Struggling farmers who bet everything on hemp this year experiencing bitter harvest

(This story has been updated to correct to 1,700 the number of clones per acre recommended for hemp farmers.)

For many first-time hemp farmers, 2019 is being written off as an expensive learning experience that they can apply to future crops.

But for farmers who grew hemp this season in a Hail Mary attempt to make up profits lost from decreasing prices for row crops, dairy and livestock – and, in many cases, to save their family farms – the stakes could not have been much higher.

The seriousness of the situation for struggling growers this season was realized when industry members reported that some farmers had ended their lives over lost hemp crops.

Darrel Kolb, who owns Trego, Montana-based Old Hemp Co., said he knew one of the farmers who died. He told Hemp Industry Daily that some people literally bet their farms this year on hemp.

While his own business had the seed available to plant more than 100 acres, Kolb said he opted to plant 16 acres but was able to harvest and dry only 7.

“The rest of it rotted in the field,” Kolb said. “It was depressing. I get emotional thinking about it right now.”

“That’s a lot of money invested, and that’s a lot of time and a lot of energy … and a lot of money that was lost sitting out there with no guarantee.”

Farming in general is a high-risk profession. The U.S. Centers for Disease Control and Prevention reports the farmer suicide rate is five times higher than for other careers in the United States.

Roughly 91% of farmers and farmworkers have financial issues that affect their mental health, and 87% are afraid they’ll lose their farms, according to a May poll commissioned by the American Farm Bureau Federation.

Yet, fewer than 20% of rural adults know how to access a therapist or counselor in their communities, the survey found.

Last year, Farm Aid reported a 30% increase in calls to its helpline, and in August, the organization partnered with the American Psychological Association to develop resources for stress and behavioral health.

New legislation pending in the U.S. Senate would address mental health and stress stemming from the farm economy.

The Seeding Rural Resilience Act – introduced by U.S. Sens. Chuck Grassley, an Iowa Republican, and Jon Tester, a Montana Democrat – would expand on the $10 million authorized last year for the Farm and Ranch Stress Assistance Network.

Betting the farm, literally

Many traditional row-crop farmers and livestock producers, faced with falling prices and trade tariffs cutting into already thin margins, planted hemp this year with hopes to profit from the rising popularity of hemp-derived CBD.

In some cases, farmers were told they stood to make upwards of $50,000 per acre, a dramatic increase over the $787 that an acre of corn was projected to produce in 2019, according to the University of Illinois at Urbana-Champaign.

In Hemp Industry Daily’s 2019 Hemp & CBD Factbook, hemp farmers reported median revenue of $15,000 per acre planted in 2018, a figure they expected would double this year.

That gold-rush mentality led some farmers down a dangerous path, according to Joel Bedard, CEO of The Vermont Hemp Co. in Corinth, Vermont.

The “industry ballyhoo” – talking about the benefits of hemp – is overshadowing the ugly side of the realities of hemp production this year, such as “barns burning down and wet-baled crops turning to mush,” he told Hemp Industry Daily.

“Farmers don’t exactly like to brag when their crop goes to (hell),” Bedard said.

Hemp, like any other crop, has its nuances – it’s not like sowing another field of corn or soybeans or wheat. With no crop protection or insurance, the plant isn’t ideal for the risk-averse.

Also, high prices for seeds and clones caused many farmers to leverage their land to afford to plant it, in effect making them literally bet the farm on hemp.

Survey respondents to the 2019 Hemp & CBD Factbook said they paid a median price of $4 per clone and $2,000 per pound for hempseed, with an average germination rate of 85%.

Planting an average of 2,600 seeds per acre, according to Kolb, would cost farmers $2,600 an acre – more, if they ended up with male seed or needed to replant because of low germination.

Jason Stephenson, facility and production manager at Greenhouse Growing System in Lochbuie, Colorado, said hemp farmers planting clones need approximately 1,700 clones per acre, which would cost about $6,800 per acre at the average clone price of $4.

These costs leave out expenses such as irrigation, fertilizer, labor and drying and processing fees, which can drive costs up to $30,000 per acre, according to Kolb.

Financing remains an issue

Many farmers were either promised contracts that didn’t work out or didn’t secure contracts before their crops were in the ground, leading them to grow on speculation of the booming industry.

Also, a lack of working capital has been a major challenge for many hemp businesses this season.

Despite the legal status of hemp and ongoing requests from lawmakers to open banking and financing services for hemp farmers and CBD businesses as a legitimate agricultural industry, hemp farmers and businesses continue to be hamstrung by a shortage of capital to start or maintain their operations.

One couple in Maine, who planted 3 acres of hemp on their farm, tried a pick-your-own model to go along with staple produce crops such as strawberries and vegetables.

