by Deborah Jeanne Sergeant
Hemp is hot. There’s no doubt many growers are excited about the possibilities surrounding the commodity, whether for fiber or oil. But farmers need to consider the regulations and expenses attached to growing hemp. As part of the recent 2021 Industrial Hemp Conference hosted online by the University of Vermont, Suzy Hodgson with UVM and Rose Wilson, hemp consultant, presented “Is Hemp Worth It?”
Hodgson said farmers need to consider hemp regulation and how it can affect their crop. State regulations can vary, so growers need to look to local as well as federal laws. Extension agents can be helpful in learning about them. Farmers need to register, understand testing protocol requirements and inspections.
Hodgson said the FDA’s FD&C Act stipulates that it’s illegal in interstate commerce to sell a food which tetrahydrocannabinol (THC), the psychoactive element of cannabis, or in which cannabidiol (CBD) has been added.
“We have regulations not only on the production side of hemp but on the products derived from hemp,” Wilson said. “One of the key things to be aware of is that nothing technically considered a food should cross state lines. If you see CBD tea or edibles, they need to stay in the state.” (However, cosmetics and wellness products containing CBD may cross state lines.)
The level of THC must remain within legal limits. Hodgson said that in Massachusetts last year, 40% of tested crops did not stay within that threshold and had to be destroyed. “You want high CBD and low THC and it can be difficult,” she said. “Most of the people growing hemp are growing it for the flower because that’s where the concentration of CBD is. If you’re harvesting the flower, you may think you’re not a processor, but if you trim the flower you have to register as a grower and as a processor.”
Wilson added that like value-added products, once a grower processes, the labor costs do not count as farm labor but as processing. That factor can significantly add to the cost of production.
Producers also need to consider the demands of hemp as a plant. “This is a hungry and demanding plant,” Hodgson said. “It’s susceptible to diseases. It’s so important to know you have a reliable source of seeds. You may think you know your seeds and spend time fertilizing the plants and the leaves still look yellow.”
The crop’s success also responds to the environment. Genes express themselves based upon weather conditions, Hodgson explained. THC levels can shoot up if the plant is stressed. Drought, poor nutrition, weed pressure, hot weather and more may stress the plant.
Growers should purchase seeds with genetics for low THC. Hodgson referenced a farmer who though they were purchasing feminized seed, but it was 50% male. “Seed quality has been a big issue over the past two years,” she said. “You really need feminized seeds. Just one male seed will fertilize everything.” (At about six weeks, farmers can identify any male plants and eliminate them.)
In addition to crop loss, Hodgson also shared that highly volatile pricing and fly-by-night buyers can decrease growers’ profits. From April 2019 to April 2020, hemp CBD biomass decreased in value by 79%, from $38 to $8 per pound, according to Hemp Benchmarks.
“Given all the issues of sourcing seed and growing a crop that’s hungry for nitrogen and thirsty for water, and can change its morphology given stress, can the value you get from a buyer cover costs?” asked Hodgson.
Wilson added that the speculative nature of the industry means that growers may not be able to sell their crops. “There’s a lot of investor-fueled companies,” she said. “They’re investing with 99 companies in hope that one thing will work. As farmers and value-added producers, we don’t have the luxury of investing in a variety of things. We have to be cognizant of that when designing our market potential. You have to make sure the buyers will pay you. If they don’t have money, the last thing they’ll do is pay their suppliers.”
Hodgson encouraged famers growing hemp to cover those expenses with other crops to make sure they don’t suffer significant loss. “You may not meet the THC levels,” she said. “The buyer may stiff you. Can you risk losing your shirt? Only you if you can cover your time and investment with other crops.”
Wilson also reminded growers that their product will shrink in processing. “Even our experienced growers run into trouble with … the drying side of things,” Wilson said. “We’ve had situations where if the product is sold to the buyer and they don’t grade it two to three years down the road, then you’re totally dependent on what’s happening in the drying and storage. There are a lot of variables that come into your potential for income loss.”
Growers doing well may make $120 to $125 per acre. “It’s better than growing hay, but not much better,” Hodgson said. “You can end up with a moldy plant. You have to maintain that low moisture content so you can store the product.”
Capturing the market can challenge some producers, as the industry has a lot of competition. “People are projecting that edibles and beverages will jump significantly,” Wilson said. “Now they’re illegal but it’s presumption that the Fed is going to change things up.”
She added that the supply chain is contracting. “2020 was an ‘extinction event’ for thousands of CBD companies, but the industry remains crowded,” Wilson said.
Farmers should consider “the volatility in this market and the cutthroat nature of the competition you’re dealing with,” Wilson said. She thinks that the survivors will be the larger brands that have been around for a while and can operate multi-state and move as the regulations change. “It’s a dogfight out there. Be prepared that the competition will be big, well financed and the know how to play hardball.”
As an example, she said she spotted a CBD product at a local feedstore that had professional packaging and attractive containers. “When our local feedstore is seeing that and seeing our local products, can you compete with the shine, gloss and glitz?” she asked. “At the moment, that’s what you’re competing with.”