June is naturally an exciting time of the year. Summer is official, sunshine is abundant in most regions, and many plants are well on their way to becoming thriving crops.
But this June, an extra buzz of anticipation hangs in the air. In May, the CDC released the statement many have been waiting more than a year to hear: Those who have received their full COVID-19 vaccinations may resume normal activities without masks.
Though complete normalcy may still be a ways off, the lifted mask recommendation feels like a breakthrough. For many, it represents peace of mind—a signal that normalcy is indeed coming.
With a new sense of invigoration and a hankering for in-person interaction, I’m more eager than ever for the debut Hemp Grower Conference this Nov. 8-10, at Rosen Centre Hotel in Orlando, Fla. The event, produced by Hemp Grower, will feature three days of education and expo, and will bring together cultivators, researchers, solutions providers and more.
At a time when a pause on in-person events has also meant a pause on education and networking, I’m proud to help kick off events again with our stellar education program, created with input from an advisory board of leading hemp growers and other experts. Whether you’re a novice grower or an expert cultivator, a small cannabinoid producer or a large-scale industrial hemp farmer, our more than 20 educational sessions offer something for everyone. To see the full agenda, visit hempgrowerconference.com.
Until then, there’s plenty of work to get done, including that looming harvest at the end of the season. This issue includes Part I of a two-part feature about hemp harvesting, where writer Jodi Helmer delves into what you need to know to plan ahead—including what to look for before harvest, what equipment you need to use, how to mechanize processes and more. Part II, running in our July issue, will cover drying and other post-harvest processes.
If you run into issues with your hemp leading up to harvest, check out the latest “From the Field” from columnist Marguerite Bolt, who details how to determine whether an abiotic or biotic factor is causing a stressor and how to diagnose the problem.
And on our cover this month is Jesse and Rachael Smedberg of Tulip Tree Gardens, a company based in Beecher, Ill., that grows, extracts and sells its own hemp products. Despite being a small company, Tulip Tree Gardens has an assortment of offerings for not only consumers, but also other small hemp businesses. In the cover story, they share lessons learned from their early days of cultivation as they have worked to regenerate the soil and build community.
With the first half of 2021 nearly behind us, there’s much to look forward to the rest of the year. We hope to not only be your guide through it, but also see you at the end of it at the Hemp Grower Conference.
Theresa Bennett firstname.lastname@example.org
Hemp is susceptible to several diseases, some of which can be very damaging if left unmanaged. But hemp growers have tools available to minimize disease pressure. Here are five tips that will help reduce the severity of diseases in hemp crops.
1. Rotate crops.
Crop rotation is planting different crops in the same field in consecutive growing seasons. Hemp diseases such as southern blight, Fusarium wilt and certain foliar diseases can survive in the soil or on crop residue year after year. By following a hemp crop with an unrelated crop, growers can reduce the amount of overwintering pathogen inoculum and reduce disease pressure the next time they grow hemp in that field.
2. Select varieties that are disease-resistant.
Choosing disease-resistant varieties is the best way to manage plant diseases. Because hemp is still a relatively new crop in the U.S. following prohibition, information about disease susceptibility among hemp varieties is limited; however, more information is starting to become available. For example, in replicated field studies done by researchers at the University of Tennessee, the varieties Super CBD and Franklin were highly resistant to fungal leaf spots, whereas T1 and Cherry were much more susceptible. Knowing the most significant disease problems in a specific area and choosing disease-resistant varieties to combat those will reduce the need for chemical disease management and reduce economic losses to disease.
3. Sanitize the growing area and materials.
In greenhouse crops, sanitation is especially critical for reducing disease pressure, but sanitation principles can also apply to field crops. Sanitation involves regular scouting, removal of infested material and debris, and cleaning surfaces to reduce disease spread. Growers should sanitize year-round, from planting to harvest and post-harvest clean up. It’s best to start with clean, high-quality seed, seedlings or clones from a trusted source; make sure workers and visitors are clean before entering the greenhouse; and monitor insect pest populations, as several common insect pests can transmit hemp viruses.
4. Follow other good cultural practices.
Benjamin Franklin could have been talking about hemp production when he said “an ounce of prevention is worth a pound of cure.” All the tips discussed so far qualify as cultural practices to help with disease management, but growers have several more to consider. This is especially important for hemp because relatively few conventional pesticides are labeled for the crop, and certain consumer and retail markets may have very little tolerance for pesticide residue.
