PIP COURTNEY, PRESENTER: This story is about the Hunter Valley in New South Wales, where a controversial green crop is being harvested.

Australia's fledgling hemp industry has been trying to join the rest of the developed world and produce oil and food for human consumption. A prohibition on growing industrial hemp in Australia was lifted in the late 1990s, but farmers here are restricted to growing fibre and construction materials and politics has prevented them from gaining access to booming hemp food markets, as Sean Murphy reports.

SEAN MURPHY, REPORTER: It looks like a windrow harvest of lucerne, but this is hemp, industrial hemp. It's grown by Australia's biggest producer, which has farms and facilities in NSW, Queensland and Tasmania, producing about 2,000 tonnes of raw material a year.

PHIL WARNER, ECOFIBRE: What we are producing presently is just low-level, low-value market material such as pet bedding, horse bedding, erosion control mediums, oil spill containment products, garden mulch - you know, basic things like that. And there's lots of products we could get to eventually, but it's about volumes, critical mass that needs to be there. And, you know, the industry isn't at that stage yet. It's hampered.

SEAN MURPHY: Phil Warner says his company, Ecofibre, is trying to increase the national yield by growing and breeding sub-tropical hemp seed for Australian growing conditions.

PHIL WARNER: This is a seed crop for fibre production. This is an early stage; the males are still flowering, so the seed hasn't formed. But we produce seed for propagation of fibre crops and then you produce grain for oil crops or what would be food crops in other countries.

SEAN MURPHY: Australia is one of the only countries in the developed world that prohibits hemp seed for human consumption.

(Excerpt from the River Cottage TV program shown)

Hemp seed food is so normal in places like Great Britain, that it features in popular cooking programs such as the River Cottage. Across Europe, North America and Asia, hemp seed and its oil is considered a healthy and nutritious food.

(Excerpt from the River Cottage TV program shown)

In 1999, Food Standards Australia New Zealand, or FSANZ, found that there were no technical or safety issues with hemp seed food. But the Howard Government and state Health ministers combined to reject an application to make it legal. Now FSANZ has given the green light to a fresh application, but Australia's governments are again baulking.

ANDREW WILKIE, INDEPENDENT MP (March, 2013): Prime Minister, industrial hemp cannot be smoked and would be a lucrative crop for many Tasmanian farmers. It produces fabric, paper, construction materials and omega-3-rich oil.

SEAN MURPHY: Last March, independent Tasmanian MP Andrew Wilkie asked the Prime Minister when his government would ease restrictions on hemp food and give farmers an opportunity to grow for a booming world market. He says Australians have been misled by successive governments about the safety of hemp seed food.

ANDREW WILKIE: There is simply not a single good reason for holding off approving it for human consumption. It is a healthy oil, it's a safe plant to grow and it will be very, very lucrative for farmers, particularly in my home state of Tasmania.

The only thing missing at the moment is the political will to explain to the community that it is safe and lucrative and healthy. But for some reason, leading politicians nationally and here in Tasmania, when it comes to potentially for medicinal use, they're being weak.

SEAN MURPHY: Growers like Phil Warner are strictly licensed in Australia. Their plants are tested regularly to ensure they have minimal levels of THC, the psychoactive ingredient in marijuana, which is a type of cannabis or hemp plant.

PHIL WARNER: Because there's no THC in these at all, or very little. This one is something like 0.01 per cent THC, which is 1,000 parts per million - it's nothing. What people don't understand is out of 100 per cent of the accessions or cultivars or types, if you want to call it, of cannabis, less than 10 per cent have a drug value. The 90 per cent of the cannabis species has no drug value at all.

SEAN MURPHY: Despite the legal restrictions, it is possible to produce hemp seed food in Australia. At Bangalow in northern NSW, Hemp Foods Australia mills hundreds of tonnes a year for export. It also has about 4,000 retail customers in Australia, but must clearly label products sold here as not for human consumption.

