Why harvesting and processing may be expensive lessons for this year’s new hemp farmers

Hemp processing crunch, Why harvesting and processing may be expensive lessons for this year’s new hemp farmers

First-time hemp farmers who hurried to cash in after the crop became federally legal may be the biggest losers of this crop year, experts say.

Congress legalized hemp to bring a new crop to farmers hurting from depressed markets, low prices and crop tariffs.

But with hemp acreage up more than 300% this year, according to industry advocates, the crop that was meant to help could actually end up driving small farmers out of the business.

“My prediction is that there will be a 95% attrition rate at the farm level when these economic conditions materialize at the end of the year,” said Michael Brubeck, CEO of Centuria, a hemp processor and extraction company based in Carson City, Nevada.

“The irrational behavior of the hemp market has been fueled by a combination of artificial scarcity and speculation, which stems from regulatory restrictions prior to the 2018 Farm Bill and inexperienced farmers not converting anywhere close to 100% of their permitted acreage into a salable raw ingredient.”

Hemp farmers, consultants and processors told Hemp Industry Daily they are seeing an oversupply of the crop that may not make it out of the fields. That’s because many inexperienced farmers:

  • Didn’t make harvest plans.
  • Found hemp to be more challenging to produce and harvest than expected.
  • Didn’t have a contract to sell their crops.

“A lot of people were so worried about securing genetics and getting planted that they kind of kicked the can down the road and thought they’d figure it out in September or October,” said Brian Griffin, hemp supply manager for Mile High Labs, an extraction company in Broomfield, Colorado.

“And guys relying on third parties to harvest and dry are finding that there is no capacity left to help them get it out of the field and dried and bagged.”

The season’s challenges could end up really hurting small farmers, according to Griffin.

“I think a lot of people are going to lose this year for a number of reasons, and I think we’ll see a pullback of smaller farms,” he told Hemp Industry Daily.

Processing problems

In Tennessee, where the number of hemp farms increased by 1,500% to 3,600, a “couple hundred” of those also attempted to enter the processing business, but it didn’t go so well, according to Harold Jarboe, a hemp consultant at Tennessee Homegrown, a Nashville-based hemp and CBD company.

“This (season) was a combination of ignorance, arrogance and greed,” Jarboe said.

Assuming new farmers did make it through the season with all its challenges – from inconsistent genetics to extreme weather and a labor shortage – some processors reneging on contracts and prices were the last straw, he said.

“A bunch of the processors gave them verbal contracts and said, ‘We will pay you this much, and we can take all that you can produce,’ which is a quote that I hate in this business because it is bandied around” without specifics, Jarboe said.

But some new processors underestimated costs and overestimated their own capacity, he explained.

“It doesn’t matter whether or not there is a demand for hemp or not if it can’t be processed,” Jarboe said.

And with no firm baseline for prices, processors are taking advantage of new farmers, according to Jarboe.

“Basically what the person across from me is willing to pay at that moment is what (hemp) is worth,” he said. “There is no intrinsic value. There’s no stock market you can check.

“So, right now, people are getting beat up bad over prices.”

In some cases, Brubeck said, hemp businesses may end up “fire-saling” their product to try to recoup costs.

“Oversupply in farming is happening right now,” Brubeck said.

Farmers who can store their hemp until February or March may get better prices than if they dump hemp on the market in November or December, Jarboe said.

Controlled growing or free market?

Many states don’t require farmers to have buying plans for their hemp crops.

This includes Kentucky, which once required farmers to show proof of contract before they were permitted to grow the crop. Kentucky dropped the requirement earlier this year.

“The governments that are overseeing these programs aren’t forcing the farmers to do their due diligence and get a letter from a company that’s guaranteed it’s going to buy,” said Brian Furnish, a hemp consultant and farmer of 400 acres in Cynthiana, Kentucky.

Hemp Industry Daily asked Kentucky agriculture officials about the change. The agency called it a natural transition from a research phase to full commercialization.

“People should generally be available in a free market to make their business decisions about when and how they would like to shop their crop,” Kentucky Agriculture Department spokesman Sean Southard wrote in an email.

But Furnish believes requiring a contract before licensing would help curb oversupply.

“It’s crazy what’s going on out here,” he said. “Farmers are being told they’re going to clear $50,000 to $100,000. That’s not even feasible in today’s circumstances.”

Laura Drotleff can be reached at [email protected]

13 comments on “Why harvesting and processing may be expensive lessons for this year’s new hemp farmers
  1. Lori Parr on

    I think it’s time we begin to speak of “hemp” with two distinct terms:
    This article does nothing to address the implications of making anything but medicine. Strains need to be developed that make the exorbitant amount of biomass left after the medicinal parts removed useable.
    I think we’ve completely lost sight of utilizing the hemp plant-the whole hemp plant and what kind of ‘farmer’ does no market research for resultant product? That’s sheer stupidity.

    • Lane Cook on

      I agree. There is also a problem of pollen drift which negatively affects legal outdoor home grows. I know because the neighboring hemp farm decided to produce seeds so they purposely cultivated males. This “decision” made our home grow useless as medicine. I’m not usually a rules kind of person, but, I believe we need some guidelines in place. The guidelines would help growers, buyers, processors and neighbors.