Growers should prioritize the following cultural practices:
- Avoid working with wet plants
- Manage weeds
- Disinfect surface irrigation water using physical or chemical water treatments approved for agricultural use
- Plant into well-drained soil
- Use drip irrigation instead of overhead irrigation
- Maximize air flow by planting on a slope when possible and spacing plants far enough apart to prevent overcrowding.
5. Properly diagnose issues.
If you do spot a symptom or sign of disease, the first step is to properly diagnose it. Nutritional disorders, herbicide injury and many other conditions are often confused with plant diseases. Without a proper diagnosis, problems may be left unresolved while time and resources are wasted trying to deal with the wrong issue. Growers should become familiar with their county or regional agricultural extension office, state extension specialists, and state diagnostic laboratory to assist with disease diagnostics.
Zachariah Hansen, Ph.D., is an assistant professor and the specialty crops pathologist at the University of Tennessee’s Department of Entomology and Plant Pathology.
A small family-owned extraction company like Vermont Organic Science (VOS) measures success in many ways. For VOS President AJ Payack, escaping an unfulfilling corporate career was one measure. Another was working with his award-winning father, a former chemist in the pharmaceutical industry, to develop a proprietary extraction system and build out their own lab.
The next measurement of success Payack hopes to see play out is getting VOS’s full-spectrum cannabidiol (CBD) products on major retailer shelves.
While VOS has gained some traction getting its products in local and regional stores, Payack shares an early lesson: “It’s hard for the little guys to get into major stores.” And as it turns out, it’s not just tough for smaller hemp businesses. Growers and brands of any size must work hard to break into major retail networks.
Creating Connections to Build On
For folks new to the natural foods and hemp food markets, seeing Manitoba Harvest Hemp Hearts on Walmart shelves may seem like overnight success. But Mike Fata, one of the company’s founders and its former chairman and CEO, is quick to mention Manitoba Harvest launched in 1998. Fata was instrumental in Canada’s legalization of industrial hemp that year (as well as in Manitoba Harvest’s 2019 sale to Tilray, the world’s largest global cannabis company, for CA$419 million).
Manitoba Harvest got its footing in natural food stores, where Fata says he spent many 100-hour weeks sharing information, products and his passion for health and hemp. Though 23 years have passed, he says the importance of building a grassroots foundation of personal and business relationships hasn’t changed.
Fata says it took about five years to get into leading Canadian grocery chains. Another seven years of building the business one relationship at a time landed their products on Costco Wholesale Canada shelves. A subsequent launch in Costco’s U.S. stores, coinciding with Manitoba Harvest rebranding its “shelled hemp seeds” as “hemp hearts” to create a stronger connection with the product’s health benefits, was a defining moment. “Launching and starting to sell into Costco in the U.S. encouraged other U.S. grocery retailers to carry the product as well,” Fata says. Walmart followed a few years later.
COVID-19 hurdles notwithstanding, Fata says establishing direct connections and building relationships with retailers, distributors and brokers is invaluable for hemp brands. Natural product expos and trade shows, whether physical or virtual, were key to Manitoba Harvest’s expansion. “It’s not cheap to do those trade shows, but that’s how we built success,” he says. “And many people still use trade shows as a basis to build their business.”
VOS also won local retailer connections in its early days by making face-to-face visits, pitching products and giving out samples in stores.
But Payack’s attempts to connect with large retailers and health food chains through local connections has so far led to dead ends and corporate gatekeepers. Many companies referred him to RangeMe.com, a sourcing platform designed to connect producers with major retailers. While he made connections through that platform and sent out samples, the lack of positive progress and direct contact outside the platform was frustrating.
Reading the Room in Big Retail
One significant benefit to building relationships is exposure to varied perspectives. For major retailers considering hemp products, their view is a lot different than that of a dedicated hemp grower or brand—especially when CBD or other cannabinoid-focused products are involved.
As Payack approached retailers, he frequently found national chains reticent to roll out CBD products. Full-spectrum CBD products that contained even trace amounts of tetrahydrocannabinol (THC) sparked major concerns. Worries about becoming high-visibility targets for the U.S. Food and Drug Administration (FDA), which has not yet established a regulatory framework for CBD, kept otherwise interested companies on the sidelines.
