As new hemp farmers look to take advantage of the 2018 Farm Bill and the booming CBD market, they should also learn to take advantage of the expertise preceding them. In this podcast, Ellis Smith speaks to Mike Leago, Founder of the International Hemp Exchange, and Jon Workman, VP of Hemp Development in North America for American Cannabis Company, about the growing pains and valuable lessons in hemp farming.
Mike Leago started farming hemp in 2015 after spending several years in the legal marijuana industry of Colorado. The deeper he became involved in the hemp industry, he realized the industry had a disconnect. “The people I went to for advice and know-how, were uncertain of buyers, supply chains, price points, and market stability,” he said. By forming the International Hemp Exchange, or IHEMPx, platform, Leago started connecting buyers and sellers.
What started as a simple retail platform to help hemp producers bring the finished product to market, soon became a wholesale opportunity and IHEMPx became the first, licensed and bonded hemp broker in the United States. “We’ve been brokering and connecting those dots ever since,” Leago proclaimed.
As a fourth-generation row crop farmer from Arkansas, Jon Workman may seem like an unlikely cannabis advocate, but personal experience drives his ambition. After experiencing a snowboarding accident resulting in broken ribs, doctors discovered Workman had Stage 2 bone marrow cancer. Today, as a 20-year cancer survivor, he stated, “Cannabis was a big part of how I made it through that.”
Bringing a wealth of experience with 20 years in capital markets in Los Angeles, Workman came to the American Cannabis Company two years ago as a business consultant to provide financial modeling and business plan development. Today, as the VP of Hemp Business Development in North America, he has adopted a suite of offerings from the legal marijuana industry to fit the hemp industry. “We help hemp growers determine what is going to make them a success and how to implement a successful program,” he explained.
The Evolution of Modern Hemp Farming
Although much of the popular history of hemp starts in the 1930s and 1940s, Workman reminds the history of hemp is much more vibrant than modern history dating back thousands of years. Although the 1937 Marijuana Tax Act started prohibition, hemp production came back during the World War II era with the “Hemp for Victory” program, and Kentucky farmers grew 50,000 acres of hemp. By 1943, US farmers cultivated 300,000 acres of hemp for the war effort.
However, when the war ended, so did hemp cultivation. Workman theorizes the lobbyists for cotton and timber were mostly to blame for categorizing marijuana and hemp under the same prohibition laws.
Today, with the evolution of the cannabis industry and the growth of cannabinoid demand, the hemp industry is much more complicated. Cultivation of industrial hemp in the 40s and earlier was for things like food, fiber, and hemp seed oils, and plants were fibrous, tall, and skinny. However, Leago explained, “High-CBD hemp is indistinguishable from marijuana,” and grown similarly to its high-THC producing relative. Although the portfolio of strains is much larger today than it was in the 30s and 40s, by law, all legal industrial hemp must produce less than 0.3 percent THC.
Expansive Market Growth
The 2014 Farm Bill allowed pilot programs for hemp production in the United States. Many early adopters, like Colorado, Oregon, and Kentucky quickly ramped up production. By 2017, farmers were growing 25,000 acres of hemp, and a year later that number increased to more than 80,000 acres.
Since the signing of the 2018 Farm Bill in December, there are already more than 300,000 acres registered for cultivation in 2019 and expected to grow to more than 500,000 acres before planting season begins. Leago estimates just 20 to 30 percent of those registered acres will grow hemp for grain and fiber, with the rest slated for CBD production.
However, Leago reminds, the expected harvest will likely be much less than registered acreage. Referring to an example out of Montana, where producers recorded just 500 acres in 2017 and 22,000 acres in 2018. Although the acreage numbers spiked, it had minimal impact on the CBD market. “Farmers were duped into buying seeds with supposed high-CBD genetics, but ended up growing a grain variety of hemp,” he recalled.
While many may hesitate to get behind federal regulation, Leago explained establishing a relationship between the USDA and the FDA and creating a regulation pathway, especially for CBD production, is inevitable. “There’s much product on the market now that isn’t what it claims to be, making outrageous health claims, but it’s being produced in basements, bathrooms, and garages. There’s a lot that needs to be cleaned up in the industry,” he admitted.
Prepping for Planting
The panelists discussed important considerations farmers need to make when preparing for planting season including,
Start with Quality Seed
“Seed is the new isolate,” Leago commented. “It’s a crazy market, there’s a lot of nonsense, a lot of BS, and a lot of people who don’t belong making deals happen,” he continued eluding to the number of brokers and middle-men who are just looking for short-term gains.
Leago and Workman agreed, it’s critical for farmers to do their due diligence in finding a seed provider. Farmers need to reach out to their network and look for companies with at least two to three seasons working in established states such as Colorado, Oregon, and others. “Don’t risk the farm on first-time clone or seed producers,” Leago warned.
Speaking of a 22-million-dollar lawsuit in Oregon, Workman explained how an $86,000 investment resulted in low-performance, a loss of thousands in revenue, and inferior plants which cross-pollinated and damaged a nearby outdoor marijuana crop.
Testing Your Soil
The first thing cultivators need to do is test the soil. “You have to know what you’re dealing with,” Workman advised. As a bio-accumulator, hemp will absorb heavy metals and toxins; thus from a cleanliness perspective, farmers must start with soil tests.
Deciding on a planting method is the next step, and farmers must know why they are growing, in order to make an educated decision on cultivation. Depending on acreage, farmers may want to lay down plastic or install irrigation systems. Farming for fiber and grain means using different planting methods than farming for CBD production.
Additionally, farmers need to consider plant spacing. While Leago concedes there are no industry standards, he suggests starting with imaging what harvest will look like and work backward. Whether planting 1250 plants per acre or 5000, each will have variables in how to irrigate and how to harvest. He says, “We help farmers utilize existing infrastructure rather than reinventing the wheel.”
Whether laying down plastic, using biodegradable cloth, or canopy shade, Leago said weed control is mostly trial and error. Each method has pros and cons, and farmers are regularly adjusting their approach and improving their processes.
Commercial equipment designed for hemp is on the horizon as players like John Deere and Caterpillar eye the emerging market, but today, effective, efficient harvesting can be tricky as the fibrous plant material can clog up traditional equipment. “There’s a balance of finding common ground between how farmers can produce at an affordable cost per acre and get in there with the right equipment,” Workman said. “We’re going to learn a lot more this season for sure,” he continued.
Drying and Processing
Leago pointed out that traditional hand-drying and air-drying methods are not scalable for more extensive operations. While other ag equipment is hitting the market to help, like hops drying equipment repurposed for hemp, Leago expects this to be a massive bottleneck in the industry this year.
As they come to a close on the webcast, both Leago and Workman remind that the hemp market is not a stable market place and like other commodity crops, farmers must weigh the risks and rewards when it comes to getting a higher valuation of their crop after harvest. Both supply and demand, as well as, federal involvement, as the FDA takes the position as the new authority of the plant, leaves questions regarding stability.
As the market unfolds, processing facilities start to come online, and the hemp industry continues to evolve, farmers and cultivators need to take all of these factors into consideration. Joining a growing market certainly takes risks but making an educated approach could pay dividends in the long run.