Alberta remains the country’s largest producer of industrial hemp, accounting for more than half of Canada’s cultivated acreage, but recent data shows the sector is contracting amid weak demand, high costs and shifting market conditions.

Industrial hemp has been legally grown in Canada since 1998 and is defined by federal regulation as cannabis plants containing no more than 0.3 per cent THC in their flowers and leaves. While long promoted for its versatility and sustainability, the industry has struggled in recent years to translate those qualities into consistent profitability.

Health Canada figures show the number of active industrial hemp licences nationwide dropped sharply, falling from more than 1,200 in 2020 to just over 600 in 2024. Alberta continues to host nearly one-fifth of those licences, yet its dominance by planted area has also slipped. The province accounted for roughly 53 per cent of Canada’s hemp cultivation in 2024, down from 58 per cent the year before.

The pressure on the sector became more visible in September 2025, when Calgary-based processor Hempalta began winding down its hemp processing operations. The company cited a combination of rising operational expenses and insufficient consumer demand for fibre-based hemp products. While hemp can be used to produce materials ranging from paper and rope to building products and absorbents, converting raw biomass into finished goods requires costly equipment and energy-intensive processes.

External factors have also weighed on the industry. Increased transportation costs and cross-border trade challenges reduced competitiveness in the U.S. market, while the closure of Peavey Mart earlier this year removed a major retail outlet for agricultural and hemp-based products across rural Canada. At the same time, demand has remained stronger for hempseed, which is widely marketed as a nutritious food ingredient, leaving growers with limited options for the remaining plant material.

In response, Hempalta has shifted its business model toward environmental services, focusing on carbon sequestration and soil enhancement. Industrial hemp is recognized for its ability to absorb large amounts of carbon dioxide during its growth cycle. The company now works with farmers to measure and verify carbon captured by hemp crops and to convert harvested biomass into biochar, which can be returned to fields as a soil amendment.

Provincial officials say Alberta remains committed to expanding the hemp sector by supporting value-added manufacturing and rural economic development, pointing to its potential in emerging carbon markets and sustainable materials. Despite lingering stigma tied to hemp’s association with cannabis, industry observers say future growth may depend less on consumer products and more on climate-related applications that make full use of the crop.