HemperFi

Had someone asked me earlier this year who would be the first state to put an industrial hemp licensing regime for farmers, North Dakota would not have been at the top of my list. For those not familiar with the American federal system, the fact that North Dakota has surged forward with state-based licensing should be viewed as a not-so-subtle challenge to the U.S. Code. Specifically, North Dakota legislators and the Agricultural Commissioner, Roger Johnson, are challenging the applicability of Title 21 USC Section 812 that makes marijuana illegal to industrial hemp (for more on this see this post in HemperFi). You can read the official press release here.

The missing ingredient in all this is Congress. At this point, Congress needs to step in and help draw a legally recognized distinction between industrial hemp and marijuana. I'm guessing, passing a quick and dirty statement published in the Federal Register (that clarifies the U.S. Code) would suffice...there's probably no need to pass a bill.

Once that occurs, the U.S. Drug Enforcement Agency (DEA) would no longer have authority to block permit issuance by the states, given that industrial hemp would no longer be defined as a "drug".

I say, hats off to North Dakota! Agricultural Commissioner Roger Johnson, along with the state legislature, have laid down an important milestone for industrial hemp cultivation in the United States.

Posted by M at 07:12 AM | Permalink

Ms. Woertz:

Congratulations on your new post as CEO of Archer Daniels Midland. It's a notable switch for ADM to bring on a female from the Oil & Gas industry, and I was pleased to hear the news that ADM is serious about becoming a leader in the carbohydrate economy.

That said, HemperFi has not exactly praised ADM in previous posts. Given ADM's unmitigated pursuit for profit maximization with disregard towards the small-scale famer, it's unlikely that favorable entries will suddenly appear.

However, I'm hopeful that ADM sits at a historic crossroads. Here's a wonderful opportunity to fix a less-than-perfect (and I'm being gracious here) company history. Your noted advocacy against MTBE in the 1990s and your clear commitment to biofuels leads me to believe that perhaps we can look forward to more grounded, fairer, better governed, ADM.

And lastly, a favor. We need your help in the misguided, non-fact-based, anti industrial hemp campaign the current administration has brought to bear on the American public. It's not right for farmers and other would-be entrepreneurs, not to mention the environment and the public.

Thank You,
HemperFi

Posted by M at 12:00 AM | Permalink

The Manitoba Co-Operator has declared industrial hemp (seed) to have "a better profit outlook than any other crop in 2006." With the breakeven yield for hemp seed at 388 pounds per acre, farmers feel there is plenty of risk buffer, given average Manitoba harvest yields of over 500 pounds per acre. Coupled with the fact that many of region's staple crops are projected to "under-yield" in 2006, this could be industrial hemp's biggest season ever.

Manitoba has been repeatedly cited as a good example of how government and farmers can cooperate to ensure effect market outlets for farmers. Multiple processing options and plenty of contracted acreage, practically ensures an economically viable seaons for farmers. Currently, Canadian authorities estimate some 30,000 acres of hemp will be planted this season.

The article points out that broader acceptance of hemp-based products in the United States, coupled with the DEA's irrational reluctance to issue cultivation permits, has helped restart Canada's industrial hemp industry.

Posted by M at 12:00 AM | Permalink

Kenaf, like flax and industrial hemp is a fibrous crop particularly suited for paper-making. Botanically related to cotton and okra, Kenaf grows in Southern states such as Alabama, Florida and Texas where the long growing season, with plenty of rain, helps Kenaf producers obtain maximum yields.

In the 1950s, the Department of Agriculture undertook a study of more than 500 plants to determine the most-promising non-wood plant for use in paper (including printed money). Kenaf eeked out a win in that study. Much like industrial hemp, Kenaf bast and core fibres can also be used in cardboard and other paper products. However, Kenaf enjoys the benefit that most paper mill equipment does not need to be modified. That alone makes it an interesting alternative to wood pulp-based newspaper for mills. Per the University of Wisconsin-Extension:

newspapers made from kenaf pulp have been shown to be brighter and better looking, with better ink laydown, reduced ruboff, richer color photo reproduction and good print contrast. Quality analyses showed kenaf newsprint to have superior tear, tensile and burst ratings.

