Hemp — the hip, new superstar of the agriculture world — is getting a lot of buzz within farming and political circles in Florida and nationally. But hemp harvests this fall aren’t matching the hype, portending disaster for small growers while manufacturers and retailers stand to get rich.
Nikki Fried, Florida’s commissioner of Agriculture and Consumer Services, has been particularly active in promoting hemp as an alternative for farmers in the Panhandle who suffered devastating crop losses during Hurricane Michael one year ago.
Experience in other states raises questions about whether farmers would be wise to bet the farm on hemp absent more work toward developing production chains and best practices for this crop.
Fried is aware of the risks. “She’s made it a top priority to align all the moving parts to ensure Florida’s hemp program becomes the nation’s best,” said Karol Molinares, the commissioner’s deputy communications director, in a written response to questions raised by the Florida Phoenix.
“There aren’t yet issues here with glut, shortage of contracts, or processing bottlenecks. These types of issues would exist with any newly developing industry. Hemp presents an extraordinary economic opportunity for the farmers you mentioned, who have asked for access to alternative crops like hemp,” she added.
“The department is continuing efforts to establish processing, manufacturing, and retailing capacity, concurrent with cultivation, testing, and other issues,” Molinares said. She supplied no details beyond noting Fried’s hiring of Holly Bell, a former financial adviser to cannabis companies, to lead the hemp program. Neither Fried nor Bell were available for comment.
Meanwhile, Jerry Fankhauser, logistics coordinator for the University of Florida IFAS Industrial Hemp Pilot Project — one of two university-based programs working on the problem — voiced cautious optimism.
“Everyone I see tells me that all the potential growers are doing their homework,” Fankhauser said. But if you can’t tolerate risk, he said, “don’t plant more acres than you can stand to lose.”
The Florida Legislature authorized the hemp pilot project at the University of Florida and another at Florida A&M University in 2017. The state is expected to begin issuing hemp cultivation permits in 2020. Following nationwide legalization of hemp in the 2018 U.S. Farm Bill, Florida authorized hemp farming in the Sunshine State earlier this year. Fried’s agency is developing rules for the program and plans to seek federal approval this fall. Public hearings on the draft rules are set for Friday in Tallahassee and Monday, Oct. 21, in Tampa. The public comment period ends on Oct. 31.
‘At risk of being wasted’
To understand the potential pitfalls, consider Pennsylvania, where hemp is widely cultivated but half of that state’s crop has no buyers and may go to waste, according to Pennsylvania State University’s Southeast Agricultural Research and Extension Center, which monitors that state’s hemp growers.
That includes 75 percent of the hemp grown for CBD oil, the non-psychoactive compound derived from hemp and sometimes used in medical applications. The risk is lower for hemp grown for fiber and grain.
Even in North Carolina, no stranger to growing leafy crops, just half of the hemp farmers are under purchase contracts, and about half the crop is expected to be stored at great expense because it can’t be sold this season, according to a Southeast harvest preview published on Oct. 11 by Hemp Industry Daily, a trade magazine.
“There is a not-insignificant amount of crop that is at risk of being wasted as we approach frost and growers lack plans for drying, storage and processing,” Alyssa Collins, director of the Penn State research center, told the Florida Phoenix. “This is a considerable bottleneck in the market supply chain for hemp in areas that have recently begun production.
“Unless there are processors in a local area with the capacity to quickly and efficiently process material right now, farms will have to store the biomass, which introduces a large cost for drying or freezing and storing.”
In other words, Collins said, growers can’t get in on the hemp bonanza because there are too few processors to buy the bounty of raw materials being grown.
Some farmers bringing in their 2019 crop are still trying to “unload” what they harvested last year, at deep discounts, according to the September spot price index report by Hemp Benchmarks, a provider of financial, business and industry data for North American hemp markets. That report, too, cited concern about possible waste in the 2019 harvest.
“Farmers — especially those new to the industry and those that scaled up significantly — are discovering that the hard work does not end with raising a successful crop, as simply drying the plant material and ensuring that is remains saleable can be a difficult undertaking,” the report says.