        • Nick on

          You should do some research before you go around bashing people and calling them stupid. Male seeds are useless if you’re trying to grow CBD rich hemp for medicinal purposes. Only female seeds are capable of producing a CBD rich crop, smart guy.

    • Nancy Monchamp on

      Lori, so true. Harvest the flower or seed and if market price is below cost of production that year for the remaining biomass then cut it, bale it , or chop it and feed to cattle.

  2. FM on

    This is exactly why I pulled the reins on planting, after what I heard out on farms, everybody was going to grow and guess what “oversupply”. I am glad I pulled the reins otherwise it’s possible I would have lost large. I am going to wait until the FDA approves then its time to grow, harvest, cure, package, sell. ALL states should re-implement the “must have a signed buyers contract” before you authorized to grow. It’s sad to see the small farmer go bust over these challenges.

  3. Martin Margheim on

    Watching the status of HEMP in 2019 has certainly illustrated challenges of bringing an entirely new agriculture product into the Agriculture mix. With all the hype about money to be made and growing hemp, I read little about the implementation of processes needed following the crop phase. If there is no post harvest plan for hemp into whatever chain of events that must exist in order for it to become a viable product, then there can be little the farmer can do except watch it rot either in the field or harvested but stored. It doesn’t matter how viable hemp may be in the pulp industry if no one is processing for pulp. And, the existing providers of agricultural product to be turned into pulp are not interested is stepping aside to allow hemp to replace existing processing and distribution channels. While hemp may be a biodegradable resource for one-time use of containers, the existing chain of fossil based, non-biodegradable resources aren’t going to stop simply because hemp can become a viable alternative. Until bottling giants producing hundreds of billions non-biodegradable single use containers can be persuaded to change from fossil based plastic to plant source plastic, no change will occur. This dialogue can continue but the point is simply that growing hemp has no benefit until it is incorporated into the overall schema of the economy. Hemp is still misunderstood as an agricultural product and the benefits that can be realized in the economy and society. Perhaps there is still too much stigma attached relative to other products that are not considered socially acceptable. It is going to take some time but the most significant step was taken with the passage of the December, 2018 agricultural act. Now, society as a whole must learn more about hemp and step up to allow hemp its due place in the overall schema of agricultural products and the use and application thereof.

    • Bruce Franzen on

      What’s not socially acceptable is PLASTIC. Are you kidding me. Plastic is on it’s way out. One of the most disgusting, pollutants out there killing the oceans and filling land with the garbage. It’s so short sided and one of America’s problems are corporations dominating how they’ll kill the planet. Fake news, fake science they declare. God help our grandchildren.

  4. barry paterno on

    Due to the massive oversupply of Hemp that was encouraged by various State Agricultural Agencies, Hemp is essentially nothing more than a very worthless row crop like soybeans or corn. In Tennessee, the State Agriculture Department had presentations all across the State saying farmers could net as much as $60,000 an acre, hemp production went from1700 to 58,000 acres. Prices have dropped over 90% and buyers still can’t be found even at these low prices. Processors backed out of their contracts with farmers or didn’t have the money or processing equipment to deal with this oversupply of hemp.At these prices and considering the expense and intensive labor involved in growing and harvesting, hemp’s a crop that’s just not worth growing. I won’t grow it again!

  5. Kathy Holliman on

    So, where are the buyers??? If processors are in breach of their contracts, what is the grower’s recourse? And if the State is making MILLIONS on applications and grow sites (which they are do the math) why isn’t the STATE helping the growers to secure buyers? I would love for someone, ANYONE, to explain to me how to “secure” a contract. Of course a breach of contract has possible legal ramifications, but if the processor cannot even be found, how can the breach be remedied? If the growers joined a farmer’s coalition (say 400 growers) and each grower paid $2500 (that’s MUCH less than it costs to grow 1 ACRE of hemp!) that coalition could build its OWN processing plant, employ folks to run it, and the growers would NEVER get cheated by these “so called” processors who breached their own contracts. However, you still have to SELL the products but at least the growers would get all of the product including the fiber. So again, I ask where is the LINK between the growers and the buyers? WHO are the buyers. WHERE are the buyers? And in my opinion, anyone who invests ALL the money it takes to buy, grow, maintain, harvest and sell hemp that is not smart enough to have an attorney prepare and/review ANY contract between a grower and a buyer should not be in business in the first place. Let’s get real, in any business where contracts are involved, there are legal ramifications to either side of the transaction that breaches the contract. And WHERE are the buyers??? The growers/farmers are always the ones getting burnt. Join a coalition, build your own processing plant, hire your own plant employees, don’t get cheated out of your HARD EARNED PRODUCT, and get some help from somebody somewhere (maybe the government or the gentleman who wrote this article) to help growers/farmers obtain the buyers needed, prior to growing, so this whole PROCESS works and everyone makes a little money. “Some” money above costs is worth better than “no” money. If you tell me how to research the resultant product, I will not be on your “stupid” list. I’ve “researched” for a year and I have not found ONE SINGLE BUYER yet. Pray tell, please tell me what I’m doing wrong. I’d LOVE your help.

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