Farmer Standing at a Starting Line with Hemp Seeds in Their Palm | Woodruff

On Your Mark. Get Set. Grow Hemp.

While the 2018 Farm Bill last year made it legal for growers to produce hemp for general commercial activity, the country has been anxiously awaiting the release of the U.S. Department of Agriculture’s rules and guidelines before that production can begin. This fall, the USDA released those guidelines in its interim final rule. And as if the USDA shot off a starting gun, growers, the ag industry and consumer products companies alike are off and running. But while there’s a lot of excitement for this potential market, what should marketers know going into this trial 2020 crop year?

Market Potential

The market potential for industrial hemp is huge. According to Vote Today, a U.S. organization aimed at gaining acceptance and a market for industrial hemp, there were more than 25,000 industrial hemp-based products globally in 2017 estimated at a total retail value of $820 million. In 2019, the global industrial hemp market was projected to be valued at $4.6 billion ( Five years later, in 2025, that market is estimated to reach $26.6 billion.

The hemp market has largely been untapped by the U.S. and completely untapped by U.S. farmers as we import 90 percent of our industrial hemp from our northern neighbor, Canada. That’s a lot of opportunity, eh?! U.S. farmers are recognizing that opportunity: nearly 17,000 state grower licenses were issued last year and more than 500,000 acres of industrial hemp were licensed — a 455 percent increase over last year.

Benefits of the Bud

In addition to large market potential, there are more specific ag-related benefits to farmers who grow hemp. To start, it’s a great rotation crop. It suppresses weeds, decreases outbreaks of insects and diseases, and is seen as a good sustainable option with lower water requirements. From a soil health perspective, it puts organic material back into the ground, which benefits future crops.

Each acre of industrial hemp grown can produce an average of 700 pounds of grain, which can be processed into 22 gallons of oil or 530 pounds of meal. That same acre can also produce approximately 5,300 pounds of straw, which can be transformed into 1,300 pounds of fiber.

On the financial side of a farmer’s operation, the fact that growing industrial hemp is now legal means that farmers can qualify for Small Business Administration loans, crop insurance and other farm programs. And as a niche market, it offers value because feasibility studies from some states estimate the value of one acre of hemp seeds at $21,000 and $12,500 for stalks. And they can now legally transport that product across state lines.

Challenges with U.S. Hemp Production

But as marketers know, early adopters are on the bleeding edge. U.S. hemp farmers will face their own challenges in the coming years. First, they must know, understand and follow the rules and guidelines set in the USDA’s interim final rule that came out this fall, including:

  • Farmers must apply for a license to grow industrial hemp through a state, tribe or USDA (if their state doesn’t have a program), and to get a license, they can’t have any felony involving a controlled substance within the past 10 years.
  • Farmers must report their hemp acres and provide geospatial coordinates to USDA.
  • Sampling of their crop must take place 15 days before harvest by an authorized agent.
  • Testing of each crop must take place at a DEA-registered laboratory to ensure it measures no more than .3% THC.

There are other challenges hemp farmers will face, too. Harvesting and drying can be cumbersome, the right equipment to help may be unavailable, the number of facilities that are certified for hemp testing are limited, and there are just a handful of processing facilities. Not minor feats to overcome!

With Challenges Come Innovation and More Opportunity

As with any new market, it will take a while to see where the market will shake out on industrial hemp and if farmers and the industry can work through the initial challenges to find value. While that plays out, one thing is clear — challenges breed innovation, which makes industrial hemp an even more exciting market opportunity. New harvesting equipment and testing technologies will be needed to streamline operations and ensure their profitability. New testing labs will need to be certified, and new processing facilities will need to be built and staffed. It sounds like that would take a long time, but early market indicators show promise.

So What Should Marketers Do Now?

Remember that starting gun we mentioned? There are farmers and companies in the U.S. who are off the blocks and hurdling down the industrial hemp lane. Based on trend reports, the innovations and opportunities will come hard and fast, so marketers should get familiar with the existing market. Know the newly issued rules, because chances are you’ll either be working with farmers who want to get involved in hemp production or who will be impacted by it.

Explore your opportunities. There may be a way to expand your equipment line to meet the needs of this unique market or ways to partner with potential processors. Determine if hemp is a viable rotation in fields where your customers may currently have soybeans, corn or wheat. If you’re in crop protection, understand which of your products may be effective on hemp and make sure they’re labeled accordingly.

Establishing a new market is never easy, and it will be even more challenging for industrial hemp. If you’re not sure how your company or organization can tap into this emerging area, give Woodruff a call or reach out by email. We’ve been monitoring the hemp market as it’s developing. We’d be happy to provide you with a birds’ eye view of the trends we’re seeing. Consumers will keep driving demand for low-THC cannabidiol products in everything from bath bombs to chocolates to furniture. Let us help you understand this market and develop an approach to tap into this developing niche in agriculture.