CANNABIZ

A dearth of buyers has turned boom to bust in the hemp industry.

BY GRIFFIN COOP PHOTOGRAPHY BY MATTHEW MARTIN

This article first appeared on arkansascannabiz. com, the Arkansas Times’ new online marijuana industry publication.

Just a few years ago, the American hemp industry was booming, and Arkansas was a prospective boomtown. If it were a time and place, it was California in the 1850s. Trade out the prospectors panning for gold in the California hills for farmers looking to stick legal cannabis plants in the ground for the first time since federal law banned it in 1937. All were looking to grab their piece of a young and fertile industry.

The farmers got licenses from the state and planted acres and acres of hemp, mostly to produce CBD, the medicinal part of the plant with healing properties. The Farm Bill, passed by U.S. Congress in 2018, had made it all possible, legalizing hemp farming and hemp products. Hemp flower, the part of the plant used to make CBD, drove the industry with 8285% of the product dedicated to it nationally. In Arkansas, 96% of hemp farming was for floral hemp production. And then, as it often does, boom turned to bust.

“I think what you saw was the mass CBD rush, everybody thinking they could make a million dollars jumped into it,” said Brad Fausett, one of the few Arkansas hemp farmers still in the business. “Everybody lost their ass because the market flooded like crazy.”

Growing the plant seemed to go well. Nearly 200,000 pounds of crop material were harvested in Arkansas in 2019 and another 224,000 pounds the next year. That number dropped to about 55,000 pounds last year because there were simply no buyers.

“The growing part is the easy part,” said Rick Funderburg, who joined a farming operation in Fayetteville after a long career at UPS. “Get a buyer and we’ll fire it back up. There’s just no buyers.”

Some farmers, like Funderburg’s operation, never found a single buyer for the crops they grew. In many cases, the hemp flower grown years ago still sits in storage, waiting for a buyer.

“Many growers are still storing crops produced from 2019/2020 seasons,” said Sarah Cato, public information office for the state Department of Agriculture.

Bill Morgan, a self-professed hippie who lived in California before settling in the mountains of Newton County, now farms an acre of hemp in Fayetteville. Morgan leases the property from a farmer who tried to make a go of hemp farming a few years ago. That farmer’s crop of hemp flower, Morgan said, sits in vacuum-sealed bags — a reminder of a more hopeful time.

Caleb Allen, who runs the state hemp program, said the state’s farmers have done well growing the crop and some of them might be interested in coming back to the program if the industry matures — “once some profitable, legal markets open for them,” Allen said.

Times were different in 2019. After Congress passed the 2018 Farm Bill, called the Agriculture Improvement Act of 2018, the prospects for hemp were bright. Hemp had been illegal since Congress passed the Marihuana Tax Act of 1937, although the U.S. Department of Agriculture did make it legal for a while to assist in the war effort during World War II. As a consequence,

some of the parachutes used during the D-Day invasion contained hemp fibers, according to Larry Farnsworth, spokesman for the National Industrial Hemp Council.

After the Farm Bill passed, the Arkansas Department of Agriculture set up a regulatory and licensing system for hemp farming. States across the country did the same.

In 2019, 125 farmers signed up to grow hemp in Arkansas on 913 acres while the prices for the oil used to make CBD products were very favorable.

Funderburg said when he started working on the farm, the price for crude oil to make CBD products was estimated at $10,000 per kilo.

But price estimates are meaningless if there’s not a buyer actually willing to pay that price.

“Once you get to the finish line, you’ve got the product, [but] there were no buyers,” he said.

Prices fell fast. According to Beau Whitney, an economist who studies hemp, the prices for biomass, the leaves and small flowers used in the cannabinoid extraction process, have fallen from $42.90 per pound at its peak to around $1.90 per pound today. The price of crude hemp oil fell at the same rate, he said.

“The days of $10,000 per kilo are long gone,” he said, estimating the price is closer to $200$300 today.

By 2021, hemp farming had taken a nosedive. Arkansas had just 49 growers sign up for hemp licenses that year. Only 27 have signed up so far in 2022.

Other farming statistics tell a similar story.