Like so many other non-wood fibre crops, Kenaf's success is deeply lilnked with local processing options for farmers. Transportation costs of getting the fibre to a processing facility determine the profitability of this crop. However, Kenaf "...plants provide about three-five times more fiber per harvest than southern pine trees, which can take 7-40 years before they can be harvested." At least one paper company --Vision Paper-- has fully embraced Kenaf...their "About" page is worth checking out>. Among other things, it states: "We use the kenaf as our raw material instead of trees. We manufacture pulp and paper, without using any chlorine compounds, and we sell the paper to printers, companies, and organizations nationally."

Posted by M at 03:00 AM | Permalink

Every industrial hemp discussion touches on ethanol. Every ethanol discussion touches on processing/refining capacity. Unfortunately, not every processing/refining discussion touches on farmer-owned facilities. The fact is that famers have been getting screwed out of the value--added processing that occurs after harvest. Capital intensive processing and refining facilities attract big business' deep pockets, and that means profit maximization. As HemperFi has already reported, farmer-owned processing plants are good, when executed properly, but as per recent experience in Manitoba, such plans can also lead astray.

Although it's a lengthy read, I've recently stumbled upon David Morris' excellent article Ownership Matters: Three Steps to Ensure a Biofuels Industry That Truly Benefits Rural America. In Ownership Matters, Morris lays out three governing principles to ensure an ethanol economy with the rural farmer as an active participant. Quoted directly from his work, the three principles are:

-- First, create an aggressive and broad national and even international educational effort focused on the importance of and benefits of farmer and local ownership.
-- Second, establish mechanisms to allow farmer-owners of ethanol facilities to get their equity out of the biorefinery while enabling continued local ownership.
--Third, change the federal ethanol incentive into a producer payment that favors local and farmer ownership.

According to Morris, John F. Kennedy once described Farming as " the only business where you buy everything retail and sell everything wholesale." Profitable rural farming hinges on equitable participation in profit margins enjoyed at the retail-end of agricultural output, not at the wholesale end.

As Morris states in The Carbohydrate Economy, Biofuels and the Net Energy Debate:

For farmers and rural areas to truly reap the rewards of a carbohydrate economy they must gain some of the value created by processing the agricultural raw materials into finished products. That can occur only if the farmer and rural residents own a share in the processing or manufacturing facility.

Posted by M at 10:31 AM | Permalink

I believe that the mass cultivation of energy crops will eventually precipitate to the forefront of Western politics. In many ways, oil and gas dependence has characterized nation states' foreign policy since the First World War. The supply-side realities coupled with geopolitical instability and ever rising demand all suggest that we will see oil at 100 dollar-per-barrel mark within 18 months.

It's truly mind-boggling why our society has not poured more intellectual might into creating a carbohydrate economy, supplied primarily by organic feedstock (including industrial hemp). "Western" society's future is inextricably linked with oil dependence and my hope is that higher oil prices will eventually serve as a energy-awakening "tipping point". It's true that current processing technology is still not at a level that makes industrial hemp based fuel, or other cellulitic-based fuels for that matter, an economic slam dunk. But for goodness sakes...we've grown ears on the back of fluorescent mice and figured out how to put rovers on Mars. With a little volition, we will figure this out as well.

Imagine an economy where cellulitic biofuel has 5% of the fuel market. The dampening effect of such a demand-led curve shift would ease oil reservoir supply-driven fears and stabilize prices. The world is depleting oil reseirvoirs at a rate of 5 to 10 percent per annum...having biofuel as a mitigating and stabilizing alternative would have profound implications for oil prices...and ultimately foreign policy.