PAUL BANHAIM, HEMP FOODS AUSTRALIA: We sell cosmetic ingredients. These are clearly shown on our label. You can see on the front label a disclaimer in extremely large size making it very clear that anyone that purchases these products must use them for external use only to rub on their skin.

There's ingredients and recipes on the back that show you how to use these things. We actually have to hide the nutritional analysis - how you can actually make any meal really healthy for you by adding hemp seeds on the top, for its omega-3, 6, 9 essential fatty acids, for its high content of vitamin D, vitamin E, the fact that it's low in carbohydrates and actually how to use this in a smoothie or other recipes.

SEAN MURPHY: Paul Banhaim says he's losing patience with Australia's governments. The nation's food ministers still haven't made a decision on the latest application made to FSANZ, which was lodged in December, 2009.

PAUL BANHAIM: Our company is now focusing - because of the delays by COAG, is now focusing on exports alone. We foresee that by early 2015, our exports will far exceed our current national sales and our products are being sold without this label on throughout Asia, North America and Europe as a food and we can't currently keep up with demand increasing overseas.

So we will be investing further money into our production facilities to expand here in Australia. That will increase the amount of jobs that we have here. However, if COAG do not agree, then we're going to have to, at some point, look at the level where we take our business overseas and take our production facilities to supply these overseas markets closer to market.

SEAN MURPHY: Last month, ministers from the national Forum on Food Regulation moved to again defer any decision until at least next January. There's an abiding concern about mixed messages on drug use.

KATRINA HODGKINSON, NSW MINISTER FOR AGRICULTURE: There are other things that have to be taken into consideration with this and that is the message that you're sending.

So I can understand the arguments that come into the debate surrounding: is this a message that we're saying that hemp is OK, that marijuana is OK? You know, there are young and impressionable minds out there. If we're seen to be growing it in the open, it must therefore be legal, not recognising that it's only the low-THC varietial that is - that would be allowed. All these messages, we have to take those things into consideration very seriously.

SEAN MURPHY: Although she accepts hemp seed food is different to marijuana and can't make users high, NSW Agriculture Minister Katrina Hodgkinson says her government does not support changing the law. Besides sending a message which could encourage drug use, it's worried about what hemp food could do to police roadside drug tests and the cost to the court system of any legal challenge.

MICHAEL BALDERSTONE, HEMP EMBASSY: You're not going to get stoned at all. So, it's not us that's really blurred the lines. The police, the Government, the whole hemp plant has been so criminalised, they've thrown the baby out with the bathwater big time. I think the public's slowly waking up that hemp seeds a good food and no big deal and you don't get stoned. It's nothing to do with getting stoned.

SEAN MURPHY: At Nimbin in NSW, hemp is clearly on the menu. The Hemp Embassy's cafe is serving a range of food that contain hemp seeds and hemp oil. Although this is against the law, retailers all over the state are avoiding prosecution because the NSW Food Authority says it's waiting until the latest FSANZ application is considered.

In some respects, is what you're doing here hindering the opportunity for a hemp seed food industry because it does blur the line between recreational drug use and hemp seed food?

MICHAEL BALDERSTONE: Yes, I think having hippies talking about hemp seed is probably not that smart and we tend to try to keep our head down a bit because you get so judged, you know? We get so judged, you know - "You don't want everyone turning into Nimbin." They're not.

SEAN MURPHY: Australian HEMP Party president Michael Balderstone says it's time for some honesty in the debate.

MICHAEL BALDERSTONE: We are into fully legalising the plant for everything. With regulations, with quality control. You know, there's just massive hemp-ployment - is a word we've conjured up. There's just massive opportunities for employment in the hemp industry on every level. But certainly farmers - it's ridiculous farmers haven't been free to have a go at it.

SEAN MURPHY: Hemp growers such as Andrew Kavasilas say they're locked out of the hemp seed food market while importers are openly selling their products here in Australia.