Matt Storey is senior vice president of global business development for NuSachi, a vertically integrated Nashville-based startup offering B2B contract manufacturing in the hemp space. NuSachi’s contract services for B2B clients taking hemp-derived products to retail include everything from full product ideation and development to custom growing, extraction, formulation, toll processing, bottling and white labeling.
Storey was also part of the original team at CBD pioneer Charlotte’s Web, so he speaks from experience gained at the table with major retailers that were enthralled by the brand but backed by legal teams averse to risk.
He recommends that CBD brands going to market or seeking to enter bigger markets need to read the room. “All the big players—the Walmarts, the Targets, the Walgreens—have still not gotten a clear enough indication from the FDA that they feel safe putting these [cannabinoid] products out in significant volume in any format other than topical application products,” Storey says.
“If you think you’re going to make a hemp product and then just go blast it in and be in Costco by the end of the year, it’s just not happening,” he adds. “Unless you’re a topical product—then you have this potential.”
Valuing Grower-Brand Relationships
In refining your path to major retailers, don’t undervalue the relationships between grower and brand. VOS does extraction for several farmers, but just one farmer grows for VOS-branded products. When choosing a grower for VOS’s organic-certified CBD extracts, Payack says organic certification was essential, and personal character was the deciding factor. Having partners you can trust is crucial, whether you’re the face of the brand or the farmer behind it.
NuSachi operates a 3,000- square-foot, data-driven greenhouse cultivation facility as part of the company’s vertically integrated supply chain. President J. Mitchell, who brings broad cultivation and food industry expertise to the company, explains that NuSachi only grows crops to support specific development projects. “We always grow for customers and have that partnership on the front end, never trying to get over our skis too much around how much we cultivate,” Mitchell says.
NuSachi’s facility produces all the hemp flower for company clients, but other vendors contribute ingredients for larger contract manufacturing. Entry into NuSachi’s supply chain doesn’t come easily. Producer-partner vetting includes vendor qualification and quality control that embraces rigorous full-panel testing more common in medical-grade cannabis production, including potency, pesticides, heavy metals, mycotoxins and microbials. “The majority of vendors we seek to qualify fail for one or multiple contaminants,” Mitchell says.
Fata says grower partnerships have been critical to Manitoba Harvest’s success. More than 20 years post-launch, the company still works with some of its original hemp farmers. “That’s the backbone of the business,” he says. “The success of Manitoba Harvest was built on vertical integration.”
As an early capital raising strategy, Manitoba Harvest offered its best producer-partners opportunities to invest in the company, and many did. As a result, Fata says these long-standing relationships are much stronger than typical supply relationships. “We’ve spent a tremendous amount of time making friendships, educating our producer group on how to be successful, teaching them about quality and allowing them to invest in the overall success of Manitoba Harvest,” he says.
Partnerships with growers also enabled Manitoba Harvest to scale effectively. Farmers shared the company’s “goodwill” with other growers, Fata says, so the producer network grew along with the company. “It was a huge part of the company’s success and why Manitoba Harvest could outcompete literally hundreds of hemp companies that tried to do the same thing,” Fata recalls.
In Canada’s early hemp years, many other producers faltered by growing on spec without contracts. Fata notes the same thing happening in the U.S., intensified by the country’s size. “I’m a big believer in encouraging producers to have a contract with a company that has enough strength to fulfill their end of the contract,” he says. When partnerships lack value, producers get “the bad end of the stick.”
Navigating Retailer Expectations
As a grower or brand dealing with smaller stores, one-on-one interactions ensure both parties stay on the same page regarding what they need from each other. But handling larger retailers involves a much broader set of expectations than most nascent brands realize. Even in smaller retail chains, the expectations for marketing materials and free samples—with no promise of shelf space—can be daunting.
Payack says establishing relationships with retailers is like the chicken-and-egg paradox. If you could get your foot in the door, you could scale production to meet expectations. But without the scale up front, you can’t get in retail doors. “That’s a huge challenge,” he says.
