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License to Grow: Hemp’s budding industry

Area producers are getting into their fields to harvest the 2019 crops. While the focus is on finishing this year, hopefully in the black, the potential market for hemp is expanding rapidly.

Posted 08/15/2019

By Melissa Anderson

Around the globe the hemp market is still in the early stages of having substantial room for growth to occur. Recent market reports indicate that the estimated gross value of hemp production per acre is about $21,000 from seeds and $12,500 from stalks. North Dakota State University Assistant Professor in the Department of Agribusiness and Applied Economics David Ripplinger explained that while Canada and Europe have more developed hemp industries, they are still on the  small side.

“The United States has much it can learn from others, especially from our neighbors to the north,” Ripplinger explained. “They have experience with production, processing, and marketing that is a real asset to the domestic industry.”

This is especially true for North Dakota growers as much of Canada’s hemp production is based in Manitoba, which has similar growing conditions. In comparison to the Canadian and European growers, the producers in the United States have a new, large market for hemp products.

“If growth is as expected, there is need for much more production which makes hemp more of a blue ocean opportunity,” Ripplinger said.

The global industrial hemp market is projected to reach well over $13 billion within the next 10 years. The push for hemp as a viable agricultural product is based not only on it’s many uses as raw material but also has environmental benefits as a renewable resource. Researchers across the country have found the fast growing crop to excel at reducing input costs as it does not require herbicides or pesticides and reduces soil erosion, making it a smart and lucrative rotation crop for farmers.

The possibilities of what hemp can be used for are incredibly vast, making the question of ‘what can it be used for?’ better phrased as ’what can’t it be used for?’ to narrow the scope of possibilities. Every bit of the plant can be used for something, from the leaves to the roots, letting nothing go to waste. Currently, the product made from hemp that is getting the most attention is Cannabidiol or CBD oil. The oil is derived from the leaves that have high-CBD low-THC hemp.

The growth projections for CBD hemp are huge, with as much as 50 percent annual growth through 2024. This growth is astonishing but should be taken with a grain of salt as this growth is coming from a relatively small base.

“The CBD market is bonkers right now. Farmers who have a good crop and market well this year could make a lot of money,” Ripplinger said.

While potentially lucrative, growing a good CBD crop is not easy. Hemp production for CBD oil is labor intensive from start to finish and should be “considered horticultural rather than agricultural”. Producers must research thoroughly to weed out bad genetics or contamination risks that could put an entire crop at risk. Over all, Ripplinger advises caution as he believes the nationwide excitement over CBD oil is overblown.

“There is and will be a large market for the product. Many CBD growers have little or no experience with production or agribusiness, and they will have an extremely difficult time when supply catches up, which it always does,” commented Ripplinger.

The other popular raw product comes from hemp seed oil. Nearly two-thirds of imported hemp to the United States in 2017 were of hemp seeds. The imported hemp seed is used mostly as inputs and ingredients for hemp-based products. Currently there are plants within the state of North Dakota and Minnesota that could process the hemp seed.

“Growth for hemp seed oil is expected to be about 25% year over year. The hemp seed market is better behaved.  The crop demands are not as high, and the market is functioning well with good prices available,” Ripplinger shared.

Hemp fiber is the dark horse of hemp raw material in the United States. Used mostly in the textile and pulp & paper industry due to its long and strong fibers, its application has been increasing in many diverse industries such as construction, animal bedding, agriculture, furniture, and automobiles. Additionally, its usage to obtain biofuels and bioplastics has been expected to increase its demand in the coming years.

“Hemp fiber could also see fantastic growth as well, again, coming from a very small market today. Fiber markets don’t exist yet. As a regional processor, which we don’t yet have, is needed,” commented Ripplinger.

As producers begin wading into this crop there are aspects of this new crop they need to keep in mind. According to Ripplinger, it is not just the planting and growing of the crop that requires forethought but also producers marketing the crop and looking for contracts prior to planting.

“That doesn’t mean to say that many farmers, processors, and marketers won’t do well, but it will require an attention to [detail] ensuring quality and delivering value.  Many will be too inefficient or careless and not stand a chance when commercial agriculture/horticulture takes over,” Ripplinger said.

Because the crop is still in its early stages and supply has not met demand, producers may have opportunities to be financially profitable their first years of hemp production. As it stands, the United States imports were valued at $67.3 million in 2017. Canada is the single largest supplier of U.S. hemp imports, accounting for about 90 percent of the value of annual imports.

North Dakota agriculture as a whole is unique amongst a nation of producers.  The North Dakota producer is used to growing new crops and growing them very efficiently with substantial return. Ripplinger has no trouble seeing a future where hemp production is easily 100,000 acres in the state and could eventually be 10 times that amount. This  production would be a mix of all three possible raw material.

“North Dakota’s niche in hemp is the same as in many other specialty crops.  We have very good farmers who have experience with new crops.  We can easily ramp up and produce hundreds of thousands of acres of a crop within a few years,” Ripplinger stated. “If the opportunity is there so will be the North Dakota farmer.  The experienced, small producers in other parts of the country don’t stand a chance.”