ANDREW KAVASILAS, HEMP GROWER: Companies are springing up all the time. I think the latest import I'm seeing is from Inner Mongolia. Inner Mongolian hemp seed food available in Australia. The problem for me and my company is that if we were to grow hemp seed here in Australia and if that got into the food supply, I would lose my licence and I wouldn't be able to grow anymore.

I see Tony Abbott was in Canada last week. They've got a thriving hemp seed food industry, huge export industry growing double digit every year. I'm sure he didn't say, "Hey, we're open for business, but we don't want any more of your hemp seed food."

SEAN MURPHY: It also means companies like Hemp Foods Australia are having to source their hemp seeds from overseas.

PAUL BANHAIM: Australian farmers are the people that are losing out now because of this lack of decision. We would love to invest - through our investors, a long-term farming plan for Australia. Right now, we have to work year by year, which ensures that we don't have enough certified organic seeds for our production facility in Australia because we don't know what the demand is going to be next year.

If we know the foods are going to be allowed - hemp is going to be allowed as a food in this country, then we will invest more for the long term and we will see that support farmers in a very significant way.

SEAN MURPHY: Besides being a useful break crop, a hemp seed food industry could also provide a healthy new source of fodder for livestock. Farmers are not allowed to use hemp as a feed while the current restrictions remain.

ANDREW WILKIE: It makes no sense whatsoever that in Australia it is restricted to being farmed for materials when there is this other very significant, very lucrative and very healthy option to grow it for human consumption. Now remember, Food Standards Australia and New Zealand have recommended that it be allowed to be farmed in Australia for human consumption.

It is a political decision not to have approved it by now. It's a political decision to have put off the approval for at least another six months against all of the evidence and against the very well-considered and very well-regarded recommendation of Food Standards Australia New Zealand.

PHIL WARNER: When we started off in this business, Canada had about $50,000 retail sale into the US for hemp seed products. Now the retail sales in the US are $500 million. We could have been on that bandwagon.

SEAN MURPHY: Phil Warner lodged Australia's first hemp seed food application in 1999. He struggled to develop markets and systems for producing new products. But he's also become one of the world's leading breeders of industrial hemp. He's been working with Southern Cross University's plant science researchers on a collection of seed from more than 200 hemp varieties from around the world. Under licence and in special purpose-built growing chambers, they're helping characterise features like fibre, oil content and anti-microbial activity.

TERRY ROSE, SOUTHERN CROSS UNIVERSITY: Some of them are the last remaining seeds from the world, from wherever they came from. We want to make sure that the lines maintain pure, if you like.

We've had to - or Tim Shapter, through his PhD, has purpose-built these chambers that don't allow pollen flow between them, so we can grow an accession or a male and a female within a chamber and be confident that the seed that's produced is pure for that line, and by doing so, we can reproduce these accessions that we've got in the bank and maintain the purity.

PHIL WARNER: What we're doing is creating a plant variety that suits a manufacturer's end use. This is what it's all about. We're not just creating biomass for the sake of biomass or for fibre or anything else.

SEAN MURPHY: Phil Warner says it's frustrating that the politics of pot has clouded the industry here in Australia and choked its potential.

PHIL WARNER: I set out to actually create something that brought the business back to the bush. And I'm extremely disappointed that the politicians and the bureaucrats that sort of advise the politicians have never come to us once to ask us a question, any question about this.

We're one of the leading breeding entities in the world for cannabis. We have got developed systems that are advanced of anywhere else in the world and not one politician or government bureaucrat has rung us - from a high level - has rung us to ask us anything about this industry technically.

SEAN MURPHY: Now, with the United States looking like developing its own industrial hemp industry, he says he's been approached about moving there, taking his business, the systems he's designed from scratch and his breeding rights with him.

PHIL WARNER: I wouldn't want to live anywhere else in the world but Australia. We've put so much investment and time into this, I do want to see it happen. And even if it happens elsewhere in the world and it does come back to Australia, then maybe I'll have achieved the goal I set out with, you know, 18 years ago. So, I think it's inevitable that I do have to move offshore and the company and the technology to actually implement it in a full industrial form.