Fata says scale isn’t optional: “You can’t be a startup and go into a major retailer. There’s no way that you’ll be successful doing that.” You need a minimum production capacity—in addition to meeting all market standards—just to get a presentation with large retailers.
One alternative is approaching smaller independent retailers or national retailers that support local business in your area. “That’s why the industry really started in the natural foods space—going into the local health food stores and the co-ops—so that you could actually get some brand awareness and get some sales velocity,” Fata says.
Beyond scale, a retail launch comes with numerous costs. Fata explains that “free fills”—giving a store free initial product to fill the shelf space at no cost to the store—are common expenditures. These costs can be considerable, especially with multiple stores involved. Add in advertising commitments for the retailer’s flyers and other marketing programs. Next comes the distributor that supplies the retailer and a broker to facilitate the distributor’s margin and take their own cut. “There’s a whole supply chain of costs besides the actual retailer costs themselves,” Fata says.
Storey agrees: “I don’t think most small or emerging brands—micro brands or just new—understand how much of a commitment and promotional spend there is with larger chain retailers.”
Other costs may include “slotting fees,” which are fees producers and brands pay to retailers to get products on their shelves. Brands that are unprepared, unwilling or unable to handle those types of costs won’t fare well. “They’re just not going to carry you, no matter how awesome your product is,” Storey says.
He says brands need to consider whether they should spend time building a regional presence by gaining traction with smaller retailers or go big by devoting a significant budget to the promotional spending it takes to live in major retail. “That’s a big consideration,” he says.
Bigger chains are also going to expect traceability, Storey adds: “When they’re taking this risk on … they’re going to want to know that you have taken all the safety measures to protect their customers, their consumers, their companies and their stores.”
Telling Your Story
Even if you’re prepared for the promotional spend, gaining and retaining consumer attention still falls on you, not the retailer. Differentiating your company and products from the retail competition through branding and marketing is a necessity many small brands and growers aren’t equipped to accomplish without outside help.
“The consumer packaged goods industry is one of the toughest industries, especially in food,” Fata says. “Most of the products that start out small-scale or at a farmers market with a plain label aren’t going to find success or aren’t going to find big business because branding and messaging to the consumer, educating the consumer, and turning the consumer into a lifelong customer is very, very challenging.”
Storey believes many growers sell themselves short on telling their story effectively. Without it, your product becomes a faceless commodity. But he acknowledges storytelling doesn’t always come easily. That’s where investing in branding and marketing help comes in.
“A lot of farmers I’ve met were very humble, salt-of-the-earth kind of people that don’t like talking about themselves—it’s not natural,” Storey shares. He adds that marketing professionals can help you share your story so customers understand the care and precision you put into what you grow.
That kind of story—when told effectively and tied to product origins and your farm—can be the differentiator you need to attract consumers and retail buyers.
Injecting Innovation Into the Industry
Whatever product you pitch to retailers, Fata says innovation is key: “It needs to be different. Not just new.” He says consumers want high-quality products for the right price. And when they already have those on the shelf, it’s hard for new brands to compete.
Case in point: New Frontier Data puts Manitoba Harvest’s retail sales share of the entire U.S. hemp foods space at 58% for 2020. Fata says the company’s hemp hearts enjoy about an 85% share of the total hemp hearts market. In that space, only real innovation gets a place. “The competition is 20 years old, and it’s super tough,” Fata says.
At NuSachi, an innovative B2B business model combines novel approaches to contract cultivation, transparent customer-facing traceability, nuanced proprietary extraction techniques, product development from ideation to manufacturing, and inventive packaging.
NuSachi’s recently announced partner product launch with Nashville hemp dispensary Perfect Plant Hemp Co. includes full-spectrum gourmet gummies with a 10:1 CBD:THC ratio, fortified with cannabichromene (CBC) and cannabigerol (CBG). Flavors range from Mango Chili Lime to Peanut Butter & Jelly.
“We really like pulling from a pantry of cannabinoids and being able to utilize as many as we can to fit our customer specs and create unique products in the market,” Mitchell says. And consumers are responding to the innovative ingestibles.
While industry innovation includes products destined for physical retail shelves, e-commerce innovations are growing in importance. A recent NuSachi partnership involved Kat’s Naturals, a CBD company with products found at retail shops in nearly every state. But the product NuSachi created—the first in a limited-edition Kat’s Craft Collection— was only offered through the Kat’s Naturals website.
