Why do we need hemp? Why did the Federal Government reclassify it as an agricultural commodity after all this time? Why now when the American economy hasn’t been stronger? Yes, the Bureau of Labor Statistics reported that in April alone, a total of 263,000 non-farm jobs were added to the economy. The unemployment rate is the lowest it’s been since literally December 1969—the year we put astronauts on the moon. But did anyone take note that those were non-farm jobs? Because American farmers are currently living in economic crisis. According to data from the U.S. Department of Commerce, in the first quarter of 2019, their income declined by $11.8 billion, marking the biggest first quarter drop in three years.
Why is our agricultural sector experiencing one of the worst economic crises during a time of prosperity? For starters, the issues affecting their income (or lack of income) are out of their control:
- Farmers are experiencing record flooding, particularly in the Midwest, which means planting has been significantly delayed. The Mississippi River has been flooding since March; the National Weather Service indicated in their Spring Flood Outlook that “snowmelt alone will cause rivers to rise near or above flood stage,” and heavy rains (that the Midwest has been experiencing) will only increase the degree of flooding.
- Apart from the weather, commodity prices are low, and interest rates are high. According to the Des Moines Register, data from a 2018 fourth quarter report from the Chicago Federal Reserve noted that seven percent of farm borrowers in Iowa, Illinois, Indiana, Michigan and Wisconsin were struggling to repay operating loans (which are used to purchase seed, etc.), which is the largest percentage since 1999.
- Domestic commodity prices are low in part because exports have declined. Trade wars with China have increased the tariffs on everything from beef to soybeans.
While hemp can’t change the weather or negotiate trade deals with China, it can bring more sources of income to farmers so that the bank doesn’t take the farm. In Kentucky, soybeans have replaced tobacco as the state’s leading crop. As of December 2018, an acre of soybeans yielded about $500, yet an acre of hemp being grown for cannabidiol (CBD) could bring in as much as $30,000 per acre. While this appears to be an overly optimistic figure, it turns out that earning $30,000 per acre is not only accurate, but a conservative estimate.
According to Kentucky growers surveyed by Hemp Business Daily in 2018, a pound of dried CBD flower went for about $20 to $50 (depending on the quality of CBD content). Most CBD farms yield about one pound per plant, and they can fit up to 2,500 plants per acre, so on the low end of the spectrum, one acre could very well produce $30,000 to $50,000. Bringing that math full circle, Kentucky has 75,800 farms, with the average size being 169 acres (the national average for a farm is 444 acres). Now, I’m not a hemp farmer, nor do I live in Kentucky, but if I was growing 169 acres of soybeans, making approximately $84,500.00 every harvest season (prior to expenses), and had the opportunity to make at least $5,070,000.00 on the same exact piece of land, I’d want in on that. Who wouldn’t?
Of course, that total amount isn’t net pay, but even after all expenses from growing the plant are deducted, that’s still an obscene monetary difference for farmers looking to avoid bankruptcy. In Kentucky, most farms are small family farms—not the mammoth corporate farms that get all the USDA subsidies. More than 50 percent of Kentucky (that’s 12.8 million acres) is considered farmland, yet 55 percent of its farms (41,800 farms) have had annual sales of less than $10,000. No wonder Kentucky farmers are excited about adding a new crop to their portfolio.
According to the Courier Journal, in 2018, Kentucky’s hemp program employed 459 people:
- Hemp processors made $57.75 million in gross product sales, which is a significant increase from 2017’s $16.7 million total.
- The processors paid Kentucky farmers a total of $17.74 million for all harvested hemp materials, which is a $7.5 million increase from 2017.
As of May 2019, Kentucky’s agricultural department approved more than 50,000 acres (20,234 hectares) for hemp production, which is more than triple the approved acreage in 2018. As for the number of approved hemp growers for 2019, that is set to be 1,047, which is nearly five times higher than what was approved the previous year. Now that hemp is defined as an agricultural crop, the industry as a whole can operate as any other legal industry by opening bank accounts, applying for federal loans, deduct expenses on their taxes, and so on, making it much easier for a farmer to incorporate it into the crop rotation.