Posted by M at 09:20 AM | Permalink

The new Tasmanian Minister for Primary Industries, David Llewelly, indicated yesterday (April 13th) that he will work to change Tasmanian legislation to allow for hemp farming. According to (Australia's) ABC news, Llewelly is quoted as saying "I was not aware the hurdles in legislation here in Tasmania are now making it a little more difficult," he said. "We'll address that and sort it out." Sounds promising.

It turns out that the Deparment of Primary Industries has a well-informed horticulturalist on staff by the name Peter Simmul. Simmul has authored a number of industrial hemp articles/studies, including this 2003 informative study. In it, Simmul concludes:

Hemp fibre could be used as a sustainable substitute for imported wood kraft fibre for papermaking. With its food value yet to be fully realised, it could prove to be an ideal supplement for animals and humans. The oil is reported to have many uses with a favoured one being for use in skin conditioners. Until the scale of production increases significantly, and efficient machinery is employed in value adding systems, the economics of industrial hemp production and marketing in Tasmania will remain something of an unknown.

Two days ago, Simmul was quoted in ABC Rural news supporting hemp:

"I think it’s just one of those things where you’ve got a lot of competition on fibres, a lot of competition on food oils, and I think it's got to establish itself in the market place and be seen to be a worthy opponent in the competition field....There’s always a perception issue with these kind of things, some people would interpret it as being an undesirable thing because of the illicit components of it. But these crops are just so safe… there is no illicit component in them. The greater issue here is marketing and getting the confidence of people who are prepared to invest in it."

It's always refreshing to hear folks in government talking sense.

Posted by M at 09:30 PM | Permalink

I've found a great article by Don Lotter posted on the New Farm website. In two parts, the article covers the virtues of hemp and (more interestingly) reports on how two farmers are having a go at industrial hemp farming in Canada. A good reading for anyone considering hemp cultivation.

According to the article: "Hempseed yields in a good year are 1,500 lbs/acre for conventional and half of that from organic fields. Paul considers the 50% lower yields of organic hempseed to be attributable to inability to get enough nutrition to the crop, especially nitrogen."

The article also confirms what we've already reported on HemperFi...that growing hemp as a fiber crop (as opposed to seed) is risky business. The bailing, transporation and processing costs associated with hemp fiber makes it uneconomical in many geographies.

Posted by M at 12:00 AM | Permalink

Flax, much like hemp, has a myriad of commercial uses, many of which overlap with industrial hemp as a fibre and food crop (i.e., seed). It turns out that flax has had marginal success in the United States. Flaxseed prices peaked in 2004-2005 at nearly 700 Canadian Dollars per ton, but are projected to drop to 325 Canadian Dollars per ton in 2006.

For anyone seriously considering flax (or hemp) as a rotational crop, the Canadian government has published a useful guide called Flaxseed: Situation and Outlook. The guide states: "The US is forecast to produce 0.43 Mt of flaxseed for 2005-2006, a sharp rise from the 0.27 Mt per year produced for the previous 3 years. The increase is due to a rise in seeded area resulting from the unusually high flaxseed prices of 2004-2005." U.S. farmers, not wanting to miss the pricing peak, are ramping up production for a record U.S. 2006 harvest. Free market economics dictate that, barring any drought, frost or other externalities, the markets will shoulder a much lower price in light of greater supply.

Ok, but what yield rates does one need to sustain to make money from flax? Canadian farmers need about 32 bushels per acre yield rates if they are to cover their costs. However, in 2000 Canadian farmers only managed to harvest approximately 20 bushels per acre.

That said, it's somewhat puzziling why Canadian farming acreage dedicated to flax has been on the rise. The short answer seems to be that farmers are willing to gamble that prices will rise again, and therefore include flax as a rotational crop.

Where processing facilities exist, especially processing facilities that target niche commercial segments (e.g. organic flaxseed oil), things seem to be going well. This is perhaps the biggest takeaway for soon-to-be industrial hemp farmers in the U.S.: entrepreneurs must link with co-operatives and local governments to ensure success. I'll have some examples shortly on HemperFi.

