Hemp isn't just an Oregon thing. It's nationwide.
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| Click: Food Business News |
Demand is up. So is supply. The acreage data is unreliable.
The question is price.
The sources disagree on how many acres are planted but they agree on one thing: there is at least four times as much of it this year as last year.
Kentucky farmers are switching from tobacco to hemp. Montana and Colorado farmers are switching from grain rotations. In Oregon land that was in grass or alfalfa is going into hemp. A hemp advocacy group prepared this chart of acreage growth from 2017 to 2018–a tripling of acreage.
Kentucky farmers are switching from tobacco to hemp. Montana and Colorado farmers are switching from grain rotations. In Oregon land that was in grass or alfalfa is going into hemp. A hemp advocacy group prepared this chart of acreage growth from 2017 to 2018–a tripling of acreage.
Update: 2019
The US Department of Agriculture published a report on the 2019 acreage, as described by Quartz: more than four times as many acres as 2018. This is being funded in part with big investments from existing Canadian firms, including Cronos, and from tobacco giant Altria, formerly known as Philip Morris, which made a 1.6 billion dollar investment. Click: Hemp Industry Daily
In 2018 Montana was the big hemp producer with some 13,000 acres. Colorado was
second with 5,500 acres, and Kentucky was third with 4,600 acres. Oregon was an also-
ran.
second with 5,500 acres, and Kentucky was third with 4,600 acres. Oregon was an also-
ran.
This changed. This year Jackson County, Oregon itself has some 8,600 acres planted according to the State of Oregon, and Oregon has leapfrogged up to the third largest producer, but still far behind Montana and Colorado. Hemp Industry Daily called the Oregon increase "eye popping," an increase from 3,500 acres to 51,000 acres. They report Colorado having 80,000 outdoor acres.
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| Click: qz.com |
(Note that every source reports different numbers for acreage, and I consider them all unreliable.) What is consistent is the direction: explosive growth of acreage and presumably supply.
What is unclear is demand and therefore price.
The industry has specialty journalism following the industry. They observe what market participants readily admit: there isn't a public marketplace or consistent reporting of prices. Individual growers negotiate prices with individual extractors
and processors. Hemp Industry Daily says, "The boom is coming mostly from word-of-mouth reports about hemp's profitability, rumors underpinned with little data." Price discovery is done through anecdote and personal experience.
and processors. Hemp Industry Daily says, "The boom is coming mostly from word-of-mouth reports about hemp's profitability, rumors underpinned with little data." Price discovery is done through anecdote and personal experience.
A Kentucky farmer tells Quartz magazine that he would make about $500 per acre growing soybeans. He expects to make $30,000 an acre growing hemp. Oregon growers tell me they expect to make 2,000 pounds per acre of "biomass," i.e. hemp plants simply cut, dried and baled, like alfalfa. They consider $20/pound to be a floor price for biomass: $40,000/acre gross revenue, for a net of some $30,000 an acre.
A comment sent to Hemp Industry Daily reported a price of $25/pound for biomass as "very conservative."
A survey of growing conditions and CBD quality in each growing area suggests Oregon hemp might have a quality advantage the markets will support. Hemp Industry Daily suggests likely prices in the $40-60 per pound from Montana hemp, where the crop would displace acreage in barley and wheat. “With good access to water, fertile valleys, and a reliable dry hot summer season, Oregon’s climate is ideal for hemp production.” They predict $35-100 per pound of biomass.
A survey of growing conditions and CBD quality in each growing area suggests Oregon hemp might have a quality advantage the markets will support. Hemp Industry Daily suggests likely prices in the $40-60 per pound from Montana hemp, where the crop would displace acreage in barley and wheat. “With good access to water, fertile valleys, and a reliable dry hot summer season, Oregon’s climate is ideal for hemp production.” They predict $35-100 per pound of biomass.
Those are the number that put dollar signs in the eyes of hemp growers. At $100/ pound, an
acre that produced 2,000 pounds would have a revenue of $200,000 per acre. Sunk costs at time of planting are approximately $4,000 an acre. There is labor involved in tending and harvesting the crop. Still, $20,000, $50,000, and $200,000 in revenue give a lot of margin to pay those costs
It might work out.
acre that produced 2,000 pounds would have a revenue of $200,000 per acre. Sunk costs at time of planting are approximately $4,000 an acre. There is labor involved in tending and harvesting the crop. Still, $20,000, $50,000, and $200,000 in revenue give a lot of margin to pay those costs
It might work out.
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