Farmer beware. Pitfalls and genuine promise make up a hemp cauldron set to high boil in 2019—yet the temperature will get even hotter, warns producer Chris Adams. “There is no secret knowledge about this crop: The real truth is it’s a crapshoot right now.”
Going no holds barred on profit, genetics, seed costs, mortality, and more, Adams offers a blunt assessment from the front lines of hemp farming, and urges growers toward a hard reality check. “Who do you trust? You better take a hard look because there’s so much going on in hemp.”
After four years of growing experience and a host of invaluable lessons learned, Adams, 32, is emerging as a leading hemp producer in the Midwest. He tends a diverse crop roster on 9,000 acres located on both sides of the North Dakota-Minnesota line in fertile Red River Valley soils: sugarbeets, hard red spring wheat, hemp, soybeans, and six varieties of specialty dry beans. Bucking the middleman, Adams also operates an export business, and delivers crops (via containers loaded and sealed on-farm) straight from his fields to the doorsteps of foreign buyers. Convention ranks low on Adams’ priority list and his maverick approach afforded early entry into seed hemp in 2016, soon followed with hemp for CBD purposes.
As hemp acreage cranks up across the U.S., with 78,176 acres grown in 2018 and 511,442 acres licensed in 2019, Adams sends out a strong warning: “For potential growers or guys just starting, you have to realize there are a lot of scoundrels out there and you’d best be selective as to who you get information from. Also, so many people don’t realize how little they actually know, and others think they know because they were told by someone else, and it’s likely they’re banking on false information. When you buy seed and grow hemp, it’s very, very important to know you have a good source. I’d guess 80% of the information I see is partially wrong or completely false.”
Adams predicts dismal results in many states during the 2019 harvest. “There’s going to be a big chunk of CBD acreage that isn’t sellable due to genetics or being too hot on THC. Maybe people don’t want to hear this stuff, but that’s how it’s going to be for a while.”
Genetics, Adams contends, is the single biggest hemp concern at present. Feminized seed can cost up to $1-$2 per seed, an amount that adds fuel to scam fires. Adams insists fraud is frequent: “When someone pays $2 for a seed—and that’s not a clone or seedling—just a seed, then suddenly every Tom, Dick and Harry is a master breeder, and they charge forward with no proper strains or stabilizing genetics. They plant, fertilize and sell it as feminized seed, make several million bucks, and then you’ll never see them again. This type of fraud is real and guys have to know that.”
Adams has the battle scars to back his words. In 2018, he bought a batch of clones from Colorado that served as Trojan horses. After planting the purported clones on 3.5 acres of ground and anticipating a good harvest as the plants climbed nearly 7’ tall by September, Adams found 2,000 males carrying fat pollen pouches in the field—verboten for CBD hemp which requires all-female production. Salt in the wound, even the plants he was able to harvest from the Colorado source produced an abysmally low CBD level of 1.5%.
If you’re interested in learning more about growing hemp on your farm, click here to see future Hemp College dates.
“Ignorance can get you leached if you just listen to anyone and start off doomed from the get-go. After this year, guys are going to get more selective, but these problems aren’t just going to go away overnight. Safe to say, bad genetics is going to be a problem for at least several years, and that’s just a single aspect of hemp fraud—there are others.”
Adams views CBD purity claims from a highly dubious perspective, and hopes pending USDA regulation will lay down proper oversight. “I don’t know what is going on with extraction, but I’d bet 70%-80% of CBD products on the shelf are not what they’re labeled. That means a lack of know-how and a lack of integrity. Don’t tell me the crap sold in convenience stores contains real CBD. I don’t know what’s in it, but I guarantee it’s some really Wild West stuff.”
Adams fields six to seven calls per day from potential hemp growers, often asking questions on the basic differences between production for CBD, seed and fiber. “Even now, there are plenty of guys that don’t know the difference. They get offers on seed contracts for CBD production. Sure, you can get CBD from seed hemp, but the CBD percentage is tiny, maybe 1%-2%, but I’m not sure the growers are told that. They’ll have to process into an isolate and it’ll take an unreal amount of plant material to get a good amount of CBD isolate.”
