THE NEW GILDED AGE (Part 2)
THE NEW GILDED AGE (Part 2)
Is it too little too late?
31st January, 2019 0
“Make the most of the Indian hemp seed and sow it everywhere!”
-President George Washington (1794)
Hemp has a long history as a useful industrial crop, equally valuable as timber, that should never have been classified as a narcotic. Now, it no longer is. The hemp stalk is wrapped in strong durable fibers for making sail canvass and rope, textiles, paper, friction linings, and for compression molding. Inside the stalk is hurd, which is useful for paper, mortar, cement block, fiberglass, and insulation. Hemp seed is used to produce bird seed, ink, fuel, oil, solvents, varnishes, and personal hygiene products. It is considered a superfood containing essential omega-3 fatty acids and proteins. The buds and leaves resemble marijuana, but are not suitable for smoking and do not have the ingredients that get people high, but the grain is nutritious and makes other good byproducts like mulch.
Hemp is low in THC (≤0.3%) but contains between 5-15% of CBD (cannabidiol). CBD and other cannabinoids are naturally occurring compounds that display potent anti-inflammatory and pain-relieving properties, without the other pesky side effect of a mild euphoria that has given marijuana, and by extension hemp, a bad name over the years. Popular CBD products include CBD infused lotions. Heineken and Corona are developing brews with CBD instead of alcohol. CBD teas, coffee, and dietary supplements are making their way to the market. Acre-for-acre, hemp can produce four times the amount of fiber of an average wood forest.
Now that the legal barriers to hemp products have fallen many entrepreneurs are incorporating hemp into products. Hopefully these changes are not too late for the American hemp industry, which lags far behind Canada, China, and Europe. With cannabis prohibition nearing its end nationwide, hemp farming is legal once again in America after the Marijuana Tax Act in 1937 effectively banned it. Over the past decade hemp products have mostly used imported ingredients. Even as would-be hemp farmers sought access to seeds and permits, they were denied access to federal programs crop insurance and other benefits generally available to the farming community due to the Schedule 1 stigma.
FEDERAL FARM ACT OF 2018 & INDUSTRIAL HEMP RESEARCH AND DEVELOPMENT ACT
On December 20 President Trump signed into law the 2018 US Farm Bill, which removed hemp, defined as Cannabis Sativa with a THC concentration of no more than 0.3% from Schedule I of the Controlled Substances Act. The Drug Enforcement Agency (DEA) no longer has regulatory authority. States and tribes that submit a plan to the Department of Agriculture have primary regulatory authority over the production of hemp. Hemp farmers will be eligible for banking services, federal crop insurance, other programs and USDA research grants.
Michigan’s voter-initiated Proposition 1, passed by a 56% landslide last November; it legalized “possessing, cultivating, processing, obtaining, transferring, or transporting industrial hemp.” Since the election, the legislature passed enabling legislation. Consistent with the new federal law, the legislation gives the MICHIGAN DEPARTMENT OF AGRICULTURE AND RURAL DEVELOPMENT (MDARD) power over hemp farming and processing.
Hemp farmers will pay a minimal $100 annual registration fee to grow hemp. MDARD will also license new processing facilities to process, handle, broker, or market industrial hemp. Hemp farmers may also request permission to sell to marijuana processing facilities licensed under the Medical Marijuana Facilities and Licensing Act. Unfortunately, while MDARD is working on its “plan”, the US government shutdown may delay approval.
MDARD may not have a viable hemp program for 2019. Blain Becktold, a retired USDA farms service official and owner of Down on the Farm LLC, says the state has a 50-50 chance of having its hemp registration program up and running for 2019, based on conversation with MDARD staff. Growers have indoor options for 2019, but should probably limit their ambitions to learning the crop and developing seeds and cloning for the 2020 season.
GLOBAL HEMP MARKETS AND OVER REGULATION
Where we were once a leader, American farmers and processors will need to redevelop a meaningful hemp industry from scratch. Hemp originated in China, and China has exploited America’s absence from the industry to dominate the world hemp agriculture market. China’s hemp industry enjoys the processing capacity and experience to reliably supply the world’s hemp needs. Czechoslovakia and Italy also have major hemp production capacity in a well-developed European market. Canada is far ahead of the US in the CBD industry, and has all its infrastructure in place.
If US farmers and processors don’t develop this industry within just a few years, there may not be room left. 80% of the US hemp market is controlled by Canadian farmers, and Canada’s government will dump hemp on the US market with the intent to drive prices down by over 96%, according to Joe Brown, a Michigan hemp farmer and processor who has spent years in the Kentucky Hemp Research Program.
Canada has the hemp infrastructure and developed market to withstand years of low prices, and the strategy is to freeze out American farmers. The new CBD market can provide an opening for American hemp. China’s hemp production industry is developed and mature with respect to its traditional “industrial” uses, but CBD extracts are of only recent interest.
American science has already developed low THC hemp with “feminized” hemp seeds that produce super high CBD levels. CBD hemp will likely dominate the next decade in America and may drive development of a viable hemp processing infrastructure. Overregulation by FDA may hold hemp markets back. The US government destroyed the American hemp market in the first place, and it is important that the government not do so again though overregulation, if America is to compete in the lucrative global hemp market again.
Hemp and hemp products will continue to be subject to regulation by the USDA; FDA regulations and labeling regulations will be a big deal, maybe even where the products contain naturally occurring CBD’s. New dietary ingredient (NDI), food additive, food facility, and current good manufacturing practice regulations will need to be managed. FDA regulations that prohibit the addition of CBD extractions to a food unless the drug was marketed in food before any substantial clinical investigations involving the drug were instituted.
