In the US, CBD glut inspires bet on industrial hemp | Business and economy


It all started in 2019. Travis Samuels and Brandon McFarlane, cousins ​​in the US state of Vermont, had grown newly legalized hemp to produce CBD. Also known as cannabidiol, CBD is a chemical derived from hemp and marketed for its potential health benefits.

But once the ban on growing hemp was lifted, the market was flooded with the CBD variety of the plant. Several acres of Samuels and McFarlane’s crop were unsold in their Vermont barn. That’s when they started thinking about the untapped market for another variety of hemp, the stalky fiber which, unlike the flowery CBD type, has 25,000 industrial uses.

There was a problem, however. They could grow hemp but there were no facilities nearby to process it. So they decided to solve the problem by building their own.

In January, the couple bought an old grain mill in St. Johnsbury, a small town about 80 km south of the Canadian border. They plan to upgrade it to store and prepare hemp for wholesalers who want to make animal bedding and materials such as insulation. They hope to be operational by September. If they reach their goal of 9 million pounds (4 million kilograms) of materials in the first year, they estimate they will make $3-5 million in revenue.

“Industrialized hemp is coming one way or another,” McFarlane told Al Jazeera. “It’s used all over the world, but America doesn’t manufacture on any scale. Someone has to enter the market.

The pair belong to a select circle of trendsetters in a fledgling industry.

Industrial hemp has been used for years in Europe and Canada, but was only decriminalized in the United States in 2018. Most American growers initially planted for CBD, used for tinctures or distillates.

According to the US Department of Agriculture, the value of last year’s flower crop was $623 million, compared to $82.9 million combined for seeds and industrial-grade fibers. But this latest variant has a multi-billion dollar market potential. That is, if someone takes the first risky step.

Travis Samuels and Brandon McFarlane belong to a small circle of trendsetters in the industrial hemp market [Courtesy of IND HEMP]

In theory, industrial hemp has immense prospects due to its versatility. The plant gives edible seeds rich in anti-inflammatory fats. The outer fiber – called bast – can be made into textiles, biofuel and paper.

The inside of the stem, which looks like bamboo – called hurd – can be mined for wood substitutes and even plastics. Hemp’s durability also makes it fashionable green. It absorbs carbon and is resistant to mold, pests and fire. It can adapt to almost any climate. It enriches the soil and does not require fertilizer.

Depending on where you plant, there may be more than one harvest per year. Currently, however, there are no economies of scale to make it worthwhile for the various stakeholders involved.

The supply chain fails due to a chicken and egg puzzle. Simply put, there are not enough middlemen processors like cousins ​​who can guarantee volume sales to farmers. Thus the large distributors eager for this eco-product, such as Patagonia – which has expressed its desire to source locally and the potential to “create new American jobs” – must for the moment rely on China or other foreign suppliers.

However, processors can fill the void by guaranteeing local supply. They buy bales of hemp from farmers, cut and clean them, then resell them to manufacturers who turn the hemp into shirts, kitty litter, or composite boards.

“How does an industry bridge the disconnect between intrigued multinational corporations and a skeptical farmer wondering if it makes sense to add hemp to its ranks?” Jody McGuinness, executive director of the Hemp Industries Association, told Al Jazeera.

The answer, he said, is “more processing capacity”.

Extend footprint

McGuinness said such facilities are currently rare. Being scattered across the country, they can only reach a small number of growers, who must be within a radius of 50 to 100 miles (80 km to 160 km). Indeed, transport costs are high, due to the weight and volume of hemp bales.

However, new companies popping up are expanding the footprint. Among those entering service is South Bend Industrial Hemp in Kansas, which opened a processing plant in June, the first in the Midwest.

Hempitecture is looking to build a plant in Idaho to produce HempWool thermal insulation. Hemp Inc has processing centers in North Carolina and Oregon and is exploring additional locations in Florida.

Panda Biotech expects its new hemp gin in Texas to be operational later this year. California’s Riverdale Hemp Factory plans to be operational after harvest this summer.

These companies are beating the bushes to recruit local farmers, often educating them about a crop they may know nothing about. Interest is growing among struggling dairy and tobacco farmers looking for alternative uses for their land, especially if they can secure agricultural tax incentives to cultivate fallow plots.

But first, farmers must be convinced that there is a market for them. Having been burned by the oversupply of CBD, many have left the hemp market altogether. High prices for traditional crops like soybeans and corn create less incentive to bet on hemp fiber. Hemp Benchmarks estimated that the quantity of all recorded hemp acreage plunged last year to 195,000 acres (78,913 hectares), from 430,000 acres (174,015 hectares) in 2020 and 580,000 acres (234,717 hectares). in 2019.

Tractor harvesting hempSome industry watchers believe the industrial hemp market has the potential to be worth billions of dollars [Courtesy of IND HEMP]

For those geographically close enough and ready to get started, one of the biggest players is IND HEMP, which is investing $25 million in two Montana facilities. The family business hopes the two together will be able to process 20,000 to 40,000 acres (8,093 to 16,187 hectares) of fiber and oilseeds within two years.

So far, COO Morgan Tweet has contracted nearly 20,000 acres (8,093 hectares) over the past three years between Montana, Oregon and Washington. Potential customers are enthusiastic, she says. Since launching a pilot-scale fiber installation in 2020, every customer has called back about the samples she sent them and wanted to know when they could get a truckload.

Tweet sees a huge opportunity in his vision, arguing that wholesalers who import from abroad would prefer to buy closer to home. Yet, this is a slow maturing industry and IND HEMP’s return on investment will take time. “It’s a marathon, not a sprint,” Tweet told Al Jazeera.

On the one hand, low inventory poses challenges. It takes approximately up to three years to develop a network of growers, seed stocks and infrastructure, Tweet said. We need to plant now for the 2023 season, and there are not enough national seeds available to meet the demand.

Then there are the substantial transportation costs: many farmers and customers she spoke with operate hundreds of miles away. The company has ordered from farmers within a 400-mile (643 km) radius in Montana and supplies customers on the east and west coasts. They hope to contract acreage in Idaho this year and plan to expand into the Northwest region. Currently, IND HEMP will have to subsidize freight, but this is not necessarily sustainable in the long term.

She remains optimistic. Either way, there is no turning back.

“Failure is not an option,” she said.


Comments are closed.