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Legislative News and Views - Rep. Paul Anderson (R)

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Industrial hemp’s niche evolves in ag. market

Monday, February 24, 2020

 

By Rep. Paul Anderson

Industrial hemp, an agricultural crop thought by some to be the next big financial breakthrough for farmers, is having growing pains as demand is playing catch-up to supply. Acreage nationwide has expanded so fast that processing facilities have not kept up. And as that supply has grown, prices have dropped, in some cases, dramatically.

The 2014 Farm Bill was the catalyst that allowed the crop to be grown under a state pilot program for research. It also established a legal definition of hemp as being a plant with less than 0.3 percent THC, the drug that produces the “high” in marijuana. The 2018 Farm Bill went further by expanding the definition of industrial hemp to include seeds and all derivatives, extracts, and cannabinoids. It is now an agricultural commodity overseen by the USDA. Hemp has been removed from the federal “controlled substance” list, although the Food and Drug Administration still has authority in the regulation of the product. CBD and other cannabinoids are still considered illegal by the FDA in food and dietary supplements.

The number of acres devoted to the crop has grown steadily since the first year of production in 2016. That year six growers were licensed in Minnesota and a total of 38 acres was grown. The next year 33 growers planted 1,200 acres. By 2019, the number of growers had increased to 343 and the acreage was up to 8,000.

It’s also interesting to follow the harvesting intentions and see how they have changed. Nearly all hemp grown in the first year was for grain with none for CBD oil. By 2018, with uses for hemp expanding, 88 percent was grown for grain, 10 percent for CBD, and 2 percent for the plant’s fiber. That mix changed dramatically last year with the number of acres devoted to CBD production jumping to 78 percent, while grain production dropped to 22 percent.

The reason for the swift change in grower intentions was the huge profit numbers being claimed for CBD production. Gross profits of $50,000 an acre and even more were being tossed about. Those growers who contracted their crop early may have received payments such as that, but market prices for the oil throughout last summer and fall dropped precipitously, down by as much as 75 percent.

According to the Minnesota Dept. of Agriculture, between 10 and 20 CBD extractors are operating in the state and buying hemp flower from Minnesota growers. There are currently no fiber processors located in the Upper Midwest, with high operating costs being a challenge. And four companies are offering contracts for grain and seed, two of which are located in Canada. Minnesota and Wisconsin each have one.

All fields growing industrial hemp in the state are inspected by MDA for THC compliance. The varieties grown primarily for CBD have a greater risk of having too much THC. If the test shows THC levels are too high, the grower can request a second test. If both tests fail, the crop must be destroyed. Of the 568 fields tested last year, 69 of them, or 12 percent, had levels that were too high. All the fields destroyed were CBD varieties. No fields containing varieties bred primarily for seed or fiber were plowed under.

*****

The first days that tell us spring will eventually get here are great. Last Saturday, especially, was one such day. Bright blue skies, no wind, and temps in the upper 30s had many of us outside enjoying the balmy weather. I would rather be right here in Minnesota on these first nice days of spring than anywhere else.

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