The European Hemp Sector: A Market in Transition

The European Hemp Sector A Market in Transition
Image: Wikibugg via Wikimedia Commons
April 12, 2023

Is the European hemp sector ready for an economic breakout? Several years ago, it appeared that hemp was primed to take its place as a major agricultural crop across the European Union (EU). 

According to the European Commission website, hemp cultivation in the EU increased from 19,970 hectares (about 49,347 acres) in 2015 to 34,960 hectares (86,388 acres) in 2019. During that same time period, the production of hemp in the EU grew from 94,120 tons to 152,820 tons, an increase of 62.4%.

However, that upward trajectory came to an abrupt halt in 2020, as the COVID-19 pandemic hurt national economies and disrupted supply chains across the globe. Another blow came in early 2022 with Russia’s invasion of Ukraine. Both Ukraine and Russia are major grain exporters and the conflict has caused a spike in corn, soy and wheat prices worldwide. That rise has, in turn, convinced many farmers that might otherwise grow a relatively risky crop like hemp to bank instead on those known commodities.

Major Challenges, Unexpected Opportunities

The result in Europe, like in North America, has been several years of struggle for the hemp sector. “The hectares that we have in Europe are ridiculous!” said Lorenza Romanese, Managing Director at the European Industrial Hemp Association (EIHA). “50,000 hectares is nothing, compared to any regular crops.”

According to Romanese, Ukraine alone accounted for more than 12% of grain and grain products like oils for Europe and the rapid need to fill in that grain gap has hurt the European hemp market. “Today, it’s even more complex for [European] farmers to plant hemp,” she told Hemp Benchmarks during an interview at the NoCo Hemp Expo in Colorado. “Corn prices are so high, why should they go with hemp?”

At the same time, Romanese noted the Russia-Ukraine war has created an unexpected opportunity in Europe for hemp-derived construction materials. The disruption of trade with Russia, one of the world’s top exporters of sawn wood products, has made the price of hemp-derived construction materials like hempcrete competitive in the European construction sector.

The Future of the Long Hemp Fiber Market

Despite the global setbacks and economic uncertainties, Romanese expects the European hemp sector to rebound over the next several years. Similar to many in the U.S. hemp industry, she is looking beyond the cannabinoid market to fiber and grain.

Romanese said the oversupply of CBD and other hemp-derived cannabinoid products in Europe – with much of that CBD coming from the United States – has led to a collapse in CBD prices within the EU. She believes investors should instead be looking at hemp textiles, created from long hemp fibers.

While she expects hemp textiles to become a major market within the next five to ten years, the creation of a viable supply chain in Europe for long hemp fiber remains a challenge. “The supply chain for long fiber, it doesn’t exist,” she said. “That’s as simple as it is.” Romanese noted that there are only 12 hemp decortication facilities in all of Europe. As a result, hemp fiber grown in Europe is currently shipped to China for processing, with the final textile products shipped back to Europe.

“This is the model that globalization has led us,” she said. “We have the know-how, but it requires a bit of time to create a supply chain.” Hemp fiber for textile, she added, also requires more technology and processing than the short hemp fibers used in construction, furniture, and hemp-derived plastics.

Finding a Uniform THC Limit

Romanese noted that EIHA includes hemp organizations in 25 EU Member States. It also has member organizations in 12 non-EU countries, including in North America and the Asia Pacific. Coordinating hemp regulations across all these countries – each with their own hemp laws, cultures, languages, and rules – has been a challenge.

One large part of that challenge has been to restore the level of THC in the field up to 0.3%, the limit in the EU to receive direct subsidies payments from Brussels. As of January 1, all European member states brought into effect a Common Agricultural Policy (CAP) that puts the maximum THC level of hemp grown in Europe back to a 0.3% limit. 

However, according to the EIHA website, that CAP level, adopted in late 2021, “only applies if farmers want to receive direct payments, meaning that in Europe it is possible to plant hemp with THC level on the field over 0.3%.” Each EU member state is then free to adopt a higher THC level in conformity with their national regulations – such as in Italy, which has a national THC limit of 0.6%, and in the Czech Republic, where the THC limit is 1%.

These varying regulations create their own dilemmas for the European hemp industry. Romanese gave the example of a farmer in Austria, who decides to cultivate hemp with a 0.4% THC level. They can farm up to 0.4% (provided that national law does not prohibit it). However, that farmer will not receive direct payment from the EU. 

“The legislative process in Europe is very complex,” she noted. The European Commission is the body that has the legislative power; when that text is finished it then goes to the European Parliament and the Council for a so-called co-decision process. If the two legislative bodies don’t agree, Romanese added, “the text goes between these two until a solution is found.”

Education Remains Key

Despite the current setbacks, hemp remains a permanent part of the European commercial marketplace. There are at least 85 different varieties of hemp registered in the EU catalog, compared to about 58 approved varieties in 2016.

Romanese noted that hemp food products are accepted by European consumers as a part of the growing trend towards natural, “green” superfoods. The issue, she added, is that hemp continues to have a cannabis-related stigma in the mind of many government regulators who need to catch up with the demands of their consumer base.

“[The regulators] catch up 30 years later and they believe they have done something very new,” she said. “Regulations take time to be changed, and we need to fill in the gap between the consumers’ expectations and what the market can deliver. We are doing education, because I think regulatory change goes with education. But the education has to be science-based. Education supported by science makes the difference.”

Looking Globally

As we reported several months ago, the Federation of International Hemp Organizations (FIHO), a working group of 20 global hemp organizations, held its first meeting in Canada in late 2022. EIHA is part of FIHO, and Romanese is enthusiastic about the new collaboration between international hemp organizations. “The beauty of FIHO is that we are big,” she said, “but if you are big, it’s harder to find compromise between all of us. So it requires time and discussion. We will only work on regulation and not on flow of trade; this is up to the companies.”

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