Editor’s note: This is an installment in an ongoing series on industrial hemp production.
There’s a new crop in town. And it could be big.
The legalization of industrial hemp production in the nation and in Illinois brings a giddy optimism tempered with a tinge of uncertainty. Chiefly, how will markets develop?
“We’re on the cusp of something,” said Stuart Herman of the Chicago-based startup firm CBD Apothecary.
Hemp is botanically a variety of the same plant as marijuana, though it contains negligible levels of the buzz-inducing chemical THC found in its cousin. The plant’s stalk, seeds and other parts can be made into many products.
But without markets, there is little incentive for farmers to grow it. That is changing quickly.
“Our farmers consider it to be a great opportunity,” said Bill Hilliard, chief executive officer of Atalo Holdings in the Lexington, Kentucky, suburb of Winchester. “There are unique farming opportunities that have intrigued and brought back youthful farmers.”
The crop has a rich history. Many founding fathers grew it. It was instrumental during World War II, when its fibers were used to make cording, parachutes and other materials essential to the war effort.
It quickly fell out of favor after the war, when the government went from urging farmers to grow hemp to outlawing it.
As with any fledgling ag industry, processing is a key component. And processing plants aren’t cheap. Still, they are beginning to flourish in Kentucky, which in 2002 became one of the first states to pass legislation allowing hemp production. That meant the state was ready to go when hemp was included in the 2018 farm bill, essentially making it legal at the federal level.
“There has been explosive growth in Kentucky,” Hilliard said. “Last year we authorized 15,000 acres by 176 farmers, and had 42 processors that were licensed. This year, 56,000 acres and 1,034 farmers have been approved, and there are 120 processors and counting.”
He expects the crop to have a per-acre profitability level equal to that of tobacco.
“There are so many variables,” Hilliard said. “But some of our models show a farmer can net $3,000 an acre on budgets that we’ve produced, based on five years’ experience growing the crop.”
Cannabidiol, commonly referred to as CBD, is the hot commodity. Unlike marijuana, it has no psychoactive effects, and is considered to have medicinal benefits including anti-inflammatory and anti-anxiety properties. The substance is legal and is available in retail outlets.
“We think that fiber may be a greater long-term opportunity,” Hilliard said. “But fiber processing facilities are very expensive to build. We think the processor should be 50 to 100 miles from the location where the crop is grown. It’s not cost-effective to ship it long distances.”
He said the most advanced processing facility in the United States is in Louisville, Kentucky.
Meanwhile, the best bet in the short term may be meeting the CBD demand.
“I have no concerns whatsoever that it is fad-ish,” Herman said. “It will be a part of a very large segment of our nutrition for years to come.”
Rachel Berry has jumped aboard. She and her husband, Chris, formed the Illinois Hemp Growers Association, which for now consists of the two of them.
The Princeton, Illinois, resident likes the crop’s sustainability. Hemp offers a natural alternative to petroleum-based synthetic fibers.
“There is an exploding market with CBD. But there is also, in the background, a lot of us who have our eye on fiber,” she said. “I hear things about the CBD bubble. Some people are calling it a gold rush. How long will it last? Nobody knows.
“Fiber is the long-term game here. We’re talking building materials, clothing, bioplastic. I’d like to see hemp diapers and women’s sanitary products made from hemp.”
Berry said Illinois once had 11 hemp processing plants. The crop’s revival could lead to a much bigger industry.
“Illinois has a huge opportunity to put itself at the forefront of the hemp renaissance by getting fiber production up and going,” she said. “We want to see farmers participating in this new market.”
Among many uses for hemp is animal feed. Hilliard, whose company includes a research arm, is convinced that market is ripe to be tapped. But regulatory hurdles remain.
“The research we’ve done shows that the plant material has feed value relative to alfalfa hay,” he said. “But at the moment, it is not approved as a food ingredient for animals.”
Herman has been a fan of hemp for a long time. His first paper on hemp was written for a class at Southern Illinois University in 1976.
“It is amazing how much information was already there, based on years of hemp in Illinois,” he said. “It’s come full circle.”
Herman and Berry said the solution may lie with farmer coordination.
“Processing is an issue,” Herman said. “There is going to be a lot of product, and a limited amount of processing. I’m also advocating for smaller cooperatives of farmers that could work with manufacturers. That way, a farmer has more control over his product.
He senses a thirst for a new crop that could help pull farmers out of the economic funk they have experienced over the past several years.
“In the situation we are with corn and soybeans, farmers are looking to another revenue source,” Herman said. “... I’m not saying this is going to be the silver bullet, but it’s going to help.”