Fata says engaging in internet sales is a smart strategy that holds great promise for growers and brands. “It’s very, very expensive to sell products in retail, and it’s very challenging to get on the shelf. But you can start your own website and start selling online and start promoting through social media to drive traffic and conversion to the website, and you can control the cost that way,” he says. “There are very successful companies that are doing millions of dollars of business, just online. They haven’t … even launched in retail [stores] yet.”
Fata, Storey and Mitchell all advise growers and brands to draw on the resources available through local and regional hemp associations. “It’s all about community,” Fata says. “For people that are starting a brand or want to actually get into the business, it’s good to create community that way and meet others. Those partnerships are really important in the supply chain, from producer to manufacturer to brand, to get [products] out to retail.”
With e-commerce and natural foods stores high on his list of targets, Payack advises hemp brands to do their research. “Before you get into the industry, go meet with stores or go meet with an extraction lab. See what they have to offer or if they’d be interested in your products,” he says. “Don’t just go in blind, hoping that you’re going to make millions of dollars. It’s not that easy.”
Jolene Hansen is a freelance writer specializing in the hemp, horticulture and specialty ag industries. Reach her at email@example.com.
Linda Noel didn’t sell a single ounce of the hemp she harvested on Terrapin Farm in 2019. The entire 17-pound harvest—plus the small portion of her 2020 harvest that didn’t go hot—is vacuum-sealed and stored in her freezer.
Thanks to an oversaturated market, Noel, who received her hemp license in 2018 and grows plants in two 3,500-square-foot greenhouses, is hesitant to plant a 2021 crop on her Franklin, Mass., farm until she can sell her stockpile.
“Massachusetts had a massive oversupply because there wasn’t enough of a market,” explains Noel. “Most growers grew hemp for [cannabidiol] flower only to find out we couldn’t sell it.”
Oversupply is a national issue in the U.S. Excess biomass averages 24,795 pounds per farm—or 135 million pounds nationwide, according to “Déjà vu: An Economics Analysis of the U.S. Hemp Cultivation Industry,” a 2020 report from the Portland, Ore.-based consulting firm Whitney Economics.
The Agriculture Improvement Act of 2018 (the 2018 Farm Bill) removed hemp with less than 0.3% tetrahydrocannabinol (THC) from the list of Schedule I drugs under the Controlled Substances Act, providing opportunities for growers to begin cultivating the once-prohibited crop, and it sparked massive interest.
The number of acres of hemp grown increased from 78,176 in 2018 to 201,126 in 2019, according to Vote Hemp, an industry advocacy organization. Many hemp growers produced crops without contracts, and the glut of available biomass led to a price crash. A Hemp Benchmarks report found that the price for up to 25,000 pounds of cannabidiol (CBD) biomass sold for $4.02 per percent CBD per pound in June 2019; seven months later, the price fell to $1.31/%CBD/lb.
Growers recognized the issue and scaled back operations. Vote Hemp reported that the number of licensed acres decreased from 511,442 in 2019 to 336,655 in 2020—and just 70,530 acres of hemp were planted last year in an effort to correct the oversupply problem. But the problem remains.
In fact, PanXchange, a commodities trading platform that provides baseline prices for hemp, estimates that meeting the entire domestic CBD demand requires less than 3,000 acres of hemp—or less than 6 million pounds—of hemp production per year. Despite the reductions in acreage, PanXchange’s calculations show growers are still significantly overproducing hemp—and with two years of hemp in storage, Seth Boone, PanXchange’s vice president of business development, expects the 2021 acreage to decline even further.
But solutions do exist. As growers struggle with oversupply, these six strategies may help producers, lawmakers and other industry stakeholders deal with stored biomass and alleviate the issue for seasons to come.
1. Leading With Legislation
Although the 2018 Farm Bill paved a path for legal hemp cultivation, the industry remains plagued by regulatory confusion. Some current legislation—or lack thereof—is contributing to the oversupply problem, according to Ryan Quarles, president of the National Association of State Departments of Agriculture (NASDA).
