Alternative Investment Spotlight: Hemp Farmland

Investing in Hemp / Marijuana Farmland

An economic boom is taking the Prairie Provinces by storm, thanks to the federal government’s recent nationwide legalization of cannabis. For the first time, industrial hemp promises to be one of Canada’s most lucrative cash crops.


 

Hemp is a close relative of marijuana but contains almost no tetrahydrocannabinol (THC)—the psychoactive ingredient that causes people to get high while smoking or consuming marijuana. Instead, hemp contains high concentrations of cannabidiol (CBD)—a non-intoxicating alkaloid with demonstrated medicinal benefits known to treat seizures, chronic anxiety and pain.

Until late last year, hemp farming in Canada was heavily regulated. Farmers licensed to grow industrial hemp needed to submit to a criminal background test and were only allowed to harvest stems and seeds. The leaves, buds and flowers—which contain CBD—were left to rot in the field.

Thanks to the government’s legalization of cannabis in 2018, it’s easier than ever before for prospective farmers to begin growing hemp. Licensees are now permitted to harvest the entirety of the hemp plant and extract CBD from the flowers, buds and leaves.

Savvy investors from across Canada are turning toward the Prairie Provinces to explore the possibility of investing in hemp farmlands. Hemp is a versatile cash crop that’s relatively easy to grow. The plant’s fibres are used in many textile and industrial purposes; the seeds, meanwhile, are a valuable source of Omega-3 fatty acids and are often pressed into cooking oil. Hemp is used to making everything from bed sheets, to seizure medications, to protein powders. Needless to say, it’s in demand.

Growing demand for the plant

Nationwide cannabis legalization has created an unprecedented demand for CBD and other cannabis-derived products across Canada.

While many people associate cannabis-infused products with THC, an increasing number of products focus on the purported health benefits of CBD, which is entirely non-intoxicating. Today, CBD is present in a wide range of products, including sparkling water, dog biscuits and even beers. High demand for CBD-infused products is even leading to nationwide shortages.

Looser rules surrounding the production and distribution of hemp and cannabis around the world are creating a significantly larger market for CBD-infused products, as well. The United States recently legalized hemp nationwide (though cannabis remains illegal at the federal level). Many countries in Asia and Europe are also beginning to allow imports of CBD products.

Hemp textiles are also on the rise. Hemp fibres are long, strong and resistant to many of the types of rot impacting other plant-based fibres. Additionally, hemp is quick and efficient to grow compared with many other textile commodity crops.

It’s worth noting, Canada’s hemp market has experienced a boom and bust cycle in the past. Following the legalization of industrial hemp in 1998, farmers dedicated increasingly large amounts of acreage to the crop after the seeds became an important health food staple, particularly in South Korea. After China began increasing its industrial hemp production, exports to South Korea largely ceased and the Canadian hemp market collapsed.

This history doesn’t seem to be deterring Canadian hemp farmers from trying their hand at large-scale production again. The amount of hemp acreage in Canada is expected to double this year, to a total of 82,000 acres.

How to invest in hemp farmland

If you’ve decided you want to invest in hemp farming as a unique, creative way to diversify your portfolio, you might be wondering what the best way to approach a hemp farmland investment might be.

It’s helpful to first take a look at some of the ways investors add farmland to their portfolios. If you’re looking for a unique real estate investment opportunity, chances are you’re not an agricultural professional. Because of this, you likely won’t want to operate your hemp farm.

Some real estate investors opt to directly purchase farmland and hire an agricultural team to manage it. You can find all types of agricultural professionals specializing in the production of specific types of crops. If you’re planning on growing hemp, you’ll also have to consider licensing requirements, as well as hemp production experience.

If you’d rather not purchase farmland outright, but still want to add farmland to your investment portfolio, you could try finding a real estate investment trust (REIT) specializing in agriculture. In addition to REITs, there are several other types of funds investors can leverage to add agriculture to their portfolios, including mutual funds and exchange-traded funds. Many Canadian cannabis companies are now operating as publicly traded stocks, as well.

For the adventurous investor looking to purchase farmland for hemp production, there are a few important points to be aware of.

  • Like many grains, hemp is only profitable when grown at high volumes. This means you should plan to grow a minimum of 50 acres of hemp.
  • Hemp is suitable for growth in a wide variety of climate types. The plants prefer hot, humid weather with well-drained soil.
  • Additionally, hemp doesn’t tolerate desert or alpine environments. This means more mountainous areas of Alberta, in particular, aren’t suitable for hemp production.

While it’s now easier to grow hemp in Canada than it was in years past, it’s still more tightly regulated than the production of wheat or barley. You’ll have to work with a certified cannabis company to process and extract CBD from your hemp buds, flowers and leaves. Due to high market demand, many CBD processors are struggling to keep up with the amount of hemp that needs processing.

A unique opportunity in a booming market

Hemp is considered a high-risk high-reward investment, due in large part to the fact it’s still a niche crop. While putting all your eggs in the CBD basket may not be wise, industrial hemp and CBD represent a potentially lucrative investment for investors looking for ways to diversify their portfolios.

While directly purchasing farmland can be prohibitively expensive and challenging to mention, it’s still possible to try your hand at investing in hemp through REITs, mutual funds and publicly traded stocks.

5 Things to Know About Hemp Farming