“If those hurdles are cleared successfully, the question of how much functional processing capacity is online in the U.S. remains hard to determine definitively, raising the possibility that portions of this year’s harvest could ultimately go to waste if serious bottlenecks arise.”
‘Can and will benefit’
In northwest Florida, Hurricane Michael destroyed $1.4 billion in timber and crops last October, leaving farmers in desperate straits. Fried has pitched hemp as an alternative crop that may aid in recovery. As a former cannabis industry lobbyist who ran in part on a pro-hemp platform last year, she knows better than most about hemp and its cousin, marijuana.
“We believe farmers across the state, but especially those recovering economically from these storms, can and will benefit from an alternative crop that is in such high demand,” said Molinares, Fried’s deputy communications director.
“Florida’s extended growing season provides the potential to harvest more frequently, making it a viable crop that not only drives job growth but can generate a considerable amount of revenue in a potentially multibillion-dollar industry,” she added. “From fibers to building materials, CBD oils to edibles, hemp presents an opportunity for Florida to take the lead in producing the alternative crop of the future.”
One veteran manufacturer scoffed at that claim, telling the Phoenix he predicted in 2016 that farmers new to hemp would never be able to succeed in this high-stakes game.
Michael Brubeck, CEO of Centuria, a large hemp processing and extraction company based in Carson City, Nev., predicts 95 percent of new hemp farms will fail nationally, while the winners will be established hemp giants like his own company, with sophisticated manufacturing and supply chains.
Such companies are poised to make a killing when the U.S. Food and Drug Administration approves hemp-derived CBD oil for use in food and beverages such as sports and wellness drinks, he said.
It won’t be long, Brubeck added. Companies the size of Coca-Cola Co. report they are “closely watching” the action.
But a gold rush in hemp won’t pay off for family farms and other small operations, Brubeck said. “The commoditization of goods isn’t this great unknown. It’s quite predictable, and I identified the driving factors in this economic event within the industry years ago.”
He calculated the market math this way: If only 10 percent of the 511,442 acres permitted in the United States this year for growing hemp prove successful, they will produce 41 metric tons of biomass for a CBD market that Centuria believes needs only 15 tons to meet global demand. The number of licenses for growing hemp and the acres involved is tracked nationwide by VoteHemp, an advocacy group that issues annual crop reports.
No ‘slam dunk’
That’s alarming news for Jackson County Extension Director Doug Mayo, a 16-year agriculture veteran who is assessing the risks and benefits of planting hemp in the inland counties of northwest Florida. So far, he isn’t advising vulnerable family farmers to jump in.
“We are a long way from hemp being a slam dunk in our area,” Mayo said. “It’s going to take off — I don’t argue that — but that doesn’t mean it’s going to be a good investment.”
As for any crop, Mayo wants to see research on seed quality, germination rates, time of planting, and other best practices. He wants to know about hemp’s resistance to unfavorable weather, weeds, pests, and disease — and how to treat those conditions. Florida’s university pilot projects aren’t far enough along to generate confidence at the farm level, he said.
Moreover, family farmers who sustained heavy losses during Hurricane Michael can ill afford to experiment. “They’re not in a position to invest in risky ventures,” Mayo said. “Just because it’s legal doesn’t mean it’s profitable.”
Pointing to reports from Pennsylvania and elsewhere, he said, “I wouldn’t put anything in the ground until I knew there was someone to buy it.”
Corporate farmers who can vertically integrate their operations from harvesting through marketing may succeed, Mayo said, but for most others the market would be a gamble. “They will learn some hard lessons, or they’ll make a fortune.”
As for timber, the conditions that make pine trees grow well in northwest Florida aren’t as suitable for other crops, he said. That’s why timber has been king, followed by cotton and peanuts.
Mayo thinks the best hope for Panhandle farmers may be the federal Wildfire and Hurricane Indemnity Program, or WHIP, set up in 2017 to assist victims of natural disasters. U.S. Secretary of Agriculture Sonny Perdue, a former governor of Georgia, announced the eligibility on Sept. 9. Enrollment began on Sept. 11, 11 months after Michael struck the region.