“In 2018, the biggest thing holding hemp back was its legal classification as a controlled substance,” he says. “The 2019 crop year created an influx of growth, … and one of the reasons [growers] continued to move forward knowing there would be increased supply was the belief that the Food and Drug Administration [FDA] would promulgate and release a legal framework for how their legally produced and processed hemp-derived products could be sold in America. The FDA has yet to act.”
Quarles calls the lack of legal framework a “chokepoint” that is creating an issue with oversupply and preventing the hemp industry from flourishing. FDA guidance on how CBD products like tinctures, oils and infused foods and beverages would be regulated is key to addressing the stockpiles of biomass from the past two seasons, he adds.
“The market is experiencing a correction … as growers continue to struggle to understand what FDA oversight might look like [because] they don’t want to get sideways with the law,” he says.
But, it’s not just the lack of federal regulations that are contributing to excess biomass. In some states, local jurisdictions make their own laws governing CBD sales, dictating where (and if) it can be sold and which age groups can consume it. Those local restrictions, along with regulatory uncertainties, have impacted available markets.
In an attempt to address the oversupply and create new markets for hemp farmers, states such as Illinois and Colorado have passed legislation permitting hemp growers to sell their crops to legal marijuana dispensaries. In 2020, lawmakers in Massachusetts passed similar legislation, which was the sole reason Noel renewed her hemp license this season; but she’s waiting for the legislation’s final regulations to be issued before she puts a single clone in the soil. (That legislation was expected to take effect in March, but “so far, Massachusetts’ Cannabis Control Commission has yet to administer an update, guidelines or even a timeline,” as HempGrower.com reported on March 19.)
“If [Massachusetts] can roll out the regulations in a timely manner, we could have a very good year,” Noel says. “If we have an in-state market that’s going to allow them to receive premium prices for their crops, it’ll be way better for Massachusetts farmers.”
2. Getting Creative With Sales Models
Limited processing capacity has also made it difficult for growers to get their harvests to market. Whitney Economics called processing capacity the “biggest factor affecting the hemp market,” noting the 3,179 processors licensed nationwide would have to process 900 pounds of biomass per day to keep pace with licensed capacity; most processors only had the capacity to process 90 pounds per day.
The lack of processors has led some growers to opt out of the traditional supply chain. Their preferred route: Direct-to-consumer sales. Some growers even have established U-pick operations, inviting consumers to harvest their own hemp right on the farm.
“The early messaging to growers was ‘grow big or go home,’” notes Grace Holtkamp, co-founder and head grower at Merry Hill Hemp in Mebane, N.C. “It’s the large-scale farms that are relying on contracts and extraction that have faced more of the challenges. [The issue with oversupply on larger farms] has really reaffirmed our decision to focus on getting the flower to the people.”
Holtkamp started growing CBD floral hemp in 2017 and opened Merry Hill Hemp. The decision to invite consumers to harvest their own CBD flower has allowed the farm to thrive, Holtkamp says; the 2019 and 2020 harvests sold out. Holtkamp even increased her prices last year, and she expects a similarly successful 2021.
“Smaller farms that are not dealing with high-stakes contracts—growing hemp in tens, twenties, hundreds of acres for extraction purposes—have had less of an impact … from the oversupply problem,” she says. “Our demand has pretty much held up, and our ability to sell our product has held up.”
As oversupply has become more of an issue, Holtkamp is fielding an increasing number of calls from growers looking to transition to a direct-to-consumer or U-pick models.
“What we have seen on our farm is different than what the industry discusses when they talk about an oversupply. Each year has been more profitable and more successful, [and] we’ve really hit all of the metrics that we wanted to,” she says. “I hope large-scale continues [but] I do think people are going to start running more small-farm models for this crop as well.”
3. Expanding Exports
The U.S. market for hemp is hard to measure, according to Boone. Producers can use myriad export codes—called harmonized system, or HS, codes—to tag products for tracking. But because CBD can be tagged in many different categories (with different codes), it is difficult to track the quantities of CBD leaving the U.S. for other countries.
A Hemp Benchmarks report found that exports of smokable hemp destined for Canada, Europe, the Middle East and Asia have “increased significantly” since 2019. Some shippers are reporting that prices on the global market are much higher than domestic prices, making international sales attractive to growers—especially those with excess hemp to sell.
Exporting hemp could help address oversupply, according to Boone, but he acknowledges “it’s probably a drop in the bucket for the amount of material we need to move.”
