North Carolina Farmers Embrace Hemp as the Market for Tobacco Dwindles
Big investments in hemp processing facilities is creating a reliable market for a new cash crop to replace tobacco.
Grandma and grandpa might raise an eyebrow, but a new generation of farmers in North Carolina have traded acres of tobacco for acres of the state's newest crop -- hemp.
It's actually been legal to grow hemp for research purposes in North Carolina since the passage of the Farm Bill 2014. Since then, farmers have been able to apply for a license to grow the crop under the state's Industrial Hemp Pilot Program. Flash forward to the 2018 Farm Bill, passed in December, which legalized hemp and promotes it as a viable crop.
What's that saying? Legalize it and they will come? Yeah, something like that.
With the expected growth in hemp production, a new alliance has formed that's putting North Carolina farmers at the forefront of the rapidly growing East Coast hemp industry. Root Bioscience and Greenfield Agronomics are partnering to launch the largest hemp processing, storage and extraction facility in the state.
The new Green Root Extraction Services (GRES) alliance will increase access to national markets and resources while providing a farmer-to-farmer support network currently limited in the Southeast. Additionally, the collaboration will provide regional cannabis processing companies with a reliable source for top-quality hemp flower and crude oil.
"The national hemp and CBD markets are growing rapidly with the passage of the 2018 Farm Bill, and there is significant need for a large, centralized drying, extraction, storage and sales facility for local farmers," says Garrett Perdue, CEO of Root Bioscience. "With unmatched agricultural, university and life science resources, North Carolina is poised to become the epicenter of the East Coast hemp industry. We have known the families who make up Greenfield Agronomics for decades, and this new company is the result of our deep trust and confidence in each other."
GRES currently operates a 65,000-square-foot processing plant in Windsor, N.C. The facility, in operation since North Carolina's inaugural 2017 growing season, is poised to be one of the five largest plants in the mid-Atlantic. It features streamlined processing with equipment custom-built for harvesting, drying, storage of harvested hemp flower to efficiently and effectively preserve the valuable cannabinoids and terpenes. Extraction is accomplished using a proprietary cold ethanol procedure designed to be updated as improved technology becomes available.
"As hemp growers, we built this new company to be responsive to farmers and to create a unifying standard for best practices in cultivation, genetics and extraction," said Fen Rascoe, Member Manager of Greenfield Agronomics. "Currently, most North Carolina farmers have limited access to national markets and must rely on inaccurate, inconsistent and unregulated hemp flower valuation methodologies. Green Root's philosophy of "farmers first' will aid in its commitment to see that growers be fairly compensated for their crops."
Farmers are at a disadvantage the way hemp flower is currently sold, Perdue explained. They have to send flower samples to a third party lab to test for cannabinoids. Once they have results they need to find a processor and negotiate a price per cannabinoid percentage point per pound. There are many problems with this method, Perdue said. The cannabinoids grow as crystal formulations on the hemp flower. Every time the flower is handled, crystals fall off. In transport, they settle. There are wide variants in lab testing and variability in testing equipment from lab to lab.
"Farmers have basically been held hostage by third party lab results that they don't control," says Perdue. "It's a poor, archaic way to value these transactions."
The farmer-to-farmer support network GRES toutes promises to be another differentiator in the hemp marketplace.
"When we talk about farmers helping farmers, we are talking about a holistic approach," Perdue continues. "We have three years of growing under our belts. And growing these plants in eastern North Carolina is different than growing them in western North Carolina -- which is radically different than growing in Colorado."
Another advantage is access to top markets close to home. "Instead of selling to other states, you're selling 60-90 minutes from your farm," Perdue said.
This merger will hopefully be welcome news to eastern North Carolina farmers like Taylor Carson. In 2017, Carson, who lives in the small town of Bethel, N.C., and other area farmers were invited to join a hemp co-op and participate in the North Carolina State University pilot program to grow industrial hemp. Unfortunately, the program was unable to obtain enough seed in time for the growing season.
In 2018, the focus turned to growing hemp to extract CBD oil, and Carson obtained a N.C. license to grow two acres. The acreage for hemp for oil extraction is much smaller than industrial hemp due to the manual labor required to plant and harvest the crop.
Carson has been farming row crops in eastern North Carolina for 38 years. He has primarily grown tobacco, cotton and soybeans, with the profits coming mostly from tobacco. Carson said farmers have seen the profits from row crops decline over the past five years due to the world economy and trade issues with China.
According to Statista.com, North Carolina produced more than 360,000 pounds of tobacco in 2017. That number decreased to just over 250,000 pounds in 2018. Carson predicts tobacco acreage in North Carolina this year will be even lower.
Carson and farmers like him are searching for other crops, so the timing was right for hemp to be reintroduced with the passage of the 2018 Farm Bill. More than 3,100 acres of hemp were planted in North Carolina last year, according to VoteHemp.com.
Carson said he has enjoyed learning to grow hemp. He had a good harvest in 2018, but had trouble finding a market for his crop due to the lack of infrastructure and capital from potential buyers. Hopefully, companies like GRES will alleviate those problems.
Carson plans to grow eight to 10 acres in 2019 and feels the market will be better when he is ready to sell his crop. He continues to grow his other crops, hoping trade relations and commodity prices will improve, but he is optimistic that hemp will become a major crop for North Carolina farmers in the future.
John Brecker of Altitude Investment Management, LLC, agrees that hemp is part of the future of farming. Hemp is a higher margin crop than normal food products, Brecker said, and with the increasing demand, it will be beneficial for farmers. "That's why Mitch McConnell is so passionate about the Farm Bill," Brecker said.
According to the Brightfield Group, demand for hemp CBD is expected to sharply rise with the passage of the 2018 Farm Bill, reaching $22 billion by 2022.