of CBD prices falling could be mitigated by the growth and stability of the fiber industry o no combine is required • the focus is on gentle handling of the CBD-filled flowers during harvest: This is ALWAYS an expensive proposition.
Introduction to hemp and environmental plastic pollution
Hemp is a plant, grown across the globe, which has internal fibers which offer a valuable opportunity to reduce the volume and the impact of thermoplastic production. Thermoplastics use heated oil-based polymers and use various methods to shape them – including extrusion, injection moulding and compression moulding. These “plastic composite products” range from single-use retail bags up to complex compounds for specialty applications. Once they are formed and dry, they are almost permanent – and will take hundreds of years to naturally breakdown. As a natural fiber, hemp can be used in a broad range of thermoplastic applications to add strength, reduce weight, displace polymers – and reduce cost. The opportunity is to replace as much volume of the polymers as possible with the hemp fibers – to reduce weight and cost and increase durability and environmental benefit. Hemp seed oil can also provide a natural polymer, creating cost effective bio-degradable plastic products – where appropriate. This is expected to be a huge opportunity for the hemp fiber industry.
.Robert Ziner is the CEO of Canadian Industrial Hemp Corporation (CIHC). He founded CIHC in 2016 after being sent to China by the Canadian Alberta government, to determine if AI could be effective in building a viable and thriving hemp fiber industry in that province. He has a 30 year history in AI and advanced manufacturing technologies as they relate to natural fibers. In 1989 he partnered with General Electric’s Factory Automation group to develop an AI-driven, Computer Integrated Manufacturing application for secondary wood processing – which he patented in 1991. After building a new facility in 1997, sales increased from $37 M a year to $240 M by 2001. CIHC’s proprietary Smart Stalk System is now globally patent-pending: It redefines the economics of hemp stalk processing by transforming it into hemp fiber optimization. The technology is built around its core IP which is the world’s first automated hemp fiber quality control system. Projections indicate that Smart Stalk will increase operating margins over 100%.