CBD is not grandfathered-in because CBD was not added to food prior to the clinical investigation of CBD-containing drugs. These rules don’t prohibit marketing of hemp that contains CBD as a naturally-occurring constituent. The FDA may let the hemp market flourish during this critical but short window of opportunity for the US market to develop before it is too late, but if the government takes the path of overregulation it could kill the new hemp market in its crib.
TECHNICAL ASPECTS OF CULTIVATING, CLONING, AND SELLING HEMP
There are three main types of hemp production: Grain/seed, fiber, and CBD. Spacing, cultivation methods and equipment are different when CBD’s are the goal. Special whole-plant cutters have been developed to address the special needs of harvesting high-CBD plants; one is called the Triminator (thetriminator.com).
Field hemp is simply mowed and left in the field for 5 weeks before it is baled, but CBD hemp plants must be cut and hung to dry. Seed humbuggery is as old as the hills, and no doubt seed scams will abound this spring. There are literally no reliable Michigan seeds available at reasonable prices for the 2019 growing season, according to Brown, owner of Brown Farmacy. Seeds may be selling for $1.00 or even more. Certified seeds are available online for $35-50/lb. for field hemp and $4,500/lb. for feminized 15% CBD hemp seeds (1lb contains about 24,000 seeds), according to Becktold.
Internet seed sources include hemplogicusa.com, bijahemp.com, jupiterseed.com and legacyhemp.com. As always, caveat emptor in this internet age and in any new industry. Clones may be more reliable but even more costly and scarce. Land raised varieties of hemp can produce between 5%-15% CBD levels, with ultra-low THC required to avoid the schedule 1 designation. Frequent testing is required to make sure the THC level stays below the 0.3% threshold; if the government finds that level to be exceeded the farmer can be fined and the entire crop destroyed.
Hemp profitability is encouraging but uncertain. One acre of CBD hemp with 6’ by 6’ plants spaced 7’ apart in rows spaced 4’ apart will contain about 150 plants, at 1-pound dry weight each with an average 10% CBD content, brought a price of $5,000 last year, while the price of corn and soy brought $800/acre, according to Brown. Becktold estimated planting at about 700 viable plants/acre, and a net profit of 18,000/acre at $40/lb. after about $10,000 costs.
Pesticides and herbicides are prohibited for hemp (as no such products are labeled for hemp). Hemp does require irrigated fields but needs only moderate water. Hemp grows well in Michigan’s well drained soils and cool temperatures. Hemp may be grown between crops - before or after corn or as a cover crop instead of alfalfa. Typical pests are spider mites and thrieps. Switch grass and pigweed can develop between rows, making harvesting difficult. Overspray irrigation can cause powdered mildew to develop on the leaf, which requires removal of the affected plants.
According to Brown, who grows a White Plume cultivar from the Dakotas, branches are pruned often to increase the number of flowers producing stalks, like tomatoes. Field hemp closely resembles a wheat crop. Cloning hemp varieties may be the most reliable way to insure high CBD and low THC. Brown recommends creating mother plants to clone in time for a spring field planting. Sowing seeds indoors, then inducing vegetative stage after 90 days by reducing light to 12 hours/day, reveals gender. Clone the best females then fertilize the remaining plants by using pollen on a Q-tip to also produce seeds.
Prices will be somewhat unpredictable in the future, and so too will be farmland rental rates. Landowners may not trust hemp cultivation companies to pay and have no history of how much to charge. However, farmers may be attracted to the high prices that hemp can bring, and growers who rent land for cultivation may pay double the rent they pay for other crops, according to Brown.
It is reasonable to assume that flexible profit-sharing arrangements will be developed where growers and land owners share the risks and returns of help farming. Processing capacity is lacking so farmers may need to do their own processing. It may take years before processing plants locate within delivery distance from farms, so farmers can achieve good results by preparing their own hemp products and delivering them to retail outlets for sale. In order to do this, they will need to get a state license which will cost $1,350 and follow food processing and labeling rules.
HELP AVAILABLE FOR NEW MICHIGAN HEMP FARMERS
Keep in mind that the legal hemp farming industry is only a few weeks old, and that the USDA has been shut down ever since the federal law changed, so there have been few government resources brought to bear so far.
A Facebook group called “CBD Trade Marketplace” is very informative (you need to ask permission to access it). The MSU Extension Service is planning a small research project this year, and Ferris State should offer reliable services soon. The best way to get involved in the Hemp industry in Michigan is to utilize the expertise of people who have actual work experience in hemp farming and processing.
A knowledgeable consultant who contributed to this article is Joe Brown of Brown Farmacy. At $55/hour he seems a bargain for anyone who wants straightforward cautious advice and assistance, and his knowledge of the pitfalls and opportunities within this new industry is impressive. He can be reached at 616.328.3492 and his email is email@example.com.
His advice for aspiring hemp growers and processors is simple – research methods and learn the crop with a small investment, use 2019 to develop seed and clones for 2020, learn how to make basic products so you can vertically integrate your hemp business, then slow down and watch the market develop to avoid failure.
A group (ihempmichigan.com) put on a conference in Flint last week and is putting on a second hemp growing conference on March 7 at the St. Johns AgroLiquid Center. Organizer Blain Becktold can be reached at 616.502.0881 for more information.
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THE NEW GILDED AGE (Part 2)