But despite the small-crop experiment – which didn’t end up selling – they lost both their insurance policy and bank account for the entire operation because their providers were unsure of how to handle hemp without federal guidelines.

“Everything went really smoothly, and then as we were finishing the harvest, our bank called at 4 o’clock on a Friday and said, ‘We’re recalling your loans and closing your bank accounts.’ We were super caught off guard,” Taryn Marcus, co-owner of Sheepscot General in Whitefield, Maine, told Hemp Industry Daily.

“We have been scrambling to figure out our banking and insurance over the last week, and it has been more complicated than we thought – and it’s probably going to be more expensive all around.

“We have yet to actually wholesale our hemp crop, so we are still in the hole on it.”

The lack of capital extends to the rest of the supply chain, which will ultimately affect farmers, too, according to Julie Lerner, founder and CEO of hemp trading platform PanXchange.

“I’ve not seen a market like it,” Lerner told Hemp Industry Daily. “It seems like everyone is interested in assets and focusing their money on that.”

Private investors and venture capital firms are sinking their money into farmland, processing equipment, branding and distribution, Lerner said.

“No one has left enough money in the budget for the juice to get this industry moving,” she said.

“So that’s why we’re hearing a lot about the (processing) tolling splits. Buyers just don’t have the cash” to pay farmers directly, she said.

To vertically integrate or not 

Businesses that are vertically integrated are the best equipped to make it in the hemp industry, Bedard said.

He notes that most of the large processing facilities themselves are vertically integrated, so they’re already at capacity from their own farms, not needing to buy in additional crops.

Vertical integration is “where your mathematical quantifiers are,” Bedard said.

“You get X for growing it, you get 8X for getting it processed … and maybe get 80X for putting a retail product out there.”

“That’s actually where a lot of those … hyperbolic numbers of $150,000 per acre (come from),” Bedard said, calling those estimates “conclusionary jumps” based on the full potential of the market.

But most traditional farmers prefer to grow and sell their crops without having to worry about the business end of processing and manufacturing end products, according to Rex Powers, founder and chair of the Cannabis Hemp Industry Employers Association.

“Farmers want to be farmers. They’re happiest when their hands are in the soil,” Powers told Hemp Industry Daily.

He said the industry needs to develop standardization and sophisticated cooperatives that protect farmers’ interests from the Wild West promises that have become commonplace.

“Let’s put a business structure around it and keep the farmers insulated from all the craziness and the lack of business maturity and business ethics in this industry right now, because that’s what keeping them vulnerable,” Powers said.

“The Wild West hustle has to come to a grinding halt. Because sooner or later, farmers are going to say, ‘Screw this. We don’t want to be part of this industry.’”

That’s a concern that was echoed this week by USDA Undersecretary Greg Ibach when the agency unveiled the federal interim final rules for hemp production.

“The experience that producers have this fall with harvesting their crop, handling their crop, finding buyers for their crops (is) going to be very instructive as to whether or not we see continued growth in the hemp industry or whether or not producers take a step back,” Ibach said.

Laura Drotleff can be reached at [email protected]

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16 comments on “Struggling farmers who bet everything on hemp this year experiencing bitter harvest
  1. Bruce Ryan on

    Yes, very similar to the hemp industry in Canada circa 1999-2002 when the industry collapsed. CBD gold rush must be balanced with harvesting, drying, extraction and subsequent product production.

    Reply
    • John DiGimato on

      Exactly – its no “gold rush”, idiots, gold cannot be grown.

      Greed, once again, has done this, instead of charging 200 bucks for a 30ml bottle thats really priced at 40 bucks, THIS is what happens, its NOT GOLD. It grows back, does gold grow back?

      SMH.

      Reply
  2. Robert Villeneuve on

    There is something wrong with the numbers.

    -In Hemp Industry Daily’s 2019 Hemp & CBD Factbook, hemp farmers reported median revenue of $15,000 per acre planted in 2018

    -These costs leave out expenses such as irrigation, fertilizer, labor and drying and processing fees, which can drive costs up to $30,000 per acre, according to Kolb.

    Or am I missing something?

    Reply
  3. Gerry T Jones on

    We given this “buyer be ware” speech at several conferences to better educate insurance agents to pass along to their clients. While true the market for “traditional” crop insurance hasn’t developed yet, follow the USDA Risk Managment group for updates, their are several options for risk management once the crop is harvested, curing, transported, extracted and processed. In addition, getting farmers comfortable with the testing requirement and Product Liability issues requires a longer conversation. If your agent isn’t familiar with hemp, have them give us a call and we’ll walk them through it. If you don’t have an agent, we can refer you a couple.

