Tagged: Profit in hemp farming?
There is a lot of misleading information about how much money you’ll make from growing hemp. Market trend websites (such as Arcview) are great to get a general sense of the market, but they have a great disconnect with the actual farmers in the trenches. The information below are from our experience in farming 300 acres a year since 2016. Results may vary based on your industry connections, location, cultivation style, etc..
First, it’s important to realize there is a massive surplus of hemp biomass in the USA and prices are crashing at a ridiculously fast pace. For example, biomass prices were around $2.5-4/CBD % ($25-40/lb for 10% material). After 2019’s harvest, most labs are not paying cash for biomass, only offering farmers splits. The few cash shark buyers that are in the market are offering farmers around $0.30-0.50/CBD% ($3-5/lb for 10% material). This doesn’t seem to be a trend that’s going away anytime soon and the landscape may be the same to worse after 2020’s harvest, although prices WILL increase between May – August.
Bulk smokable CBD flower is a part of the market that’s always been all over the place. Trimmed flower was going for around $200/lb around 1/19. Prices peaked around summer (5/19-8/19) reaching around $400-700/lb. Currently, bulk shark buyers are offering $50-60/lb for trimmed flower and small spot orders are going for $150-250/lb. Hard to predict where it’ll be summer, 2020.
In addition, extracts have also crashed in price. Isolate was $20k/kg in 2018. That fell to around $6k/kg by 1/19. Currently, isolate is selling for around $1400-1700/kg. Crude prices fell from $1200-1500/L in 1/19 to $300-500/L by 1/20. THC-free distillate fell from $8k/L in 1/19 to $2000-2500/L by 1/20. See the trend? One thing to keep in mind, prices have not decreased this drastically for consumers, so someone has increased their margins along the way.
As far as farming the actual crop… Costs vary drastically depending on your cultivation method, irrigation, location, harvest techniques, etc.. The leaders of the CBD hemp industry in the next 5-10 years will be large family farms that are able to keep labor costs low by automating the whole process. i.e. direct seeding, overhead irrigation, sun-drying, automated harvesting, etc.. There will always be demand for craft growers, but most small farms won’t be able to implement a successful and sustainable business model. We grow our crop in 2 different parts of Oregon. The high desert and the Willamette valley. Both come with their unique challenges, mostly due to harvest. For our plots in the valley, we use raised beds, subsurface drip tape, and transplants. The plants for this area are mostly used for smokable flower and the rest is biomass. Our drying technique is hang drying the tops in a dark, climate-controlled environment with plenty of airflows and 25-35% humidity and using a forced-air propane belt dryer (pretty much a large pizza oven that’s 140′ long and uses 5,000 gallons of propane/week) for the biomass. After factoring in labor and harvesting costs, we have a cost of production of around $8,000 per acre for the biomass. Our yields are between 700-1500/acre. Results vary year after year depending on many factors but most important is fall-rains (which leads to mold in our region, we normally lose 20% of our crop to mold but some local farmers lost 80% this year to mold). The cost of production for smokable tops is ridiculous. Since it’s a very labor intensive process, it costs us roughly $85/lb to harvest and sort tops and an additional $25/lb to machine trim the flower. It’s also important to note we lose about 50% of the flower weight by using automated trimmed because it beats up the buds a good bit. For example, 10,000 lbs of untrimmed flower = 5,000 lbs of trimmed flower. When it comes to hand trimming, a really good worker can trim about 2-3 lbs in 10 hours. This cost normally comes out to $75-90/lb for hand trimming. We normally pull around 200-400 lbs of trimmed smokable flower/acre due to harvesting logistics. Our 20,000 sqft warehouse can only fit so much hemp at a time and with a window of 45 days max, we’re limited on how much we can actually dry.
As far our plots (biomass only) on eastern Oregon’s high desert… We utilize direct seeding, overhead irrigation, and combine harvesting. Our cost of production out there is around $4,000/acre. Yields are also a bit lower, 500-1,000 lbs/acre. We utilize the sun to dry the crop versus having to cut, transport, and run them through a dryer. The main advantage is we can handle large amounts of acreage at with low labor input due to the planting, irrigation and drying techniques.