Posted by M at 02:28 AM | Permalink | Comments (5)

Flax as a rotational crop in North America is on the upswing. It can be grown for both fibre and seed, and farming implements required to harvest the crop are readily available and well understood by North American farmers. Much like industrial hemp, flax's versatility make for countless commercial possibilities, including: clothing, food (as an oil), feedstock, and paper. Somwhat delicate, prone to lodging and physically short, harvesting and processing flax has it's share of complications.

Canada leads global flax production while India, China, the Commonwealth of Independent States, and Argentina are notable players in the international flax trade.

In 2001, the United States produced 11.5 million bushels of flax on 585,000 acres. North Dakota is the biggest U.S. producer with 327,000 acres of flax that yielded 6.8 million bushels annually, while in 2000 Minnesota had about 10,000 acres of flaxseed, yielding 198,000 bushels. The United States imports about 1.9 million and exports about 2.4 million bushels of flax annually. (Source)

Like hemp, flax is touted as an excellent rotational crop with similar commercial uses. Given the similarities, the question is why American farmers have not embraced flax more widely. Is the market limited?

More flax discussion to come on HemperFi...in the meantime, here are some useful links (and many more here).

- Fiber Flax Farming Practices in the Southeastern United States
- Flax: Alternative Field Crops Manual. Prepared by the ­University of Wisconsin and University of Minnesota
- Flax Crop Production - by the Flax Council of Canada

Posted by M at 12:30 PM | Permalink

I've been thinking about the market mechanisms needed to ensure a thriving North American industrial hemp economy: processing techniques, cultivar imports and certification, processing and harvesting machinery and co-operatives.

Farming cooperatives have a 200 year tradition in the United States...A cooperative is defined as a business with two unique characteristics. First, it's members own the business. Second, the earnings of the cooperative are paid back to the famers (user-owners).

In many ways, farming cooperatives are similar to cartels...in fact, the U.S. anti-trust code has a farming cooperative exemption. This means, that farmers can legally price-fix, collaborate on go-to-market strategies, legally influence market dynamics through supply-managed strategies, and buy collectively for better volume discounts on seed, farming implements, etc.

In short, cooperatives are generally a good deal for farmers. Particularly for inchoate markets like industrial hemp, where collective thinking and strategies can help mitigate market risks and provide the political clout to spur local government agencies to help.

One model, and perhaps the archetype for soon-to-be hemp growers in the United States, is the Kentucky Hemp Grower's Association. All aspects of hemp cultivation are handled through the co-op...many of these practices are based on time tested tobacco cooperatives.

Listed below are the Kentucky Hemp Grower's Association "rules of the road". These are taken directly from David P. West's Industrial Hemp Farming: History and Practice available here.

- Farmers plant seed provided by the co-op; this provides for control of genotype.
- The co-op manages issues related to hemp variety evaluation and certification in compliance with legalities. Just as the cannery specifies the pea variety to the farmer, so does the hemp co-op allot acreages for specific hemps.
- The co-op forward contracts with fiber end-users for the needed production. Acreages are alloted accordingly among co-op member farmers.
- Marketing of the fiber is handled through the co-op.
- The crop can only be grown under contract to the co-op. It cannot be grown "on spec."
- Supply/demand relationships are managed to maintain profitability for the farmer.
- A grower must be a member of the co-op and bonded.
- Members found violating variety control regulations lose their allotment and forfeit their bond.

Posted by M at 01:28 PM | Permalink

The Industrial Hemp movement has inspired Bolivian president Evo Morales to tout the coca plant as a commercially viable industrial crop. Running under the moniker of "Coca sí, Cocaína no", Morales and supporters have undertaken a successful marketing campaign espousing the virtues of the coca plant. Much like hemp, the coca plant can be used in everyday products such as shampoo, food, and cookies.