In 2019, Arkansas hemp growers farmed 913 acres and produced 199,221 pounds of crop material. In 2021, Arkansas’s hemp farmers worked 190 acres and produced 55,492 pounds of crop material. That’s a 79% drop in acres farmed and a 72% drop in crop material.

Arkansas wasn’t alone. Nationally, the number of hemp acres licensed fell from 522,000 in 2019 to 235,000 last year — a drop of 55%. There are only 95,000 acres licensed so far this year, according to data from PanXchange and Whitney Economics.

Going into 2022, there were 201 million pounds of excess biomass but about 60 million of that has been sold through, according to Farnsworth, much of it to make Delta-8 products from the THC found in hemp that has fallen into a legal gray area in many states.

While the hemp industry has gone through its boom and bust cycle, industry leaders believe the future is still bright for American hemp. But they say the future lies in industrial hemp, not flower and CBD.

Industrial hemp, like the type grown for CBD, is grown from cannabis plants but different varieties with fewer flowers than those that are grown to produce CBD. These plants have few flowers, grow much taller than the other types of hemp, and their usefulness lies in their stalk and seeds rather than their flowers.

The stalks can be harvested to make textiles, woods, building materials and much more.

The industrial hemp industry wants to be seen as part of the agricultural world. While the marijuana industry prefers the term “strain” for different types of plants, some in the industrial hemp world prefer the term “variety” as you’d hear among growers of corn or soybeans.

“We’re an agricultural commodity,” Farnsworth said.

Hemp can be used to provide all of the things a person needs to live: food, medicine, clothing and shelter, Farnsworth said.

“Show me another plant that can do all of that,” he said. “I don’t know of one.”

The plants are also good for the environment, he said, because of their capacity for carbon sequestration.

Despite industrial hemp’s benefits, the present infrastructure is lacking.

First, some hemp laws make the industry difficult to manage. Hemp, by legal definition, is cannabis with a THC content of 0.3% or less. That’s a third of a percent, which is, obviously, really low. The law also limits the number of plant varieties that are available to the farmer. There are only so many types of hemp that will produce a plant with such a low THC content.

“When you’ve got a 0.3% total THC value you have to hit under to qualify as hemp, your genetic pool is tiny, tiny,” Fausett said. “You don’t have a lot of different strains to even look at.” Hemp farmers are also required by law to destroy all plants that “grow hot” or have a THC content greater than 0.3%. The National Industrial Hemp Council would like to see the next version of the Farm Bill raise the allowable percentage of THC to 1% total THC. Negotiations should start this fall and the bill is estimated to be voted on next year, Farnsworth said, although he noted that delays could occur; the 2018 Farm Bill was originally supposed to be passed in 2015. The industry also needs more decorticators, the expensive machinery used to process industrial hemp. There is no hard data on the number of decorticators in the United States but there aren’t many — probably 10 to 20. Hemp farmers sometimes have to travel out of state to find the closest decorticator but, because hemp laws differ by state, farmers must adhere to the law in their own state as well as the state they must travel to process the product.

The only decorticators in Arkansas are “experimental,” Fausett said. “Most can’t keep from catching on fire long enough to make a product.”

Fausett said the closest decorticator is on the Texas-Oklahoma line and its capacity is limited.

The industry also needs more research. Some universities have performed federally funded research on using hemp as feed for livestock but more needs to be done for it to get federal approval. It might sound funny that the government allows humans to eat hemp but not cattle, but Farnsworth said federal officials need to learn more about livestock that eat a 100% hemp diet.

“Everything that we do is rooted in safety,” he said. We want to make sure that it’s a safe practice but everybody recognizes the potential for hemp to be included in animal feed.”

Allen, who runs the state hemp program, said he knows of two factories that have opened to produce “hemp wood” for industrial products like hardwood flooring.

Allen said the industry needs to educate the public about hemp, increase the number of processors and develop a viable supply chain, while the general public needs more general education on hemp and hemp production.

“This industry still has much to offer and explore in terms of food production, industrial materials, pharmaceuticals, cosmetics and much more,” Allen said.