Hemp Farms Australia booming as seed IP gains from new market channels

From hempcrete in construction to animal bedding, carbon sequestration to biochar, pallets to the phytoremediation of end-of-life mine sites, a plethora of market channels have opened up for industrial hemp and Brisbane-based Hemp Farms Australia (HFA) is seizing the opportunity.

Founded by Lauchlan Grout and Harrison Lee in 2013, HFA is a specialist in industrial hemp genetics with its own unique varieties that thrive in harsh, hot environments.

Grout tells Business News Australia the company has sold hemp seed for 1,200 hectares of farmland domestically this year with expectations that figure will triple in 2024, while the company has also teamed up with a distributor in the US where he believes the market opportunity could be 10-12 times greater still.

"The industry has taken some time to get to where it is, but we've also used that time very strategically to make sure that we have the perfect product offering," Grout explains.

"If we need to switch and pivot to meet a new product offering that the market’s requested, we’ve built ourselves up so that we can do that, and we can move around in a lightweight manner, and that’s due to not being heavily debt-burdened."

The entrepreneur claims HFA has just one large competitor in Australia, and the industry is still waiting for the global genetics titans to step in.

"I’d say at the moment they’re looking to people like us to form the industry and create the different segments and commercialise the end markets, which is really only just being done now," he says.

"The Australian industry has experienced some changes in market preferences over the past few years. Previously there was a complete focus solely on grain and grain production due to the low barriers to entry, and also the pre-existing processing infrastructure.

"But since then there’s been huge development and capital investment that’s poured into fibre and biomass harvesting and processing methods and capabilities."

Grout says this has allowed farmers and processers more avenues for their offtake harvest material, which increases the demand for HFA's seed.

"Another massive factor here in Australia is obviously the growing concern over climate condition and carbon emissions has increased the demand for carbon sequestrating activities, biochar solutions and also activated carbon offtakes," he says.

"Now there are actually methodologies approved internationally, and this has been a huge driver into why we’re expanding into the US market.

"HFA at the moment is perfectly placed to dominate both the Australian and US markets with our fibre and dual-purpose genetics."

Dual-purpose genetics means a crop can be around 50 per cent seed and 50 per cent fibre, so it's a more flexible way to earn various revenue streams from the one crop. However, fibre-focused varieties are a biomass crop that can either be made into a bale of hemp 'hurd' that is used in such areas as animal bedding, hemp-based concrete, or pallets as a timber alternative.

"What we’ve really seen, especially in Australia, is businesses innovating with end products focused on fibre, whether it be hempcrete, biofuels, net zero carbon pallets that are made from compressed hemp fibre and hurd so you can replace timber," Grout says.

"You can have hemp go into pallets and they can be sent all around the world without being treated. That's a big market that's taking off.

"So there’s construction, there’s pallets, there’s timber replacement products, there’s activated carbon which is a great feed additive or fertiliser, and what we’ve pretty much had to do is align ourselves with the businesses that have injected capital into those processing facilities so we have a guaranteed end customer and that customer has a guaranteed end market."

Grout adds that a big driver of growth in Australia has been mining companies looking to for industrial hemp for phytoremediation purposes, improving soil quality but also creating a marketable product from the crops put into a phytoremediation process.

"Phytoremediation is growing hemp on a degraded, already used up mining site, and it is a perfect crop to rehabilitate that soil back to a viable condition.

"When you have a mine that is now out of action, they use tailings – pretty much all the wastewater from that mining activity. That’s all kept in a huge dam or a quarry somewhere. What they’re proposing is that water can be used on these types of crops," he says, clarifying these are crops that are only industrial and not in any way oriented to human consumption.

"All of the material that will be harvested for a crop that's doing phytoremediation, or even a crop that’s just doing carbon sequestration, that material will more than likely end up in a biochar facility or a hempcrete processing facility to be fed into the construction market."

US opportunities

The Hemp Farms Australia co-founder highlights transformative growth in the US industrial hemp industry, which has opened up following a period when the sector was almost entirely fed by Canadian imports.

"Our strategy expanding into the US is due to a much larger market and also larger market demand," Grout explains.

"This demand is is concentrated in all southern states of the US primarily because these regions share very similar climatic and daylength conditions. Being close to the equator has historically posed challenges for growers in obtaining viable and reliable genetics.

"They haven’t really been able to grow their industry or create or develop new products because they haven't had varieties that would excel very well close to the equator."

Grout says this is largely due to the varieties sourced coming from sources where climates are very different, but at the same time as mainstay varieties have struggled in the southern states of the US, there have also been major investments into processing and new product development.

"The demand over in America for what we're seeing with our varieties is sitting at about 15,000 hectares, which you can tell is 10-12 times what we’re seeing in Australia," Grout says.

Grout is unable to reveal the name of the company's partner in the US, but notes they will be trialling three of HFA's varieties - two dual-purpose, one grain-focused - in six different sites within Texas and Tennessee.

"The aim of that is to pretty much build prominence and also gain some data feedback on yield metrics, which will then turn into a wholesale distribution set-up over there, which will then evolve into a licence and royalty agreement with the distributor," he says.

HFA has also embarked on a $2.5 million capital raise to assist with the expansion and beef up operations at home.

"We’re currently going through a capital raise to allow us to expand on our team, and also expand into the US, the reason being that we need to take the opportunity whilst it’s there and use all of our current funds to push towards making that happen," Grout says.

"We have taken on small amounts of seed investment up to this stage from one party, but we more so wanted to look at this as a strategic investment, because we want to expand on our knowledge and capabilities with genetics."