Hemp. It’s both alluring and alarming. Promises of big returns have piqued interest in this “new” crop, but problems plaguing the fledgling marketplace also make it a risky business.
Regardless, hemp will be planted on Missouri farms this spring for the first time—legally—in more than 80 years. After decades of being lumped in with laws against controlled substances such as its trouble-making cousin, marijuana, industrial hemp was federally authorized in the 2018 Farm Bill. The Show-Me State opened up commercial hemp production last year, and the Missouri Department of Agriculture began accepting applications Jan. 2.
At press time, 204 applications had been received and 130 farmers had been approved to grow hemp, according to MDA. Additionally, 55 permits had been issued to sell or distribute hemp seed or plant materials such as clones and seedlings.
Although hemp can be grown for fiber or grain, much of the market is aimed at extracting cannabidiol, or CBD, which reportedly delivers a wide range of health benefits. Consumers spent $5 billion in 2019 on CBD products, and analysts predict the market will grow by roughly 233% between now and 2022.
Those numbers are attractive to farmers who have seen prices plummet for traditional commodities in recent years. In a 2018 study of 33 Midwest corn and soybean farms, total revenue averaged $673 per acre, while costs averaged $664—a return of only $9 per acre.
In contrast, a sample planning budget created by the University of Missouri figured revenue of $24,000 per acre for CBD hemp with operating costs of just over $14,000—a profit of $10,000 per acre. Such potential has helped boost interest in U.S. hemp production. Today, 46 states allow hemp farming, and 285,000 acres were planted in 2019—72% more than 2018.
But, in many cases, the pie-in-the-sky return just isn’t there. With so much supply, many farmers are struggling to find a market. Hemp for fiber has low demand and low returns, while hemp for CBD is a young crop with an even younger market. You can’t just take it to the local grain elevator. According to MU Extension’s Ray Massey, only a few places in Missouri will buy and process hemp. There will undoubtedly be more in the future, but it’s currently a very real limitation.
In neighboring Tennessee, which is a few years ahead of us in hemp cultivation, my brother, Russell, discovered the crop’s challenges for himself—the hard way. He grew about an acre of hemp for CBD on his farm in 2019. Most of that crop is still sitting in his barn with nowhere to go. He knows farmers whose processing contracts became worthless when the market was flooded with hemp last fall.
Beyond marketing woes, hemp agronomics can also be formidable. It’s labor intensive and expensive. No herbicides are currently approved for use on hemp, so weed control requires manual cultivation or plastic mulch. The MU planning budget estimated 246 hours per acre of labor. To produce CBD, you need all-female seedling clones. MU estimated their cost at $4 each, and around 2,000 plants are needed per acre. Proper facilities to dry and store the crop also are needed.
In addition, hemp includes a legal risk. Plants must have less than 0.3% tetrahydrocannabinol (THC)—the intoxicating substance in marijuana. If higher than 0.3%, hemp must be destroyed, and farmers get no compensation. In 2019, 30 growers in Minnesota were ordered to eradicate their hemp crops after the plants tested too high for THC.
Financing can even be problematic. Some hemp farmers have experienced issues with banking and crop insurance, although the USDA is allowing revenue protection beginning with the 2020 crop.
Farmers should be cautious and consider the risks before entering the hemp hype. At least a couple hundred growers in Missouri want to give it a go, hopefully with the knowledge that it’s not a “get-rich-quick” venture. They need to be prepared for the challenges of production and harvest and have a solid, reliable marketing plan. MFA agronomists can provide some guidance, and MU Extension is researching hemp production specifically for Missouri. The Missouri Hemp Association and Missouri Hemp Growers also provide industry support.
Yes, the opportunity to grow hemp is exciting and trendy and could offer a new source of farm income, but keep in mind the industry is in its infancy here in Missouri. That means growers will be learning as they go, and those lessons could be costly.
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