With the Hemp Harvest Weeks Away, Profits Are Anyone’s Guess
Written by: Anne Wallace Allen – VT Digger
Barring a natural disaster, thousands of hemp plants will be harvested in Vermont this fall. Growers and processors agree prices will be lower than last year’s, but beyond that nobody can say where and how the hemp crop will be sold, and for how much.
“This summer, you have the market in fluctuation, and a bottleneck in processing,” said Merrill Hersey, director of efficiencies at Colomont Inc., a St. Albans hemp and CBD company with about 15 employees. Hemp prices depend on an array of factors including how much labor the grower can muster to pick the hemp when it’s ready; how efficiently it is dried; and its chemical content.
“It’s like tomatoes,” Hersey said. “You better be ready to pick them when they’re ready and make them into tomato sauce fast, because tomatoes don’t last long in a box. If you don’t dry it and pick it in a timely fashion, you’ll have loss.”
Hemp growers registered more than 3,200 acres of land with the state last year, as required by law. The Agency of Agriculture, Food and Markets expects that acreage to double this year. By the end of May, the agency had issued 570 registrations for growers and 158 for processors, far exceeding the numbers for all of 2018. More than 90% of the hemp grown in Vermont is expected to be processed for cannabidiol, or CBD, which is used as a supplement in food and other products.
The agency has spent several months working on rules for the new industry, and on July 5 closed its public comment period so it can put together final rules to present to the Legislative Committee on Administrative Rules, which meets throughout the year. The proposed rules include registration fees for growers.
Prices depend on more than the condition and the chemical content of the harvested plant. Growers need to find processors who want to buy their crop, and industry observers have been saying since last year that there aren’t enough processors in Vermont to handle the acreage expected.
“Right now, processors own the market,” said David Muller, who is growing about 3,000 hemp plants with some neighbors as part of a cooperative in Woodstock.
Muller said he spoke to a grower a few months ago who made $1 million on an acre of hemp he grew five years ago. Last year, that grower made $50,000 on an acre.
“It was sort of instructive,” he said. “It’s quickly becoming like dairy farming is in Vermont: You can never compete with a 20,000-acre farm in Montana. The roots of success in Vermont are going to be a Vermont-branded product that carries some panache.”
Meanwhile, selling hemp products from one state to another is complicated by variations in state law, said Muller.
“The whole regulatory issue is crazy right now; there are certain rules in place and people are making it up on their own,” said Muller. “The fact is right now there’s very limited ability for interstate commerce with this stuff. It’s not that it’s totally out of the question; it’s reasonably limited.”
That said, Muller is considering processors in Kentucky and Maine for his hemp harvest. He said some out-of-state processors require less pre-processing of the plant.
“It essentially boils down to handwork,” said Muller. “It’s a hurdle that’s tough to overcome.”
Processor Dan Chang is co-founder at Kria Botanicals in South Burlington, one of the companies that is buying only premium dried flowers, not whole plants. Kria in May paid some growers money up front on their 2019 harvests so the growers could invest in infrastructure like greenhouses, Chang said.
“The market is so immature that everybody is making individual deals with everybody else,” Chang said. “For next year, there’s a lot more available, and everybody knows the price is going to go down.”
Farmers struggling with low commodity prices still see hemp as an alternative that doesn’t require much of an investment in new equipment, said Tyler Whitley, who talks to would-be hemp growers as a case manager for Rural Advancement Foundation International in North Carolina. That’s especially true for tobacco farmers who are experienced in drying plants.
“It’s a real hot ticket right now, and something that give farmers a lot of hope as far as turning profitability, because of the downturn we’ve seen in corn and soybeans and other farming sectors,” said Whitley.
Whitley said he’s seen some farmers make money growing hemp, and others lose money. Although hemp cultivation was included in the 2018 Farm Bill, effectively freeing banks to lend for hemp operations, it’s still difficult for farmers to secure financing for it, said Whitley. And the crop itself is complicated.
“There’s always a learning curve whenever you are growing a new crop, more so with hemp because it can be a little fickle, depending on whether you are growing it for fiber or CBD oil,” he said. “And a lot of it stems from: are you going to be able to find someone to purchase your crop, and if you do find someone, is it going to be somebody who has the funds and the cash on hand to pay you for all of it at one time?”
For Hersey, uncertainty about the harvest outcome stems from the fact that amateurs have flooded the market this year. He said he tells would-be hemp farmers that they’d be more assured of financial success if they grew a commodity crop like carrots.
“They believe it’s a lottery ticket and they’re attempting to score,” said Merrill of fellow Vermont growers. “There are a lot of bad seeds and bad products going around.”
Heather Darby, an agronomist for the University of Vermont extension who works with hemp growers, said she too has seen a lot of inexperienced people, many from out of state, start growing hemp this summer. Spring conditions were so wet that they prevented many people from getting their plants into the ground until now.
“People are still trying to get planted,” she said Tuesday.
Some of those people have moved to Vermont from places like Florida, California, Colorado and even India to buy land for planting, Darby said. The $25 registration fee for growers – which will be updated Jan. 1 when the new rules go into effect – is one of the draws, Darby said.
“They told me they did all this research, and this was the cheapest land, the best climate, and basically the best rules and entry fees,” she said.
The national researchers publishing reports on the fast-changing hemp market generally ignore tiny Vermont. Colorado, which established a hemp program five years ago, is expected to triple its hemp acreage this year over last year to 80,000 licensed acres, according to [Hemp Industry Daily]. But its climate is not ideal for the plant. Farmers in Kentucky and North Carolina who have experience with tobacco have an advantage in the critical area of drying the plant, the report said. It said New York’s climate — which is similar to Vermont’s — is more conducive to growing hemp than that of other states.
Darby said she’s worried that many of the hemp farmers she has met haven’t secured processing contracts that will make them money.
“A lot of non-farmers are trying to grow hemp and they have unrealistic expectations,” she said.
Members of Muller’s cooperative have tempered their expectations.
“One of the farmers I’m working with, a fifth-generation farmer, he said, ‘Of course we’re going to lose money; this is farming,’ ” Muller said.