Even though hemp is a legal crop, the average person can’t grow it. We can’t go down to our local Home Depot and pick up a pack of seeds for our backyard vegetable gardens the same way we do with tomatoes or zucchini. Plus, anyone convicted of a drug charge is completely ineligible to grow it until 10 years after their conviction date (which I personally don’t understand and don’t agree with for many reasons… in the first place, it’s not a drug and can’t get you high). Those who do want to grow hemp must apply for a license to do so, and the fees associated with the license vary from state to state.
For instance, in Illinois, where 75 percent of the state’s total land area is considered farmland, there’s a $100 application fee; then if the farmer is approved (within 30 days), the next expense is the license fee. A one-year license costs $375, two-years costs $700, and a three-year license costs $1,000. On May 1, the Illinois Department of Agriculture announced it was accepting hemp applications, and within 24 hours, the state received nearly 400 applications to grow or process industrial hemp. So even with these additional fees, the benefit of adding another crop to the farm (which mainly consists of corn and soybeans) is being well-received. Especially since farmers in the neighboring state of Wisconsin, who are entering their second year of hemp production, can reportedly make $100,000 per acre from hemp-derived CBD, before the costs of seed, labor and processing are factored in.
As more and more states allow hemp to be grown for commercial purposes, the skeptics are already claiming we’ll soon find the market flooded with too much CBD, and farmers will find themselves in the same predicament they’re in now. What we’re seeing is the need for more CBD extraction facilities, and now that hemp can be transported across state lines, if there aren’t enough local extraction facilities built yet, there may be one a state or two away.
Personally, as long as CBD extraction facilities continue to sprout up alongside hemp, I can’t see how we’ll ever reach a point where we have too much CBD, considering how many emerging markets there are for it currently. While CBD isn’t entirely legal yet in Texas, CBD massages are already being offered at a luxury chiropractor’s office in Dallas. Walgreens and CVS are selling CBD lotions and other products in nearly 1,500 stores in multiple states. There’s CBD-infused soda. Heineken is selling CBD beer in California. Snack companies, such as the makers of Chips Ahoy, Cadbury chocolate and Oreos are also getting on the bandwagon. Carl’s Jr. is developing a CBD-Infused burger to be sold in Colorado. Supermarket chains are selling CBD oil, lotions, bath bombs, even sparkling juices infused with cannabinoids. CBD derived from hemp has only been federally legal for a handful of months, yet here we are, seeing major developments in established industries.
Plus, CBD is only one aspect of hemp. There are other varieties that produce nutritional food products, such as hemp protein powder, hemp seeds, hemp milk and hemp seed oil rich in Omega 3 & 6 fatty acids. Whether hemp is grown for CBD or food, the rest of the plant (leaves, stalk, etc.) can be sold to processors to manufacture additional products such as 3D printing filaments. Car companies have been using the fiber in hemp stalks (bast fiber) to replace carbon fiber and fiberglass; the body of one particular sports car made in Florida is manufactured entirely from woven hemp fiber. The Hemp Plastic Company based in Denver makes biodegradable plastic. The University of California recently received more than $12,000 in grant funding from the EPA to develop new ways to process hemp fibers into hempcrete, and there are companies in the U.S. that already use hemp-based building materials.
The point here is that other aspects of hemp are being embraced by researchers, start-ups and major corporations alike, so a farmer can get multiple sales out of one harvest: Sell the CBD flower to an extraction facility, sell the hemp hurds (inner stalk) to a pulp-paper facility and/or hempcrete manufacturer, sell the bast fiber (outer stalk) to a hemp fabric and/or hemp plastic facility, or use it as “green manure” (an organic fertilizer) to put nutrients back into the soil.
While all these uses are currently possible, we’re admittedly on dial-up speed right now with our emerging domestic hemp industry, but by next year, and the year after that, we’ll see more stability and opportunities. Who would’ve predicted the bulky home computer with finicky internet access would be the first step in developing Wi-Fi, artificial intelligence, and so many other aspects of our daily lives? As American hemp continues to expand our domestic industry, we’re going to see job growth across so many sectors—starting with farming—something we haven’t seen in a long time.