Wake Up Time
Many of Adams’ concerns are echoed by Bob Pearce, a professor of agronomy with University of Kentucky Extension. Hemp production, Pearce explains, is subject to knowledge gaps—a major source of jeopardy for growers. “If a grower is approached by somebody claiming to have all the answers, I see red flags. Right now, we’re relying on limited information backed by solid research, and it’s hard to prove or refute all the claims.”
Management is a key area where bad hemp advice does heavy damage, Pearce says: “At first, people said hemp didn’t need much attention and it was ideal for marginal ground. No, we have already seen that it needs good ground for real success—lots of care and attention.”
The scramble for seed, potentially lucrative contracts and lack of information can be a recipe for impropriety. “You can’t look at a seed and tell if it’s feminized. Right now, we’ve got a lack of seed certification and lack of knowledge, so people are unfortunately able to commit fraud. I certainly hope that’s not the majority of what we’re dealing with, but you can’t protect yourself if you pretend otherwise.”
Pearce advises growers to ask questions and perform basic research. “Start with simple online searches. In Kentucky, for example, you can go to the department of ag online and look up approved and cautionary varieties. Ask a supplier to provide proof of a variety meeting THC requirements; maybe results from a certified lab. Sure, somebody could manufacture those on paper, or substitute one variety for another, but in the absence of seed certification programs, those are good starts for due diligence.”
Adams currently has 700 acres of seed hemp (half the acreage is for certified seed) and 100-plus acres of CBD hemp, tended by a high school chopping crew to control weeds. Passing on clones and seedlings in 2019, he spent two weeks preparing John Deere planters to deposit seed for CBD hemp at 99.9% accuracy at 20 acres per hour. By planting seed, Adams knew he faced mortality issues. Seed purchased from breeders is typically hand-cleaned and contains significant impurities (7-10%), he explains. “Germination is going to be lower out of the gate, maybe up to 10% of your field. Mortality is an issue because there’s no coating or protectant to put on the bare seed. That has to change and I’m working on some coatings to make seed more universal in size and help emergence.”
CBD hemp seed costs are highly variable, and Adams has paid across a range of 70 cents to $2 per seed. By 2020, as the market dust settles, he predicts prices to drop 50%, easing the bottleneck pressure on populations, mortality and seed costs.
As industrial hemp and CBD hemp acreage increases across the U.S., what about concerns over drift and cross-pollination? Outweighing drift, cross-pollination is a major worry for Adams. “Hemp can be very sensitive to various chemicals or heavy metals, for example, but we haven’t had any problems. In fact, there have been zero cases in North Dakota and Minnesota of chemical residue found in CBD oils.”
“As this moves farther along, there is going to be more and more hemp in the fields, and I’m afraid it’ll reach a saturation point where outdoor CBD hemp farming is not possible because of all the pollen floating around. In time, I think cross-pollination will be a big issue.”
Profit Per Acre
Even with Adams’ concerns over multiple facets of hemp farming, potential profits command grower attention. Seed hemp, in his geography, often yields 1,200 lb. per acre but can produce upwards of 2,000-plus lb. per acre. Extrapolating, if the market for seed is 50 cents per pound (subject to consistent fluctuations) and yield reaches 1,200 lb., then gross profit hits $600 per acre. However, the math changes quickly with big yields, and Adams has cleaned, bagged and dried seed at 2,000 lb. per acre. “I’d say 1,200 lb. is a fair mark and that’s what I equate with 70 bu. wheat when you’re shooting for 100 bu. All said and done, you can net $100-$150 per acre, but that number starts to seriously jump when you have big yields.”
Regarding profit potential for CBD hemp, estimates are skewed by considerable variables. For a ballpark figure, assume 1,000 lb. dry material per acre at 8% CBD and a market paying $3-$3.50 per percentage point per pound of CBD. “That’s about $28 per pound times 1,000, equaling $28,000 gross per acre. That’s the actual realm of what a grower can get, but that can also be way higher if you yield 3,000 or 4,000 lb. of material per acre.”
