Emerging opportunities with hemp
April 21, 2017
The cannabis plant is making a comeback after going out of vogue nearly a century ago. Through the mid-19th century, the crop, also known as hemp, was grown throughout the U.S. for use in textiles and medicine.
However, by the early 1930s, more than 30 states had halted the use of marijuana for non-medical purposes, and it didn't take long for the federal government to push for a national prohibition. The Marijuana Tax Act of 1937 was passed by Congress in an effort to eradicate the use and sale of the drug through hiked-up taxes.
Since then, hemp and marijuana crops have been linked as one and the same, a misconception that has kept the industry from growing, said Artie Elmquist, president of Front Range Sustainable Ag.
"President Franklin Roosevelt redefined hemp as a cousin to marijuana even though they are completely different crops," said Elmquist, who is leading the charge to produce more acres of hemp in Colorado through his company, New Plains Agro. "Many people don't realize that hemp has no THC; you can smoke it and never get high. However, the hemp plant does have hundreds of different uses, both in the hemp flour and the CBD (cannabinoid) oil, which offers a nutritional defense against health issues that often ail people. It's even been proven to naturally destroy cancer cells in people with stage four cancers."
“Hemp doesn’t take much fertilizer and requires one-third of the water it takes to grow corn.”
Many states are now recognizing the benefits of hemp and are seeing dollar signs in the $688 million hemp industry. Under the industrial hemp research and pilot program provision, Section 7606 of the farm bill, 32 states have removed barriers for producers to begin raising this crop including: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Kentucky, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia and Wyoming.
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GROWERS AND INVESTORS
Through New Plains Agro, Elmquist is seeking growers and investors for his hemp enterprise. Last week, Elmquist met with interested landowners, farmers and investors to discuss the opportunity.
"We want to simplify this process for landowners who may be interested in hemp production through a cash rent and cost share basis," Elmquist said. "We have the silent support of local bankers, but they aren't very vocal about it just yet because they are still nervous about the federal government viewing hemp and marijuana plants as the same. So under the plan we have put together, New Plains Agro would permit the acreage under its name, which removes the tenant farmer or landowner from having direct involvement with the hemp production. They would provide the land, do the irrigation, fertilize and control pests as needed, and we would consult with them on a weekly basis to address any management concerns."
Elmquist said Denver has changed its development regulations to allow for hempcrete (a product of hemp that works just like concrete) to be used in commercial construction projects.
"One of the best uses of hemp, which comes from the herd (the inner core of the hemp stalk) is hempcrete, which is a mix of hemp, lime and water and is a phenomenal building product," he said. "There is a commercial product developing in Denver that would allow for hempcrete to be used. Another opportunity is for the landowners near the JBS-owned feedlot who sell corn for silage to JBS. They currently have a surplus of silage right now, so as those farmers look at a different crop other than corn to grow this year, hemp may be a great option for them."
Elmquist said that hemp is incredibly environmentally friendly with a low carbon footprint and has the potential to benefit the farmers' soil.
"Hemp doesn't take much fertilizer and requires one-third of the water it takes to grow corn," he said. "It's an easy crop to grow, and is a great crop to add into a rotation as it helps restore soil health. We also believe hemp production, which relies on certified organic products to control weeds, could help transition producers over to a more organic system in all of their crops and shift them away from their independence on GMO crops."
Once planted, the hemp plant takes 90-100 days to mature with harvest to be completed in September. Elmquist is seeking acreage commitments now with the hopes of getting the plants in the ground shortly.
"Obviously, many folks are still worried about the legalities of growing hemp, but with Amendment 64, which authorized recreational use of marijuana, this crop is fully legalized in Colorado," Elmquist said. "We want to work with farmers on a much larger basis. So far, we've been growing on five- to 10-acre plots, but we're working to engage farmers who can provide enough land for full irrigation pivots."
Interested landowners, investors and farmers can contact Elmquist at email@example.com or (720) 771-2570.
On April 18, the Colorado Department of Agriculture hosted a forum in Broomfield, Colo., to discuss the ins and outs of growing hemp through its Farm Products & Commodity Handlers Programs.