Seen by many as a champion for the poor, Evo Morales' humble beginnings make him an ideal spokesperson for poor coca farmers. His political saavy was honed during his years as an influential union leader in Bolivia's central coca-growing region. His poplularity has extended beyod Bolivia...Morales is fast becoming a rising interntaional star. He recently met Condolezza Rice and presented her with a miniature coca-leaf guitar:

("The gift was well received. We will just have to check with our customs to see what rules apply. We certainly hope we can bring it back (to Washington)," said a senior State Department official who attended the meeting.)

It should be noted that the U.S. and other countries have contributed some 700 million dollars to combatting coca cultivation and production in the central Bolivia. Much of this money was spent on eradication and the establishment of seemingly suitable alternative crops such as pineapples. These efforts have been an total disaster for Bolivian farmers..."the development projects failed when it became apparent that the region's remoteness makes shipping pineapples and bananas too expensive, and that prices for the crops can't compete with coca" writes Der Spiegel.

The industrial hemp movement has clearly set an example for Morales, the decriminilization of coca lobby, and coca production farmers. The issue is, that unlike hemp (which is genetically and chemically different from marijuana), coca is used for both legitimate products and illegal cocaine. This could spell a disaster for the drug war, given that Bolivia could soon become a huge exporter of legally grown coca leaf. I thought the U.S. DEA had it's hands full with the industrial hemp issue, but really it's a cakewalk compared to Bolivia's coca legalization campaign.

Posted by M at 03:00 PM | Permalink

Although I've looked long and hard, it's difficult to get recent figures on industrial hemp. Thanks to someone who works with the Ontario Hemp Alliance, I've been given some guidance on recent Canadian hemp market prices.

All prices presumed to be in Canadian dollars:

Costs:
Hemp seed (for planting): High germination yield seed $2.50 per pound, Low germination yield (<50%) 75 cents per pound.

According to the Saskatchewan government site, one should expect to use 20 lbs per acre for grain production. Fibre production requires a denser seeding rate...60 lbs per acre. OMAFRA estimates that farmers will need to spend 110 dollars per acre in fertilizer. OMAFRA lists other costs associated with hemp cultivation. The numbers are a bit sobering.

Crop Prices:
Hemp grain: Low quality, 30 cents per pound; Medium quality 65 to 80 cents per pound; and Top Quality organic hemp seed sells for around 1 dollar per pound.

Evidently the market for straw is difficult to generalize, given that the logistics determine whether or not there's a local market. Processors need to be within 100 to 200 km to make hemp straw viable. OMAFRA lists prices in the range of 70-180 dollars per ton.

Notably missing are hemp fibre prices, and that's because the processing facilities do not exist (in Ontario)...yet.

Posted by M at 08:29 PM | Permalink

I've been investigating the 1999-2000 Canadian hemp processing debacle to see what lessons can be gleaned for American hemp farmers considering (an eventual) switch to industrial hemp. It would seem that some enterprising (and not entirely straightforward) individuals at Consolidated Growers & Processors, Inc. a Californian Agricultural processing company actually contributed to the hemp hype and the ensuing "Canadian hemp glut" by providing seed, contracts and emtpy promises of new processing facilities. I've done some digging around...and the blow-by-blow is very interesting...there's definitely a lesson to be learned here for farming communities considering hemp production where processing options are limited. Read on...

Continue reading "Hemp Processor to Canadian Farmers: ' Trust Us! '" »

Posted by M at 01:01 AM | Permalink

USDA Organic Hemp is here...or at least in Canada. The Organic Producers Association of Manitoba (OPAM) provides a "credible certification system" in order to "promote organic food production and consumption." Manitoba Hemp's "certification specialist" has been busy...their home page boasts eight "certs" including a the "USDA Organic" seal of approval. It turns out that OPAM is an USDA Accredited Certifying Agent (ACA) and, therefore, can bestow the seal on anyone complying with the USDA requirements. A quick glance at the USDA 'question and answers' page reveals that all "naturals" are allowed unless prohibited on the National List." And yes, I did check the National List...hemp is not on there.

Posted by M at 09:49 AM | Permalink