Business

Hemp farming arrives in Kansas with great promise, ‘but you could lose everything’

Michael Wilson and James DeWitt are no scientists — a fact belied by the white lab coats and safety goggles they wear and the ease with which they discuss plant genetics, photosynthesis and pollination.

“We’re fast learners,” Wilson said after showing off their high-tech operation set inside a nondescript Johnson County industrial park.

But the science lab vibe fits with their experimental work: The two are among the first Kansans hoping to profit off industrial hemp, a close relative of marijuana that just became legal to grow in the U.S. for the first time in decades.

Last week, Wilson and DeWitt harvested the fruits of their first crop, a modest haul grown inside a tiny warehouse in southern Olathe. But the two plan to expand rapidly to capitalize on this emerging — if unproven — market.

U.S. farmers have suffered through years of low commodity prices and international trade conflicts — financial challenges that might be fueling farmers’ increased interest in hemp. And its debut onto the domestic agricultural market comes amid an explosion in hemp-derived cannabidiol, or CBD, products and stores.

Those factors have some farmers looking to industrial hemp as their next cash crop.

More than 200 growers in Kansas will harvest hemp this year under the state’s heavily regulated inaugural research program. While it requires the creation of a research plan, the program still allows farmers to monetize their crops. And Wilson and DeWitt’s business, United American Hemp, an indoor operation conducive to a faster grow cycle than outdoor farm fields, was among the first hemp facilities in Kansas to do so, according to the state agriculture department.

Hemp can help create fabric, food and fuel, though its recent rise has been largely driven by the exploding popularity of CBD products. CBD is believed to aid with many health ailments, though scientists caution that more research is needed to investigate specific claims.

Changes in the Farm Bill opened the door to hemp farming, which had been illegal for decades in the United States. States regulate the specifics: Kansas just introduced its program, while Missouri will allow limited hemp farming for the first time in 2020.

Neither United American Hemp farmer had any experience growing plants: DeWitt previously worked at a wealth management firm and Wilson worked at luxury watch maker Niall, a local startup that went under last year.

But all are novices in this business: “Everybody’s doing it for the first time,” said DeWitt, 33.

‘You could lose everything’

While the Kansas program has prompted business startups, it’s also luring traditional crop farmers who in recent years have been ravaged by low commodity prices and international trade wars. Some farmers have reported windfalls of as much as $100,000 per acre from hemp used to produce CBD oil — unheard of figures for those who grow wheat, corn or soybeans.

Those claims raise plenty of eyebrows — and suspicion — in the industry. For now, many questions linger about the market for hemp, the equipment needed to produce and harvest it and the banking and regulatory infrastructure needed to support its widespread acceptance.

“This developing industry has a great opportunity, but to be truthful has much uncertainty and risk for farmers,” U.S. Sen. Pat Roberts, R-Kansas, said last week during an agriculture committee hearing on hemp farming. “It’s not often that almost an entirely new crop with this level of interest and market potential comes along.”

DeWitt and Wilson sensed an opportunity with hemp that may eventually expand into marijuana, if Kansas approves a medical marijuana program. For now, they’re looking to benefit from the emerging hemp market by cultivating hemp seeds to be sold to other growers.

Nationally, CBD sales are expected to exceed $20 billion by 2024, according to BDS Analytics and Arcview Market Research.

Wilson and DeWitt expect to harvest between 2,000 and 3,000 seeds from each hemp plant. And they figure they can get about a buck for each seed they sell.

“So you can quickly do the math,” said Wilson, 35.

They expected their first harvest to produce some 19,000 seeds — covering about one-fifth of their $100,000 startup costs. But they’re just getting started. The pair plan to harvest about every 12 weeks. And a planned expansion into a 10,000-square-foot facility will multiply their current footprint tenfold.

But for all their enthusiasm, the pair acknowledge that the industry remains fragile without the built-in market that exists for commodities like corn and soybeans.

“It can be lucrative, but you also have to find somebody to buy it,” Wilson said.

Farmers face other risks: the cost of seeds have soared, making planting an expensive endeavor.

Hemp derives from the same cannabis species as marijuana. But it contains only trace amounts of tetrahydrocannabinol, or THC. But if a crop runs hot — that is, the THC level surpasses the legal limit — the state can force growers to destroy the entire crop.

That’s why Jason Griffin has worked to caution farmers about the plant.

“I describe myself as the wet blanket,” he said. “People are talking about these outrageous numbers. Then I step up and say, ‘yes, these numbers are outrageous, but you could lose everything.’”

The Director of Kansas State University’s John C. Pair Horticulture Center, Griffin is overseeing several hemp test plots across the state.

Kansans see the hemp plant growing naturally in ditches across the state and assume it must be an easy-to-grow crop, he said. But a few days of heavy rain completely washed out K-State hemp crops in Wichita and Manhattan earlier this year — an outcome that could have proven disastrous for a farmer who had invested tens of thousands of dollars

“There are some real challenges out there,” he said. “What I advise people is not to invest a dollar more than they’re willing to lose.”