However, grower costs cover a wide spectrum. For example, if population is 2,500 plants per acre at $1 per seed, the simple math dictates $2,500 per acre in seed costs. “You’ve got fertilizer and irrigation costs, and you’ve got to factor in grunt labor too, and that might be $200 per acre. There’s not a lot of uniformity between costs for hemp farming, but the profit is there if you do it right.”
Projecting expenses for CBD hemp is a tricky proposition, particularly since variables change drastically from one operation to another. Industry standards are absent, and everything from planting to harvest can be wildly divergent, even within the proximity of hemp farming neighbors. When Adams began crafting a plan for 2019, intent on mechanized harvest, he penciled out sobering, but realistic input expectations for a roster of expenses: seed, land rent, fertilizer, irrigation equipment, labor, harvest equipment, and more. “Seed costs were extreme for 700,000 plants; $15,000 for drip; $30,000 for a well and pump; labor at maybe $125,000; $80,000 for tobacco equipment to cut the plants upright and set them on trailers. The more mechanized your harvest, the more CBD percentage you lose, but you also don’t want to hand-harvest hundreds of thousands of plants.” (In addition, Adams says growers should consider bucking machines to debud plants, stem trimmers and driers—all with hefty price tags.)
Permissible THC (tetrahydrocannabinol; a psychoactive chemical) levels within hemp vary between states, a hurdle Adams contends is a major problem for growers. “It’s red tape that really hurts and is going to screw over a lot of farmers. For many states, the level has to be below .3%, but the state testers sample the top 2” of vegetation—which contains the most concentrated levels of THC in the entire plant. A true sample should include the whole plant grinded up. The limit should be raised to 1%.”
The THC issue is far more than a red light versus green light test to gain state approval—it is a ball-and-chain drag on yield, Adams contends. “To get in under the state’s prescribed THC restrictions, you might have to harvest a month earlier to ensure you don’t rise above .3%. Just one month is a lot of pounds and a lot of percentage. For farmers, that means money left on the table, just because you have to navigate around the THC testing roadblock.”
The Gold Rush
How long might hemp production be subject to song-and-dance activity? A quick buck is a powerful catalyst, but Jesse Mondry, an attorney with Harris Bricken, and head of the firm’s Portland litigation team, believes improvements will take hold in fast time. “We’re dealing with a gold rush mentality, but as the hemp industry matures, the bad actors will get weeded out. The level of expertise of producers, processors and lawyers is going to get better very quickly.”
Fly-by-night hemp visions will lose ground to legitimate players, adds attorney Nathalie Bougenies of Harris Bricken. She warns of a heavy reliance on verbal agreements—a major risk to growers—and emphasizes the necessity of written agreements with detailed expectancies on CBD and THC levels, along with certificates of analyses from respected laboratories. “You need a clause in the agreement that makes the seller liable to reimburse the buyer.”
Bougenies notes a consistent lack of documentation with many clients, and urges growers to maintain a solid paper trail. “From the get-go, you’ve got to understand who you’re dealing with as far as licenses. Jurisdiction, chain of custody, compliance with state testing, purposes of the CBD related to rules and regulations, and much more have to be considered. First and foremost, focus on documentation in order to assess whether you are going into business with someone you can trust, and you have to insist on that documentation up front.”
Typical production contracts don’t carry much weight in the hemp industry, Mondry advises. “Standard agreements won’t work because the level of rules and regulations make it easy for farmers and processors to get into trouble.”
Escrow may be a layer of protection for growers to consider, with payment for seed or clones completed after contractual obligations are met. “You can pull your money out of escrow instead of filing a lawsuit. That’s a protection option you may need when there are shady characters in this industry and something that farmers have to think about,” he says.
“There is so much opportunity in hemp, but also lots of risk, because of a changing regulatory environment and a lack of established farming, contract and business practices,” Mondry adds. “Hemp sits entirely in its own basket and you cannot approach it as just a new commodity.”
Eyes wide open, Adams is bullish on hemp, but insists growers approach the new crop with caution. “This is forming into a great, great crop and the pieces will fall in place over time, but I’m already tired of guys pretending to know everything who don’t have a clue or who go around whispering about IP secrets. Those kind of guys are everywhere in hemp and they end up costing other farmers money. Do your homework and don’t settle until you find people you can trust.”