Agriculture

For Farmers, Hemp Represents Challenges and Opportunity

By Tema Flanagan

Tucked in the mountains outside Asheville, North Carolina, Franny’s Farm is a small-scale organic operation that does a little bit of everything. In addition to raising mixed vegetables and heritage poultry, the farm hosts yoga classes and a farm camp for kids, as well as being used as an event rental venue for weddings (one of the barns sports a graphic mural that spells “love,” making it the perfect backdrop for wedding party photo shoots). The energetic namesake owner, Franny Tacy, is passionate about each of the farm’s many endeavors, but there’s something new that’s got her full attention these days: industrial hemp.

Industrial hemp is so-named to distinguish it from its illicit sibling, marijuana. While both marijuana and industrial hemp technically come from the same plant, Cannabis sativa, they are bred for very different purposes. Marijuana is, of course, bred for high levels of THC, the chemical compound responsible for the drug’s psychotropic properties. Industrial hemp, meanwhile, can’t get you high. Instead, it’s grown for an impressively broad array of products–some estimate as many as 25,000 distinct uses–including everything from food, medicinal, and beauty products to sustainable building materials and fibers for cloth and paper.

Franny Tacy on her hemp farm in North Carolina. Franny Tacy

Franny Tacy on her farm outside Asheville, North Carolina.

Especially worth noting is hemp-derived CBD (or cannibidiol), which has recently been touted widely as an alternative treatment for everything from pain and anxiety to insomnia and drug addiction. Interest in CBD is growing rapidly–with a billion dollars in projected short-term sales to match–and this interest has driven up industrial hemp’s profile in popular culture (and captured the attention of pharmaceutical companies in the process).

With so many varied uses over such a broad swath of industries, hemp’s economic potential is big. In fact, according to the Congressional Research Service, this potential is already in the process of being realized to the tune of $700 million in annual sales of hemp-related products. But, until recently, American farmers were left entirely out of the equation, unable to legally grow the raw materials needed to support this booming industry. With an estimated gross value of $12,500-$21,000 per acre of hemp, that’s a lot of money left on the table. Indeed, in 2017 alone, American companies spent $67.3 million on imported hemp seeds and stalks for use in manufacturing, the majority of which come from Canada.

But things are starting to look up for would-be hemp farmers like Franny Tacy. It all started with the passage of the 2014 Farm Bill, which contained a provision allowing individual states to legalize hemp production under state-controlled research or agricultural pilot programs. While the federal status of hemp has yet to change, more and more states are signing on, and, for the first time in decades, hemp is legally taking root in American soil.

For her part, Tacy has long been interested in hemp, but it wasn’t until 2017 that it became legal for North Carolina farmers to raise the plant as part of the state’s newly minted agricultural pilot program. “Six years ago, when we bought this farm, hemp wasn’t even on the radar,” Tacy says. “As soon as it became a reality in North Carolina, I was all over it. I didn’t know how to grow it; I didn’t know the legalities. But our country was founded on this, and we have got to get back to our roots.”

For Tacy, the idea of going back to our shared agricultural roots–a reference to the fact that hemp was once a major national cash crop going back to colonial times, before being swept up in anti-marijuana sentiment and outlawed in 1957–is more than just nostalgia. Tacy is convinced that industrial hemp could play a big role in revitalizing downtrodden rural communities and economies, and it’s clear that she’s not the only one in the farming community who’s looking to hemp with high expectations. In North Carolina alone, nearly 100 growers received licenses to grow hemp in 2017, the pilot program’s first year.

The Challenges of Growing Industrial Hemp

While American-grown hemp seems like a no-brainer, the decision to grow this legally ambiguous crop comes with a unique set of challenges in addition to possible rewards. How individual farmers navigate these issues may have a lot to do with whether this crop succeeds or fails at the individual farm level.

