As we approach the new year, the hemp industry is taking stock of the just-concluded 2021 season while considering how best to approach 2022. Many experienced hemp growers and processors, who learned hard lessons from the “green rush” years immediately following hemp’s legalization in 2018, appear to be taking a much more cautious approach for next year.
According to Steve Fuhr, an Oregon-based hemp processor and multi-state industry consultant, the predominant message he is hearing from cultivators is that many are not planning to plant hemp in 2022. “The vast majority of hemp farmers I know are not growing it,” he told Hemp Benchmarks.
Fuhr pointed to a number of factors currently depressing the hemp sector. There is the dramatic drop in prices due to massive overproduction of CBD hemp biomass that still remains in storage and without buyers, with the rough market conditions leading to a “hangover” amongst growers, he said. Additionally, Fuhr believes the hemp fiber and grain markets, while promising, “are not getting any traction.” Below, we relay reports from outside of Oregon, where cannabinoid hemp has been dominant, that tell of developments in industrial hemp supply chains. However, there is still a long way to go before fiber and grain hemp realize the full potential that some have envisioned.
Meanwhile, Fuhr noted disruptions from the ongoing COVID-19 pandemic are “still reverberating in the economy.” For example, hemp logistics company Fide Freight provided Hemp Benchmarks with data on rates to ship bulk hemp products by truck that show significant increases in average shipping prices compared to last year. As of this month, average rates to move bulk hemp products in a “dry van” from Denver, Colorado to various selected locations increased anywhere from 22% to 94% year-on-year, with the route from Denver to Los Angeles, California seeing the largest jump. More detailed hemp transportation cost data is included each month in our Hemp Spot Price Index reports.
Ken Anderson is CEO for Wisconsin-based Legacy Hemp Holdings. His operation sells seed and production guides, in addition to contracting acreage for both hemp grain and fiber. He told Hemp Benchmarks he expects less hemp acreage and farmers next year due to several factors; among them rising prices for mainstream crops like corn and soybeans that, in turn, make hemp production less appealing. Similar factors at the start of the 2021 season led to fewer acres planted with hemp, according to Hemp Benchmarks’ reporting from earlier this year.
“It’s going to be tough to get acreage,” Anderson said, “because farmers have to jump through a ton more hoops to grow hemp. Also, it’s a crop they’re not really used to growing. A lot of these farmers know how to be successful with growing corn and soybeans. When prices are elevated it doesn’t make financial sense [to grow hemp], unless we can really pay a premium for their crops. And unfortunately, in the hemp realm right now, it’s kind of a race to the bottom. Everyone that’s trying to pick up new business is doing it by becoming the low-cost provider, rather than focusing on quality.”
Colorado, one of the leading states for hemp cultivation and processing, is a prime example of how the market has contracted. According to the newly-released 2022 Colorado Business Economic Outlook, produced by the University of Colorado Boulder, hemp cultivation in the state dropped from 2,000 registered growers in 2019 to about 500 in 2021, and from 87,000 acres to 21,000 in the same span. “Growers cite the lack of a market and processing facilities for hemp fiber and competition from other states legalizing industrial hemp,” the report continued, “creating an abundant supply on the market.”
While many hemp growers wonder if the market for CBD and other cannabinoids has plateaued, the still-developing hemp fiber and grain sectors have received more attention from both cultivators and the media. As we reported back in September, the National Hemp Association, reportedly in response to a request from the White House Domestic Policy Office, released a report on the economic impact of a sustainable U.S. hemp industry. According to a press release, the report “outlines a pathway to establish a new sustainable economy around hemp fiber and grain,” with a projected $32 billion impact by 2030.
Melissa Nelson-Baldwin is co-owner of South Bend Industrial Hemp in Kansas. The company has been growing hemp grain and fiber since 2019 and opened its processing facility this past June. Nelson-Baldwin told Hemp Benchmarks that their decortication facility, believed to be the first of its kind in the Midwest, has been busy ever since it was first switched on. Business for hemp fiber, she said, has “grown exponentially. There was none three years ago, and now I need three shifts at my facility.”
South Bend, according to Nelson-Baldwin, is trying to create a network of fiber processing facilities across the Midwest, “so we can get [the hemp] farmer taken care of, and get his acres to the closest facility. And then, by working together, we can fill some of these large volume orders and get our client taken care of.” The processed hemp fiber, she added, is being purchased by a wide variety of industries; from non-woven textiles to bioplastic facilities. “Every industry that you can think of is calling and asking how they can utilize hemp,” she said.
Nelson-Baldwin’s operation has contracted for hemp fiber with farmers all across the region, “from South Dakota to Texas.” Most of the cultivators she works with are multi-crop farmers, who on average grow between 25 to 50 acres of fiber hemp. She recently hosted a growers appreciation dinner at their facility and said her farmers are all “pretty happy; they’re going to increase their acreage for 2022.” Nelson-Baldwin said that her company is trying to contract 4,000 acres of hemp fiber next year, with contract prices at $240 per ton.
In 2021, Nelson-Baldwin told Hemp Benchmarks that South Bend contracted 1,000 acres of fiber hemp, but bought another 600 acres’ worth on the spot market. Contract prices ranged between $150 – $200 per ton based on quality, with all the production at $200 per ton this year. Planting density is typically 800,000 to 1.2 million seeds per acre. Yield is generally around seven-and-a-half to eight bales per acre, with each bale around 1,100 pounds; so roughly four to four-and-a-half tons per acre, or between $800 and $900 in revenue per acre for farmers. Nelson-Baldwin noted that growers can employ existing equipment for planting and harvesting.
There are some misgivings, however, that hemp grain and fiber have become the latest buzzwords in the hemp industry, similar to how CBD was acclaimed several years ago. “One of my worries is that everyone now is promoting fiber, that it is the next great thing for hemp,” said Ken Anderson at Legacy. “It is the next great thing, but the market has to be established. If we make the same mistakes we did with CBD that will create another problem. I always look at trying to do business backwards. You have to have a buyer and market first. If everyone puts money into processing but no buyers, it’s set up to fail.”
Anderson said that hemp fiber is not yet cost competitive and any future hemp fiber market remains hobbled by a lack of federal government regulation. As yet, he pointed out, “there is no standard in America established for hemp fiber, for different input specifications. What is the standard for technical-grade fiber? What’s the [required] length of fiber? That’s not established in our industries as it is in other industries.”