Mark Gallegos, CDA program administrator, explained that these programs were designed to provide financial protection to producers or owners when they sell farm products or commodities to a dealer or commodity dealer. Additionally, these two regulatory programs protect Colorado producers by regulating individuals who purchase farm products or commodities for processing, resale or storage for others.
"The Farm Products and Commodity Handlers Acts require licensure and bonding of any person purchasing Colorado farm products or commodities for the purpose of resale or processing," Gallegos said. "Exceptions are restaurants, retail grocery stores, small feedlots, and any person or company that is purchasing farm products or commodities for their own consumption do not need to be licensed."
Under the current regulations, there is a difference between a farm product and a commodity. Gallegos explained which category unprocessed industrial hemp seed falls under.
"A farm product includes the following unprocessed products produced in Colorado or owned by any Colorado resident, dealer or small-volume dealer: agricultural, horticultural, viticultural, fruit, and vegetable products of the soil," he said. "This would include hemp stocks, leaves, clones and flowers. Commodities are unprocessed small, hard seeds or fruits such as wheat, corn, oats, barley, rye, sunflower seeds, soybeans, beans, grain sorghum, and such other seeds or fruits as may be determined by the commissioner. Unprocessed industrial hemp seed purchased for resale or processing will fall under the commodity handler license, while the rest of the industrial hemp plant would fall under the farm products license."
To be in compliance if purchasing both farm products like hemp stocks and commodities such as hemp seed, only one license is needed.
"Licensure as a farm products small volume dealer will allow you to purchase both farm products and commodities, he said. "A commodity handler may purchase farm products under a commodity handler license without having to obtain an additional license or bond."
According to CDA, "Farm Products and Commodity Handlers licenses are valid for one calendar year and are not transferable. The fees for 2017 are: Farm Products Dealer, $275; Commodity Handler, $150; and a commodity inspection fee of $50-$750. Commodity inspection fees are based on the annual dollar amount purchased by a commodity handler. An additional warehouse fee may apply if commodities are stored for others. Warehouse inspection fees range from $155 to $1,840 and have additional financial requirements to be licensed."
Producers who are interested in growing hemp and investing in this business need to know a few things about obtaining a bond or letter of credit.
Gallegos said, "Bonds you get from an insurance company, letters of credit you get through a bank. The Farm Products and Commodity Handlers programs have been assured industrial hemp dealers and commodity handlers will be able to obtain a bond. Make sure your agent knows that you are applying for a surety bond. The bond is a regulatory requirement for a Farm Products Dealers or Commodity Handlers license (for industrial hemp). Your agent is using the approved Colorado Department of Agriculture surety bond form."
Additionally, Gallegos recommended that producers document every transaction by obtaining evidence of sales such as scale tickets, bills of lading or delivery receipts. He says to avoid problems if a dispute should arise, an upfront signed contract between buyer and seller needs to be agreed upon.
For more information on CDA's Inspection & Consumer Services Division Farm Products Program, contact Gallegos at firstname.lastname@example.org or (303) 867-9213.
HEMP PRODUCTS GROWTH
While growing hemp may be considered unconventional and breaking away from tradition, this fast emerging industry could be a profitable choice for landowners in Colorado. According to Vote Hemp and market research conducted by SPINS, "The combined 2016 sales of U.S. hemp food, body care, CBD products and dietary supplements grew in the sampled stores by 24.64 percent or approximately $23 million, over the previous year, to a total of nearly $117 million. Sales by conventional retailers grew by 36.54 percent in 2016, while sales by natural retailers grew by 11.64 percent. The combined growth of hemp retail sales in the U.S. continues steadily: annual natural and conventional market percent growth has progressed from 7.3 percent in 2011, to 16.5 percent in 2012, to 24 percent in 2013, 21.2 percent in 2014, 10. percent in 2015, to nearly 25 percent in 2016."
For more information about hemp, check out nationalhempassociation.org.
— Radke is a cattle rancher, freelance writer and agricultural speaker from Mitchell, S.D. She can be reached at email@example.com.