Hemp Train Equals Potential Capital Gain?

Thinking of diversifying your farm by adding some hemp acres? 4 things you’ll want to consider before getting started.

The concept of hemp cultivation is hot, particularly for CBD production – hopefully your hemp field isn’t hot (i.e. spiked THC levels), otherwise you’ll be facing a stern talking to from regulatory and law enforcement agencies.

When a crop is getting this much attention, it’s tempting to want to get some skin in the game yourself. For corn/soy/wheat growers, this can be particularly enticing, given the pricing woes and historical weather conditions many of us have faced this year.

Here at Granular, our mission is to use technology to help farmers run stronger businesses and steward the land for generations to come. As a sponsor of the National Hemp Association, we’ve talked with all types of hemp producers, from growers new to agriculture, to established, professional farms looking to diversify a bit in their crop rotation. To better serve folks fitting into the latter bucket, we sat down with Granular customer Brandon Hunt, of Hunt Farms in Herndon, KY and compiled a list of things to consider before diversifying into hemp production.

Labor intensiveness of the crop

Hunt Farms has been growing tobacco for generations (along with corn, soybeans, and wheat). Understanding that the workflows and management strategies are similar between tobacco and hemp production, this was a logical step to take for Hunt. In fact, the list of similarities is much longer than the list of differences. When he entered the hemp business in 2018, he already knew he’d be leveraging the same equipment, same manual labor, and same fertility package used to grow tobacco.

Hunt’s biggest piece of advice for midwest growers thinking to diversify into hemp production? Be wary of the misconception that you can produce this crop with a small set of people. Without herbicide or pesticide labeled for hemp use, weed and pest control is powered by manual labor. Hunt frequently talks with growers without tobacco producing backgrounds, and during these conversations emphasizes the importance of understanding the amount of manual labor required to raise hemp.

When you think about diversifying, understand that you’ll need to increase your labor force in order to grow this crop successfully. Many growers making this transition have hired labor by way of the H-2A program to bring temporary agricultural workers to their operations.

Know your end product and identify processors ahead of time

Next piece of advice – before you even get your crop in the ground, establish what your end product will be and what processors you’ll be working with. Are you growing for fiber production or CBD production? Who’s going to be doing your processing?

Hunt started out in 2018 raising 25 acres of hemp as a fiber crop. After getting established and growing relationships within the industry, he’s decided to pivot into CBD production.

Why is it essential to keep processing in mind? Many times hemp processors (especially across different regions) have specific techniques they’re using. For example, some require the crop to be chopped green (almost like silage), compacted, and baled as tightly compressed rolls. The processor then removes the biomass from the roll, dries and separates to get to the CBD containing flower.

On the flip side, other processors expect to receive bulk bags containing only the separated, dried flower. In these situations, it’s essential the grower have access to the equipment required to dry and separate the plant (a huge advantage of Hunt’s tobacco drying barns, and a huge expense to growers without this type of setup).

Be plugged into rules & regulations

With all of the implications surrounding the growth of the hemp industry, it’s essential to be plugged into the rules and regulations surrounding the growing hemp movements in agriculture. Does your state have a pilot program you can get involved with?

In Kentucky (where Hunt farms), the state has been an early adopter. In fact, Kentucky’s hemp pilot program is already in its fifth season. Essentially, law enforcement proceedings are routed through the program – registrants are required to submit a license application, provide GPS coordinates of fields where the crop will be grown, consent to entry by KDA and other law enforcement entities, and pass a required background check.

Have a business first mindset

Regardless of the crop being produced, successful farmers (like Hunt) understand the importance of having a business first mindset. When considering a move to diversify your farming operation, be sure you’re capable of tracking costs and revenue so you’re able to make informed, empowered decisions with your farm’s data.

A four-year Granular Business user, Hunt leverages aspects of the software’s operations tracking capabilities that he’s long used to manage his corn/soy/wheat acres to monitor his hemp production even more closely.

To get specific, Hunt grows for processors who each want the crop produced slightly different ways, requiring more or different forms of labor and growing processes. Granular Business allows Hunt to track and compare the costs associated with these production methods, determining if one is more or less profitable than another, thereby empowering his ability to be selective when working with processors.

It’s the same mindset you’d use to determine whether or not to keep or let go of the leased land you’ve got down the road. When evaluating all of the inputs, labor, and other costs associated with that piece of leased ground, is it yielding enough to justify that payment to the landlord each year?

When prompted for additional advice for growers looking to diversify into the expanding hemp market, Hunt’s got some solid advice:

  • This market is going to evolve – don’t make a ton of investment if you can’t be sure of a pretty quick return.
  • If you come upon a deal that’s too good to be true, it probably is!
  • Take steps to ensure you’re working with reputable processors and suppliers.

When thinking about diversifying your farm by adding some hemp acreage, remember to account for labor, processing, rules and regulations, and to absolutely be business minded throughout your exploration and evaluation.

Added Post Options ACF fields and adjusted single blog post layout

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Jolene Brown, CSP, CPAE, December 27, 2019