    Reply
  4. stephen on

    Where is the reporting on total accessible market for CBD-based products. How many gallons, barrels or tons of raw CBD oil will be needed for the creams, lotions, capsules and powders expected to flood the market?
    Maybe Squalene is an analogue? It’s a common ingredient in cosmetics, it is even being tested as a vaccine enhancement therapy and a food supplement, and is currently a $200m part of the $150b ‘facial moisturizers’ global market. Some, perhaps many of its claims may be duplicated by CBD.
    Approx. 3 kilo tons (6 million pounds) of squalene are produced each year. How much hemp biomass would be required to create 6 million pounds of food-grade CBD?

    Reply
  5. hempman on

    I was told by a first time hemp farmer that hemp has a very large following of very dishonest people pushing agendas and selling seeds that are undesirable on a gullible public.Could the claims of high market values be somewhat exaggerated? Could it be the alpaca and emu market starting over again? Some marketing pitches work better than others. One man in Kentucky claims he sells smoking hemp at retail for $1600 per pound. That would be reasonable considering a pound of ground hemp would make many rolls of smoking papers. Hemp will find it’s market(s). When the dust settles and the dumbest of police forces finally admit hemp is not weed, I believe the world will allow hemp to become a benefit to society in many more ways than we imagine at this time in history.

    Reply
  6. Don Smith II on

    I’ve been warning farmers and investors that this CBD Gold Rush is exactly that; a Gold Rush – We have the most beneficial plant on Earth – Its been used by mankind for thousands of years – The Cannabis Prohibition is the worst Public Policy Miscalculation in American History – Yet all we hear is CBD, CBD, CBD – Gold Rushes have a history of blowing up and sure enough, here we are – What about the seed and the fiber? – Agri Carb Electric Corp has a slogan – NOTHING WASTED BUT THE BREEZE THROUGH THE LEAVES – There is so much more we can do to monetize the entire plant and that’s going to be the only way to proceed – Being wasteful is not an option on the Farm – Now we have he USDA forcing us to Bet the Farm on ,03% THC rates – Simply move the decimal point to the right – We didn’t hire our Government to treat us like Legalized Junior Drug Lords – The Cannabis Industry will develop and it will be profitable ….

    Reply
  7. Jorge on

    A lot depends on your net dry weight per acre. Break-even is 1000 lbs of dry per acre……some don’t get that wet because of poor seed germ and dead clones.

    Reply
  8. Leeann tsllbear on

    Fascinating dialogue. It reminds me of the California solar boom. Lots and lots of startups went under, even those well capitalized. But the Industry survived and grew as it should and if we are going to take climate change seriously, we have to acknowledge that Industrial hemp is just as critical to developing concrete substitutes to climate/environmentally destructive products and processes. These are facts that directly and indirectly impact the economy as a whole, for the better, not to mention improving every persons quality of life.

    Reply
  9. Jae on

    This is a really great article. It doesn’t get into the issue of non-THC compliant (hot) crops , which is another huge issue. Nor all the people selling unstable (and therefore shit) seed. But these points are relevant. And yes, once you do the vertical integration, there is a lot of money to be made on the retail end. But the farming is the hardest part and not for the faint of heart!

    Reply
  10. James Hamly on

    Vertical integration is a great idea and no crop lends itself to a better way for farmers to spent their winters turning their Hemp CBD biomass into sellable products. Unfortunately, up here in Canada, our government has used legalization as a scheme to use the law to remove any profit from farmers, craft and small businesses to concentrate it into the hands of big corporations. By lumping CBD in with THC and regulating the hell out of it, and making even a micro-licence cost well over a million, and with only one micro-licence issued in over a year since legalization……I guess it is pretty clear that farmers and rural communities will continue to be used and abused by the government and the markets.

    Reply
  11. 4 Reasons Hemp on

    Farming will always be considered a risky proposition. And in a nascent industry, it only adds to the risk. Right now it’s hard to tell who is honest and who is just trying to use fear marketing on you. Holding your crop for 3 months expecting the market will rebound in your favor is a risk. What if it doesn’t rebound? Now you have older biomass that the market may even further devalue. That said, selling right now for less than what you budgeted for is also a risk (if you have to pay back investors or if you were relying on more upfront capital to kickstart year 2). Unfortunately, many can’t sit back and wait because they need whatever capital and return they can get to survive. And my fear is that too many people know this and are taking advantage of it. I hope the honest, transparent and hard working farmers can gut it out in the interim and make it to the other side to hopefully experience the rewards the were expecting when they got into this.

    Reply
  12. Harris Smith on

    I would suggest that any farmer believing they are going to be able to swap out their current row crop (e.g. corn) for another, and immediately make 80x their usual return come harvest time, is guaranteed to be setting themselves up for disappointment.

    This is a new, difficult agriculture industry, and one that will punish people that lack a plan and think it is a goldmine.

    Reply

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