  • Contending with legal issues. The first thing hemp-interested farmers need to be aware of is the legal status of hemp in the state(s) in which they operate. Even where hemp can be legally grown, farmers typically need to apply for a license to grow hemp, go through government-approved channels to order/import seed, and agree to have all of their hemp crops tested to ensure they don’t exceed the maximum legal limit for THC (0.3%). Also, because hemp production is still federally prohibited, unprocessed hemp can’t be sold across state lines. This means that growers must rely on in-state processors and producers of hemp products to buy their crops. Some states–like North Carolina and Colorado–have a large number of processors already in operation; for growers in other parts of the country, finding in-state buyers may be more of a problem.
  • Learning the ins and outs of growing hemp. Unlike staple crops like corn, wheat, and soy, hemp is brand new to most American farmers. This means contending with a learning curve in the first years of production as individual growers figure out the best methods, tools, and timing for growing hemp. While hemp has often been advertised as a very low-maintenance, low-input crop, many growers are finding that it’s not as drought-tolerant as originally suspected; in addition, hemp also requires fertilization to thrive. Most importantly, because hemp has been illegal for so long, less is known overall about best practices for commercial hemp cultivation, and there is much to be learned by farmers and agricultural researchers alike.
  • Making sure hemp crops don’t exceed the legal THC limit. In every state but West Virginia, the legal limit for THC is 0.3% by dry weight for industrial hemp. While varieties bred for industrial uses are lower in THC, part of the learning curve is figuring out how to ensure that individual crops don’t exceed the legal limit. Even with low-THC varieties, certain growing conditions (including plant stress) can exacerbate THC production and take crops over the legal limit. During North Carolina’s inaugural 2017 growing season, for example, 10% of newly licensed growers were forced to destroy at least a portion of their hemp crops because THC levels exceeded 0.3%.
  • Figuring out the market for raw hemp. This is perhaps the biggest challenge, especially for farmers who are used to selling products direct-to-consumer, via farmers’ markets, farm stands, and CSAs–or even wholesale to grocery stores and restaurants. For one thing, it’s illegal to sell unprocessed hemp to individual consumers, and it’s also illegal to sell hemp plants and seeds across state lines (though sterilized seeds, oil and cake made from seeds, and mature stalks are not regulated). Because of the legal issues, many growers will need to sell their hemp crops to processors and manufacturers within their same state. Figuring out the business model has been the single biggest hurdle for new growers in North Carolina, Tacy says. True to her optimistic personality, however, she sees the legal and logistical restraints as more of an opportunity for local community development than a challenge. “It’s all got to start at the farm, and then within your community you need to have it processed and made into products,” she says. “This is a community project, building your community, because you can’t just sell it on the open market.” On the other hand, Tacy admits, there are pitfalls for growers who decide to jump into hemp production without a clear idea of who their buyer will be. “People get hemp fever but don’t know what they will do with the crop when it comes. There were a lot of false contracts this year that got initiated, but then it turned out there was no buyer on the end,” she says. She advises farmers to “ask questions a million times over, get buyers to document where their money is, and get signatures. It’s the wild west, so you better find the right people.”
  • Figuring out how profitable the crop really is. For many growers, the actual income potential of industrial hemp is still unknown. While some estimate the gross per-acre value of hemp as high as $21,000, one recent study analyzing actual yields in areas where hemp is already grown found that net profits are actually more like $130-730 per acre. Clearly, there is money to be made in industrial hemp. The question for individual farmers remains: how much. The answer to that question will have a large impact on whether–and to what degree–farmers decide to devote acreage to hemp moving forward.
  • Investing in a crop with an unknown future. While hemp’s potential is obviously impressive, in many ways it is a crop whose future is still unknown. Hemp advocates hope that the federal legal status of the crop will soon change–and there is good reason to believe that such change may well be on its way. The 2018 Farm Bill includes proposed provisions to legalize the cultivation and sale of hemp nationally, and by all counts the proposal enjoys broad bipartisan political support. While this would undoubtedly be a good thing for industrial hemp overall, it would also mean a more saturated market of American-grown hemp, with unknown implications for individual farmers who are currently investing in the crop. Another, longer-term monkey-wrench that could be thrown in the mix? The legalization of marijuana. While this is less likely to happen in the near future, some predict that the eventual legalization of marijuana may reduce the value of medicinal products currently made from industrial hemp (since many consumers might prefer the same products made with marijuana rather than hemp).  
Franny Tacy has advocated on behalf of a farmer's right to grow hemp. Franny Tacy

Tacy advocated on behalf of a farmer's right to grow hemp.

An Opportunity for Farmers of All Stripes

Farmers with operations of all different sizes are showing an initial interest in hemp. Emily Febles, the program manager of North Carolina’s industrial hemp pilot program, reports that the amount of acreage individual farmers are devoting to the new crop runs the gamut from half an acre to 100 acres. “The types of folks who are getting into hemp production in North Carolina are all over the spectrum,” she says. “We have traditional farmers who are interested in experimenting with new crops now that tobacco prices are declining. We have small, mom-n-pop farmers who are growing hemp to tap into the organics market. We have members of the younger generation who may have had parents and grandparents that farmed, but are currently employed in other sectors. Hemp is bringing them back to the family farm. People experimenting with hemp production come from every farming background, political spectrum, and walk of life.”

In some ways–because hemp must be processed before it can be used, and because many processors will work on an economy of scale–larger farms accustomed to growing staple crops like wheat and corn may have an advantage when it comes to meeting the needs of processors and securing individual contracts. On the other hand, these scaled-up farms–with resources tied up in big-ticket, crop-specific machinery and infrastructure–may be less flexible in terms of switching their operational focus, and this could make them less likely to take a risk on hemp until the market has been proven. Larger farmers may also be reticent to get into hemp until advances in harvesting equipment are made; for now, most hemp crops are hand-harvested–a daunting task on a larger scale.

While smaller, mixed-crop market farmers like Franny Tacy don’t have the volume of acreage to devote to hemp, the crop still holds substantial appeal, especially for those who are passionate about hemp and its environmentally sustainable profile. For these farmers, the trick will be to figure out how to maximize the profits of smaller plots of hemp. This may look like selling into a co-op in order to gain access to larger processors, finding specialty buyers (for example, smaller processors or manufacturers who will pay higher prices for certified organic hemp), or even investing in vertical integration. That’s what Tacy, ever the entrepreneur, is doing. Her plan is to become her own processor and manufacturer, producing CBD oils and other products under the auspices of the newest branch of her business: Franny’s Farmacy. “Small-scale farmers are artisans,” she says, “and it will get to a point where they can use the hemp that they’ve grown in their own value-added products.” (Note, however, that there is still some legal ambiguity around certain medicinal hemp products, like CBD oil.)

Regardless of where individual farmers go with hemp, one thing is certain: the future of this dynamic new crop is looking bright.

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