‘We’re trying to raise a pot of gold’

Agriculture has always been a roll of the dice.

Farmers invest up-front in seed and chemicals but have no control over factors like weather, trade conflicts and market prices.

But sixth generation Eudora farmer Bobby Gabriel Jr. says hemp is different.

He spent $200,000 to plant hemp seeds in an 80-acre plot — the largest volume allowed under the Kansas research program — in DeSoto.

“It’s a huge roll of the dice,” he said. “It’s like instead of making a small bet you put it all on the table.”

Gabriel, his father and brother farm about 6,000 acres of corn and soybeans in northeast Kansas. He said most farmers can’t float the kind of cash needed to get into hemp. That’s why he relied on a private investor to help back his hemp crop.

If it’s successful, he expects to earn between $5,000 and $20,000 per acre upon harvest. For comparison, he said he earns between $500 and $1,000 per acre on corn in a good year — and he hasn’t had one of those for a while.

Unlike with his other crops, he will have to hire a custom harvester to bring in his hemp crop. For now, the leafy green plants stand about eight inches tall. He thinks they’ll hit four or five feet by harvest time in September.

“They’re reaching for the sky now,” he said.

Gabriel said plenty of farmers he knows are interested in hemp. But many can’t get over its association with marijuana.

That doesn’t bother him, though.

Borrowing a line from his investor, he puts it this way: “We’re not raising pot. We’re trying to raise a pot of gold.”

Hemp’s possibilities are ‘endless’

So far, 42 states have approved industrial hemp programs, according to the National Hemp Association.

Geoffrey Whaling, chairman of the group, expects all states will soon get on board.

While most of the attention has centered on CBD production, Whaling said the plant has numerous applications. It’s used to make rope, fuel, socks and shower curtains. The plant is as strong as steel, he says, and can carry an electric current. Some have already constructed buildings out of hemp.

“It’s just endless,” he said. “If you look at the world around us, most of it — aside from windows — can be produced by hemp. We just don’t have the equipment to do it.”

Whaling believes cultural stigmas about marijuana have slowed down the United States’ adoption of such products.

“I would hope that as we continue to educate people that we will encourage them and get them more comfortable with adding the word cannabis back into their vocabulary,” he said. “Hemp is cannabis. Marijuana is cannabis. But marijuana is not hemp and hemp is not marijuana.”

But for now, the law leaves plenty of gray area.

For instance, the Food and Drug Administration has not approved the use of ingestible CBD products. But it’s so far limited enforcement efforts to those products that make egregious claims about health benefits, like promises of treating cancer, said Katie Gates Calderon, an attorney in Shook, Hardy & Bacon’s cannabis practice group.

“They’re not saying yes it’s fine, but they’re also not saying we prohibit it, “ she said. “There’s a lot of shades of gray. But that’s what makes the expansion of the industry — not just the growth of it, but the pace of it — so interesting.”

As many consumer goods companies wait for more clarity, CBD providers have forged ahead. Locally based CBD American Shaman, the nation’s largest chain of CBD stores, has 40 local stores here.

“Just because it is risky doesn’t mean people aren’t going to get into it,” Gates Calderon said.

Can hemp thrive in Kansas soil?

The Kansas Department of Agriculture has tracked about 1,200 acres approved for hemp farming this year, a relative drop in the state’s sea of 47 million tillable acres.

About 90 percent of the hemp acreage is dedicated to CBD production. And most of the state’s 207 growers are doing so outdoors, though a few are operating indoors or in greenhouses, said Braden Hoch, the state’s industrial hemp specialist.

The state has also issued licenses to 20 distributors, 34 processors and nine state educational institutions this year.

In Southeastern states like Kentucky and Tennessee, farmers have transitioned old tobacco fields to hemp production. Those plants are similar, Hoch said, but Kansas was never a big tobacco producer.

So experts don’t know how the crop will perform here, what varieties will thrive or the best methods of growing it.

“That’s why we’re operating in the research program,” Hoch said, “so large amounts of information can be generated in regards to what does well and what doesn’t do well.”

Ryan Flickner, senior director of advocacy at the Kansas Farm Bureau, worries that hemp may be just another fad to hit agricultural circles.

“I vividly remember the alpaca, llama and emu fad from the 2000s,” he said. “That was going to be the wave.”

But as many people jumped on board, supply quickly outpaced demand.

Even if hemp grows into a more reliable revenue stream, Flickner believes it will remain a niche product.

“The folks that are even thinking about growing 500 acres let alone 5,000 acres of industrial hemp, I think they’re putting their hopes and dreams out there,” he said.

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Kevin Hardy covers business for The Kansas City Star. He previously covered business and politics at The Des Moines Register. He also has worked at newspapers in Kansas and Tennessee. He is a graduate of the University of Kansas
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