Our plants normally test around 15% in the field (testing just tops). If we hang dry, shuck by hand, and mill the material, it averages out around 10-12% CBD. When we use the hemp dryer, is removes about 2-3% of the CBD from the material. The combine removes an additional 1-4%. The result is biomass testing between 6-8% CBD homogenized. With current market prices, that’s $3-4/lb, which is well under our cost of production.
I know the above was a lot of information, but we just wanted to share our experience with farmers thinking about levering everything they own to jump into this new “green rush”. You will not get rich quick in this industry. There is tremendous amounts of money, planning, experience and infrastructure required to even make it past harvest. Then you’ll run into the unstable part of the industry which is a lack of buyers, and dishonest labs. 7 out 10 labs in the industry are crooks and rip off farmers like they are stomping on a spider in their living room room. It’s hard to believe the horror stories we’ve heard and experienced first hand with labs across the USA. That’s the main reason we are very hesitant to do “splits” nowadays, but current market conditions may not leave us with an alternative. Historically, prices increase in the summer time so we’ll see what 2020 holds for the hemp industry in 2020.
Don’t listen to the ridiculous pipe dreams like the ones in the article below. This farmer is bat-shit crazy if he thinks he was going to receive $1m for 10 acres of hemp grown in a humid area like SC (probably using manual labor and tobacco barns). Maybe $50-150k best case scenario if he’s simply selling it to a lab. The situation can change slightly if he was vertically integrated, had in-house extraction and a strong retail outlet. But you can’t pile all of that up as part of the farm because each of those divisions are their own business.
True profit margins for farming hemp for biomass seem to be around $5-10k/acre if you’re lucky enough to make it. In most cases, it’s a $5-10k loss per acre. Remember, do your research and try to learn as much as possible. Be weary of those promising high returns so you purchase their seeds, clones, equipment, etc.. Just like the gold rush, the true people making a chunk of change aren’t the prospectors.
While this sounds like reality, this post is filled with obvious signs that this farmer is not doing as good of a job as others. I average 4,000 lbs per acre from 1900 plants per acre in the Valley in Oregon. I have seen often in my own fields, 6,000 lbs per acre. Just because one person has low yielding plants with modest results, there is likely a lack of good terpenes in the profile, or too much dirt in their biomass.
POINT IS, CANNABIS FARMERS KNOW THIS CROP, AND GROW IT WITH GREAT SUCCESS. We sold our indoor hemp for $1,100 per lb on December 15- 150 lbs of it. All of our cut flower goes for 400-250, with the latter being in bulk.
Our crude is selling for $700 per kilo, because it is far better for distillers, because we know how to extract it, and it is not filled with dirt from the fields like every other newcomer to the industry
We offer custom harvesting services to many farms across Oregon. The info above came from over 10 farms and about 1500 acres (most of which we did not grow). Congrats on your success but that’s not the reality many small newcomer farmers will face. We can’t begin to count the horror stories we heard of small farms going out of business because of industry instigators (brokers, breeders, etc.) were telling them they’d be making ridiculous profit margins shortly after harvesting their crop.
Nice to see your service here in Oregon. It is needed. We have been planting for clients here for the last 6 years, with only one real problem, and that stemmed from a seed supplier that had BS C4 seed that was a total scam, sold by Tyler Schnell in Colorado.
We have put over 1/4 million quality, low THC, high CBD plants in the ground for clients, with two having a hard time selling, due to their mediocre feeding and care of the plants while growing. One other decided it would be smart to wet bale too, and lost 70%. These folks were unfortunately guilty of making poor decisions. That makes them the fault.
Aside from that, I have seen more folks save their farms and begin new lives with this crop, but there are always a few out there that plant too much, have no harvest plans, or don’t consider real protocol when dealing with mold. I never have very much loss to that, due to proper variety selection, and harvest timing, and knowing how to properly grow in this climate. This year was a challenge for many, but I did fine. Folks I heard of had their asses handed to them, but that was more because they were unrealistic in the approach, versus the crop not being worth growing. Lots of folks wasted money on forced dryers, and sure enough, they are starting to appear here on this site for sale USED, because they are all garbage. One in Canada for 150K just appeared today. They tend to ruin the CBD content. Things will settle out, and the ones that can grow something other than animal bedding will survive, and the rest will go on to other ventures.