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(Reuters) – Dan Maclure planted eight acres of hemp on his Vermont farm for the first time this year, aiming to cash in on the exploding demand for CBD, a derivative of the plant reputed to ease anxiety and other ills without the high of its close cousin, marijuana.
He persevered when some of his hemp plants grew white with mildew and others failed lab tests and had to be destroyed. With his harvest now complete, Maclure has one more challenge to overcome: selling his surviving crop and recouping an estimated $140,000 investment.
“It’s heart-wrenching thinking about all the work and money you put into it,” said Maclure, who farms in Barton, Vermont, about 35 miles south of the U.S.-Canadian border. “I’m not sure I’m going to be venturing out in this again.”
Maclure is one of thousands of U.S. farmers who poured into the crop after the passage of the 2018 Farm Bill, which legalized the cultivation of hemp, a form of cannabis with low concentrations of THC, the main psychoactive agent in marijuana.
Many of them are now trying to survive a glut that has flooded the market, market experts say, driving down prices and in some cases leaving farmers with few buyers.
About 65% of U.S. hemp farmers lack a buyer for their crop this season, leaving them few alternatives, according to a July survey by Whitney Economics. Hemp has less infrastructure than other crops, so farmers cannot rely on selling their crop to a local grain elevator.
“People entered in on speculation,” said Chase Hubbard, hemp commodities analyst at The Jacobsen, a price reporting agency. “The results could be tragic for some small farmers.”
The 2018 Farm Bill coincided with a boom in the market for food, drink and cosmetic products laced with CBD, an industry that Wall Street firm Cowen & Co has estimated to grow to $16 billion by 2025.
Enticed by projections that hemp would bring $750 in profits per acre – well above the $150 or less from a typical acre of soybeans – farmers placed their bets on a crop that had been illegal for most of their lifetimes.
Last April, as farmers planted, a pound of hemp biomass sold for about $40. Now, as farmers harvest and take their crops to market, the same amount sells for $18-$25, according to PanXchange, a commodities platform.
Sam Baker, a fifth-generation tobacco farmer from North Carolina, grows tobacco seed, hemp and hemp seedlings. After selling millions of seedlings to growers this year, about 400 people have called him, asking him how to sell their crop.
“Crews planted 75, 80, 90 acres and didn’t know what to do with it in the end,” he said.
Some farmers are discovering that the crop is more labor intensive and comes with more risks than many hemp-backers claimed. As a consequence, many are exposed to everything from mold to the danger that cultivated crops contain higher-than- allowed levels of the psychoactive chemical THC, which give users a high, and have to be destroyed.
Some of Maclure’s plants tested “hot” for THC this year, so his crew had to cut the offending plants and crush them outdoors.
“You’ve grown nothing but trash,” said Maclure.
As hemp becomes a commodity, small farms cannot keep up with larger operations that can sell their crops in bulk at lower prices, wholesale buyers say.
“Mom and pop are not going to be able to compete on this playing field,” said Michael Gordon, co-CEO of Kush.com, a major hemp wholesale marketplace. “The hemp industry is more like canola oil than craft brewing.”
Despite the difficulties, some farmers remain optimistic about the budding industry. Farmers with established supply chains and experience report that they are turning a profit this season.
New U.S. Department of Agriculture interim rules released this week will likely pave the way for hemp farmers to qualify for better insurance and financing, lessening their risks in the case of poor weather or if their buyer disappears, said Ken Anderson, founder of Wisconsin-based hemp processor Legacy Hemp.
Meanwhile, industry professionals predict that many first-time hemp farmers will leave after this disappointing first harvest.
“They’re going to get the heck out of Dodge,” said Gordon.
(This version corrects 19th paragraph to read “New U.S. Department of Agriculture interim rules” instead of “New FDA interim rules”)
Reporting by Isabella Jibilian in New York; Addiitional reporting by David Randall; Editing by Frank McGurty and Dan GreblerOur Standards:The Thomson Reuters Trust Principles.