DENVER, Oct. 3 (UPI) -- A glut of CBD oil on the market, severe weather and a complex harvesting process will make this year's first mass hemp crop in 80 years in the United States a disappointment for many farmers.
As harvest season winds down and winter frosts threaten the northern United States, hemp is proving to be a complicated plant for farmers to harvest and process. Buyers for the crop are tapped out, which is driving prices down, industry observers say.
About 230,000 acres of hemp was planted in the United States this summer, but only about 40 to 60 percent, or 115,000 to 138,000 acres, will be harvested, predicts Vote Hemp, a Washington, D.C.-based advocacy group.
"A significant number of farmers rushed into farming hemp without having a plan in place," said Eric Steenstra, president of Vote Hemp. "Since we're not a commodity crop yet, it's challenging for people to take this crop to market. You can't just sell it like corn or soybeans yet."
About 79,000 hemp growing licenses were obtained this year in states where hemp was approved for 2019.
Hemp has taken off among farmers in Oregon, but wet weather and mold damaged much of the crop, said "Farmer Tom" Lauerman, who runs the Vancouver, Wash.-based Hemp Farming Academy, an online farming course.
Plants in Oregon this year were crammed too close together, causing mold and powdery mildew. Hail in the eastern part of the state and higher-than-normal rainfall also was disastrous, Lauerman said.
"There's no guarantee in agriculture. You just have to be prepared to withstand the worst-case scenario," he said.
In Tennessee, mold also dampened the hopes of many of the 3,500 farmers who applied for licenses to grow the crop, said Harold Jarboe, who also is known as The Old Hemp Farmer.
"This summer might have been the perfect storm as far as going and wrecking people's dreams," Jarboe said.
He and his partner have raised hemp for five years, "losing our shirts" for the first two. They now run Tennessee Homegrown, an online and retail CBD products company.
Jarboe said the hemp rush in Tennessee was like a "green fever," with people convincing themselves they could earn "$50,000 an acre," he said.
But many farmers had their crops damaged by heavy spring rainfall followed by extreme heat into October.
Even worse, farmers who had contracts with extractors ended up empty-handed when many of the extractors ran out of money and reneged, Jarboe said.
Extractors use ethanol to remove CBD oil from the plant matter in a technology originally developed by perfumers. Extractors typically pay farmers in cash or oil, or offer a split.
The hemp harvesting process is complicated and labor-intensive, which was a surprise to many novice farmers.
Harvesting the plants too late can cause the levels of THC to rise above .3 percent, making the hemp technically illegally grown marijuana -- and most state departments of agriculture will destroy it.
"Farmers are calling about their labor expectations, saying they had no idea it was going to take this much work," said Nick Brubaker, owner of Denver-based Canna Brothers Distribution. The company's employees shuck the plants in their Denver warehouse to trim the CBD-rich flowers.
"There seems to be an underestimation of what it takes to get to that finished product," Brubaker said. "Maybe the farmers grew corn and had a sales avenue for that. Now they're looking for labs."
Drying plants take up a lot of room -- about 38,000 cubic feet for an acre of hemp. Plants must be kept in a climate-controlled space for weeks -- or mechanically dried with blowers or a nitrogen infusion process.
CBD oil glut
A lack of extractors has been called the "bottleneck" of the hemp industry, but other economic forces also are at work, said Chris Fontes, founder and CEO of Oregon-based Hemp Exchange, an online buying and selling platform.
A glut of CBD oil exists in the market, which is pushing prices down, Fontes said.
Since May, the price of isolate, a pure CBD derivative substance, fell by half from around $6,200 per kilogram to around $3,100 per kilogram in Colorado, according to PanXchange, a hemp pricing service.
CBD oil started to accumulate on the market when online CBD sales ground to a halt this spring after credit card processing companies stopped working with CBD sellers. Most CBD sales had been online, Fontes said.
Tennessee Homegrown's Jarboe confirmed that online finance service PayPal stopped transactions for his CBD products and even froze his accounts for months.
Banking uncertainty is dampening financial transactions for both THC-containing marijuana and hemp.
However, the U.S. House of Representatives recently passed the SAFE banking bill, which may standardize banking for all cannabis products. The bill has been introduced in the U.S. Senate.
The second cause of surplus CBD oil is the slow movement of the Food and Drug Administration toward approving it as a dietary supplement, Fontes said.
The FDA still says that CBD is a prohibited substance in food for humans and animals, even though in some states, such as Colorado, CBD is added to everything from coffee to kombucha to ice cream and baked into pet treats.
The agency is working to assess health risks for CBD and has issued warning letters for companies that have made over-the-top health claims that CBD can cure Alzheimer's disease, Parkinson's disease and cancer.
"Until the FDA has clarified the rules, big players who want to get into CBD are waiting on the sidelines," Fonte said.
He believes both problems are temporary and that the market for CBD oil and other products will bounce back.
The price of consumer CBD products has remained stable for the past two years, he said.
Extractors expand, contract
About 2,900 permits for extractor companies have been issued in the United States, Steenstra of Vote Hemp said, and those don't even count the extractors in states such as Colorado that don't require a license.
But with all farmers all trying to sell their crop at the same time, extractors can run out of cash to buy it, and they may make low-ball offers, driving the price even lower. Some extractors have gone broke after investing in expensive equipment and not being able to sell their oil fast enough, Tennessee Naturals' Jarboe said.
Farmers who hold onto their dried product will command a bigger sale price later in the season when processors have line time, said Kris Schneider, operations manager at Strasburg, Colo.-based Biomass Isolations LLC, an extractor company.
The best hemp farmers appear to be those who formerly grew cannabis, industry insiders agree.
"The people who have more cannabis experience make nicer crops," Schneider said. "They have a handle on maintaining higher yields."
But the formerly illegal cannabis culture also can be a downside for farmers who want to honestly sell their products, Fontes said.
"There's dishonesty in this business, and it comes from a difficult crop with farmers who know nothing about it," as well as "everyone who ever sold weed in high school seeing a cash grab opportunity," Fontes said.
Younger farmers drawn in
Even with the ever-present risks of agriculture, large and small farms still are betting on CBD and hemp.
Virginia farmer Brock Fleeman, 37, owner of Mountain Valley Cultivations, said he became interested in CBD because his work as a diesel engine mechanic caused joint pain, which the substance eased. First Fleeman, a father of four, applied for an extractor license, but after opening a small lab, he said, he realized the high value of the flower material. He now runs a small greenhouse.
In northern New Mexico, Denver-based GoGenics LLC is growing more than 100 acres of organic CBD hemp and hiring crews to bring in the harvest in stages, said Mary Smith, the company's president.
"We have 10 to 30 people in the fields, and we're testing several types of harvest, hand-bucking some and harvesting some with a [fixed location] combine," she said. The company sells Focl CBD dietary supplements and is rolling out a skincare line.
While some farmers have been frustrated by the complexities of growing an essentially brand-new crop, hemp enthusiasts say the crop is creating one positive change: As the average age of the U.S. farmer approaches 60, hemp appears to be a path to draw younger farmers into agriculture, possibly helping to solve a succession problem.
"There are young people who love the plant and they may expand into kale here or elderberry there, and that could lead them into sustainable farming," hemp farmer Jarboe said.
Oregon's Lauerman said he also was encouraged by the enthusiasm of younger hemp farmers in his state.
"Young people are really into healing the earth. That's why they like this plant," he said. "When everything goes south, people are going to need to eat -- and farmers are going to be there to feed them."