Kentucky Department of Agriculture Commissioner Ryan Quarles says he’s given the same advice to hemp farmers for years: “Proceed with caution.”
Farmers in the state appear to have heeded his warning this year as market volatility continues presenting significant barriers to profit. The Kentucky Department of Agriculture (KDA) recently released data on its upcoming growing season, revealing a significant drop in hemp farmers in the state for 2020.
The KDA says it has licensed 960 hemp growers to grow up to 32,000 acres of hemp for 2020. That compares with 978 growers licensed in the state in 2019.
What’s more, of those 960 growers licensed for 2020, 157 have not requested growing sites. They simply received a license to store their oversupply of hemp from last year’s harvest.
Assuming all licensed farmers in 2019 planted hemp, that’s a nearly 22% drop in the number of farmers growing for 2020.
“Hemp continues to draw much attention, and these new numbers reflect an industry that is still maturing," Quarles says in a statement. “The nation’s hemp industry is reacting to a market which is evolving in the face of supply chain issues and the uncertain future of cannabidiol [CBD] products after the Food and Drug Administration’s [FDA’s] years-long struggle to provide a regulatory framework for nutraceutical or food products.”
The KDA notes growers had until March 15 to apply for licenses, which is later than the November deadline from previous years to “allow growers more time to plan for the 2020 season.”
The decline in farmers comes as many growers across the country report having inventory left from last year’s harvest—especially those located in the Heartland states, where several bankruptcies and resulting closures of processors left many without a buyer for their crops.
It may not necessarily translate to a proportionally large dropoff in acreage from the state, however. The KDA says Kentucky farmers reported growing 26,500 acres of hemp in 2019, while 32,000 acres have been licensed for 2020. KDA also licensed 4.6 million square feet of greenhouse space for 2020 production.
Economic data from the state reveals the industry has naturally grown since passage of the Agriculture Improvement Act of 2018 (2018 Farm Bill) legalized the production and interstate transport of hemp. Processors and handlers reported $193.9 million in gross product sales in 2019 compared with $57.75 million in 2018. They also reported paying Kentucky farmers $51.3 million for harvested hemp materials in 2019, up from $17.75 million in 2018 and $7.5 million in 2017.
Quarles, however, is cautious about how much that growth will translate into 2020.
"While these numbers show growth, they likely do not account for the national volatility in the hemp market over the last few months," Quarles says. “It is important for growers and processors to remember what we have been saying for years: proceed with caution, as you would in any new business. We urge everyone to move forward in a cautious manner, especially in the face of the uncertainty from FDA.”
Meanwhile, interest from hemp processors in 2020 is nearly on par with the previous year. The KDA says 150 hemp processors and handlers have received licenses so far, and it is still waiting on the completion of 60 more licenses. If all licenses are completed, 210 processors will be licensed in Kentucky this year—the same number as in 2019. (The KDA says it reviews processor and handler applications on a rolling basis.)
The state says processors reported spending $207.3 million on capital investment projects in 2019, as compared to $23.4 million in 2018.
Quarles, who is also the vice president of the National Association of State Departments of Agriculture (NASDA), says the department will continue working to draw new investment into the state “for every sector of the hemp economy, including fiber and grain.