There are efforts to build an export market for hemp, though doing so may take longer than those with excess biomass would like. The “2019 Hemp Annual Report” from the United States Department of Agriculture Foreign Agricultural Service (USDA-FAS) notes, “While China is currently not a major import market for hemp, potential exists if regulatory barriers can be addressed. [But] this potential is several years away from coming to fruition. Importation of CBD is banned and only a negligible amount of fiber was imported in 2018. Nonetheless, the industry envisions this changing rapidly as the national government recently approved CBD for cosmetic use.”
In 2020, USDA-FAS awarded a $200,000 grant to the National Industrial Hemp Council (NIHC). This Market Access Program funding allows USDA-FAS to partner with domestic trade associations, trade groups, cooperatives and small businesses to share the costs of building commercial export markets. NIHC’s emphasis is on markets in Europe and China, two geographic regions driving the global hemp market.
4. Shifting Away From CBD
Growing for other novel cannabinoids could also help hemp growers capture market share and prevent hemp harvests from going unsold. Seed and clone prices for varieties high in one cannabinoid, cannabigerol (CBG), have increased every month between January and April 2021, according to Hemp Benchmarks. The company estimates that about 5% to 10% of cannabinoid hemp grown in the U.S. in 2020 was for CBG production, with most of the rest going toward CBD and small portions being dedicated to other minor cannabinoids. (Hemp Benchmarks first started hearing about CBG during the 2019 growing season, says its editorial director, Adam Koh.)
Hemp Benchmarks’ Price Contributor Network reports varying degrees of demand across the country for this cannabinoid. While some have reported an increase in demand, assessed prices for CBG have decreased from $6.07/% CBG/lb. in April 2020 to $0.89/% CBG/lb. in April 2021.
A shift away from CBD may not address the glut of biomass remaining from 2019 and 2020, but it could prevent this season’s harvest from languishing, unsold, in storage.
However, Holtkamp worries cannabinoids like CBG and delta-8 THC could be the next fads, which could contribute to future oversupply.
“Growing hemp for CBD use has become a lot more complicated because of these fads of different cannabinoids,” she explains. “Last year, everybody was still getting to grips with the cannabinoid delta-9 THC. Now we have a surge in popularity of delta-8 THC. …We are purely growers and don’t want to involve ourselves as much in those types of trends because of the risks.”
Growing for grain and fiber markets could also provide hemp growers with important markets for their crops. A report from market analyst New Frontier Data (NFD) shows that U.S. hemp fiber production volume exceeded processing capacity in 2020 (for more on this, see And Counting ), however, the market segment has potential to see significant growth. Hemp food product retail sales hit $67.1 million in 2020, while wholesale processed hemp fiber hit $47.1 million last year, according to NFD. The company projects the 2025 retail market for hemp grain could top $144 million, while the wholesale market for fiber could hit $82 million during the same period.
“Different areas within the country are more interested [in grain and fiber],” Kostuik says. “Southern Ontario, which is very similar to Kentucky and Tennessee, had a tobacco industry, and producers in that area are looking for something to replace that.”
A current lack of infrastructure and an underdeveloped supply chain on this side of the border could hamstring, at least temporarily, the development of those industries—and transitioning from growing for cannabinoids to grain or fiber crops might not be feasible for smaller growers.
In Massachusetts, for example, Noel notes, “Most of our growers are limited in land size and have no choice but to grow for cannabinoids. I don’t have the acreage to even consider grain.”
For growers with more acreage and access to infrastructure, a pivot to fiber and grain might not reduce the current stockpile of biomass, but it could help prevent future oversupply.
Some growers, committed to hemp but frustrated with the market saturation growing for CBD, have started transitioning. In Montana, for example, 80% of hemp producers grew for CBD in 2019 (a major shift from all licensed hemp producers growing for grain in the prior year). But in 2020, that changed again, and a whopping 85% of licensed acres in the state were dedicated to grain and fiber production, according to state agriculture officials.
5. Weighing the Risks of Converting to Delta-8
The emerging popularity of delta-8 THC, a minor cannabinoid that is synthesized from CBD and delta-9 tetrahydrocannabinol, and sold in dispensaries, CBD shops, gas stations and online, has offered growers some hope for moving biomass. While some, like Holtkamp, worry it is the next fad, it may present an opportunity for farmers who currently have unsold inventory.
