Food Standards Australia and New Zealand yesterday announced that   it had approved the use of hemp seeds with very low psychoactive properties in food oils and to be eaten as seeds.

That decision still has to be accepted or appealed against by state and federal governments within the next two months.

Tasmanian Farmers and Graziers Association chief executive Jan Davis said that if the ruling was accepted, it would allow farmers to diversify.

``There is a global demand for it as a fibre, used in rope and clothing, and as a food source although up until now it has not been allowed to be grown for food in Australia,'' she said.

``Trials in Tasmania have shown that hemp can be produced efficiently and cost-competitively here, and growers are keen to rise to the challenge. We are ready to start.''

TFGA member and Industrial Hemp Association of Tasmania president Phil Reader said that if the Council of Australian Governments approved the wider use, the hemp industry could compete with the appeal of growing poppies.

``At the moment it is worth about $3 a kilo at the farm gate. If we could get $5, with these further uses, it would make it as good as poppies for us,'' he said.

Greens primary industries spokesman Kim Booth also welcomed the food standards ruling, which he said was a step towards removing ``absurd and irrational barriers'' preventing expansion of the hemp industry.

The Greens received tripartite support in March to set up a state parliamentary inquiry into how a hemp industry could be expanded.

The Liberal Party had earlier flagged an inquiry, which the Greens thought did not go far enough.

Hemp is already cultivated in Australia and New Zealand under strict licensing arrangements and is used to make fibre, textiles, paper and building materials.

About 60 hectares of industrial hemp is under cultivation in Tasmania, mainly in the North and North-West, with the seed pressed in Victoria for use in cosmetics.