In fact, a 2021 PanXchange analysis noted that delta-8 THC sales were “needed” to work through the hemp oversupply. However, growers and processors should proceed with caution on this front, as some debate still exists around the cannabinoid’s legality and ethics. (Some states have already banned it; more on this below.)
Processors are currently buying flower and distillate to make the sought-after compound, but Boone notes there is little data on how much biomass is moving to the delta-8 market.
“On paper, using a common conversion rate, … we’d need 1 million kilograms of pure delta-8 distillate to clear the market out,” he explains.
Boone believes growers must take extra care to produce top-quality products that will not raise the ire of lawmakers about quality issues.
“Delta-8 is good for cannabis as a whole, but we have to go about it the right way, especially because it’s not regulated. We have to prove to the government that we’re going to be responsible [about producing delta-8 THC]. Right now, the quality of the product that can be found on the market today is a problem,” Boone says, adding inaccurate advertising regarding delta-8’s purity currently permeates the marketplace.
With a focus on producing delta-8 THC ethically, Boone believes “it could take out the oversupply.”
In addition to helping farmers sell stored biomass, converting to delta-8 THC could also boost revenues. Data from Hemp Benchmarks show the prices for the distillate were far higher than and sometimes exceeding average marketplace prices by “several thousand dollars” compared to CBD and CBG distillates.
The solution, however, might be short-lived. As of press time, 12 states—Alaska, Arizona, Arkansas, Colorado, Delaware, Kentucky, Idaho, Iowa, Mississippi, Montana, Rhode Island and Utah—had banned delta-8 THC, and similar legislation is moving through several other states. The U.S. Hemp Authority has also declined to certify delta-8 products. These actions have limited growers’ opportunities to sell biomass into the delta-8 THC market.
Hemp Grower has also spoken with industry sources who say delta-8 THC may fall within proposed Drug Enforcement Administration (DEA) regulations classifying “synthetically derived tetrahydrocannabinols” as Schedule I controlled substances. However, the DEA did not explicitly name delta-8 THC in its interim rule, so speculation remains over whether the cannabinoid is considered “synthetic,” making it a potentially risky market.
6. Selling First, Growing Later
Growers who planted seeds and clones without a contract to sell their crops often took the biggest hit in the market. Kostuik believes most growers have learned their lesson and are focused on selling their crop, then growing it.
“All through my hemp career, I’ve been encouraging people to make sure that they have a home for their product, whether it is grain or fiber or CBD,” he says. “More producers are aware of that moving in. [Growers] aren’t just throwing in hemp because it’s cool and thinking, ‘hemp’s legalized, let’s plant it and then figure out what to do with it.’ Now, their thinking is, ‘OK, what are we going to do with it if we plant?’”
After three years of “planting on faith,” Noel is not planting a single clone until she has a contract; she hopes that growers planting hemp in 2021 and beyond take the same approach, especially when the laws are constantly in flux.
“Massachusetts had an oversupply problem … because there wasn’t enough of a market; most of the cannabidiol growers grew for flower only to find out that we weren’t going to be allowed to sell it [due to state regulations],” she says. “Processors are willing to take [my oversupply] if I’m willing to let it go, but they are paying $40 per pound for biomass and, at that price, I’d be selling at a loss. This year, I have to have a contract before I’ll commit.”
Dealing with the hemp oversupply from the past two seasons will take time, and different growers need different strategies to offload the glut of biomass. As stockpiles dwindle, growers must also be focused on preventing a recurrence.
“The speed at which new states have been able to benefit from existing frameworks [for hemp production] means that [states] can be issuing far more licenses for both growers and processors [and] increasing their capacity,” Holtkamp says. “The competition is intense because the supply has increased and these newer programs are getting onboarded so much quicker, [but] I do think there will be an increase in craft [hemp] for farmers who can reset their focus … rather than seeking out a one-off big contract.”
Jodi Helmer is a North Carolina-based freelancer who covers the intersection between agriculture and business.
2020 Hemp Cultivation Map
Hemp Grower's interactive cultivation data map provides a state-by-state breakdown of acres grown, licenses issued and more for the 2020 growing season. View More