Struggling Texas Farmers Thought Hemp Might Save Them. The Crop Hasn’t Yet Delivered. – Texas Monthly

Before the first seed was tucked into Texas soil, farmers and investors eager for a different kind of green revolution flocked to Dallas in January for the Texas Hemp Convention. It was the state’s largest such gathering yet, the culmination of a year’s worth of buzz following the Texas Legislature’s 2019 legalization of industrial hemp. Part of the cannabis family, the plant, unlike its relative marijuana, contains only trace amounts of THC, the psychoactive compound. But it is rich in CBD, a chemical component used as an ingredient in FDA-approved medication and in home remedies to treat anxiety, pain, insomnia, and even seizures.

Among the 15,000 attendees was fourth-generation Matagorda County farmer Troy Owen, who hoped to nab his share of a burgeoning industry projected to be worth more than $20 billion nationally midway through this decade. It wasn’t his first hemp rodeo: Owen and his partners had travelled to another expo in Nashville, spent a week in Kentucky at a Farm Journal program, and another visiting seed dealers in Colorado. In Dallas, however, Owen noticed something different about the attendees: half weren’t farmers, but simply curious observers there to witness the beginning of cannabis cultivation in the state. Many traveled from afar to see what the buzz was about, browsing aisles of CBD gummies and sniffing smokable hemp flower. But from those with experience, Owen received words of caution. In a panel on the unexpected challenges of growing hemp, farmers warned of its sensitivity to the elements; they said growers wouldn’t make easy money, particularly not in Texas, far south of where the plant typically thrives.

Owen saw what they were talking about after he became one of the first Texans to receive a hemp grower’s license from the state at the end of April and attempted to grow five hundred acres of the crop. In early May, a four-inch rain drowned his first batch of seedlings. He reworked the ground and replanted in June, but those seedlings dried out in the South Texas heat. The two failures left him with six-figure losses. “It was about as big of a mess as you could ever imagine,” he told me.

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Owen is not alone. According to Texas Department of Agriculture commissioner Sid Miller, five thousand acres of Texas soil were licensed for hemp this year. Many farmers are betting that CBD products will save Texas agriculture from the ruinous effects on commodity prices of the ongoing trade war with China. But experts say very few acres have yet yielded a profitable crop. A lack of research, an oversaturated market, and the lack of available infrastructure to process raw hemp are preventing widespread harvesting. After years of seeing hemp hyped as a lucrative alternative to cotton, corn, and milo, skeptics now question whether it can get off the ground in Texas.

When a bill to legalize industrial hemp farming first came up in the Legislature in April 2019, it enjoyed near total support. A hearing in the House Agriculture and Livestock Committee drew an unusually large turnout, and everyone who spoke—from veterans seeking pain relief to farmers and lawyers—did so in support of the bill. Industry executives reported dollar yields per acre ten times higher than corn, and the bill’s sponsor, Representative Tracy King of Batesville, south of San Antonio, assured other members of the chamber that industrial hemp was “a drought-resistant cash crop.” The bill passed the state House and Senate unanimously. (The law also effectively decriminalized low-level pot possession because it’s difficult and expensive to discern between legal and illegal quantities of THC in cannabis plants.)

But just a year later, expectations have dampened. Calvin Trostle, Texas A&M AgriLife’s hemp specialist, estimated that of the thousand farmers who’ve been licensed to grow it since the bill’s passage, only a handful have planted more than one or two acres. Researchers in Texas haven’t done extensive research about how the plant grows here. The risks are too great for many farmers as crop insurance isn’t yet approved for hemp and won’t be until insurers can gauge appropriate rates based on the plant’s success or failure.

Trostle estimates that farmers on about a third of Texas’s hemp acreage are delaying planting until the weather cools down. Although Miller said his department met its March target date for establishing the licensing process, many farmers had hoped it would be completed earlier in the season, before the heat picked up.

As farmers have waited to plant, they’ve seen the commodity value tank. Last summer, the average price—calculated on the assumption that each pound of hemp yields 1 percent of its weight in CBD—was about $4 a pound. Most farmers in other states were able to make thousands of dollars per acre at this rate and reports circulated of a Kentucky hemp manufacturer reaping a whopping $40,000 an acre in gross income.

Although hemp’s current market rate is difficult to discern because there is no readily available public data on prices, Justin Benavidez, Texas A&M AgriLife economist, said his best estimate now is about 77 cents per pound—a price at which farmers “almost certainly lose money.” Hemp growers across the country are learning that there’s a simple problem of supply and demand: it doesn’t take much hemp to produce a lot of CBD product. Twenty to 25 acres of hemp can produce enough CBD to fill 100,000 one-ounce bottles, according to Trostle.

Other states beat Texas to market: the 2014 federal farm bill allowed industrial hemp to be grown for research purposes in a handful of states that opted in, and the 2018 version of the bill legalized industrial hemp for commercial purposes in all states that chose to allow it. Currently, industrial hemp is legal to grow in 46 states. By the time the Texas Legislature permitted the farming of hemp, Colorado already had 31,670 acres dedicated to the crop and Kentucky 60,000. Thousands of pounds of hemp are stored in warehouses in those states.

Unlike earlier adopters, Texas also lacks the infrastructure to process the harvested crop into consumable materials including oils, gummies, and bud, where most of the hemp market is focused. Trostle believes other hemp products that can be used in construction—including textiles and paper—might represent the bigger market in the state, but he hasn’t heard of a single processing plant in Texas capable of making those products.

To establish processing infrastructure, investors need large facilities and expensive equipment. Benavidez said this creates a chicken-or-egg problem between processors and farmers, neither of whom want to pull the trigger on capital investment without the other already established. Texas currently has 33 processors licensed through his department, according to Miller, but to process hemp consumables, facilities also need a license from the Department of State Health Services. That agency only made the application available in late July, a delay that farmers speculate was because of the pandemic.

At least one processor, Bayou City Hemp in Houston, is expecting to be fully operational this year, and cofounder Ben Meggs said it has letters of intent from Texas farmers who want it to process about 250 acres of the crop for this season. A few other licensed farmers, including a group outside Lubbock and another in Tyler, have planted substantial acreage in hemp and hold contracts to sell it to out-of-state companies. But, according to Nathaniel Czerwinski, a farmer who has planted three acres of hemp between plots in Cleveland, Gonzales, and Leander, many growers don’t have buyers lined up. Although he plans to sell his crop in the form of hemp flower to local smoke shops and CBD vendors, he fears many of his fellow growers won’t have a market at all.

Miller, a former rodeo cowboy, said he uses CBD oil for pain relief. He maintained that the state’s program has been successful and that CBD consumers will provide a base for a growing  market in Texas. “This is not the peak,” he told me, “this is the baby crawling.”

Benavidez is less bullish. He cited a history of failed farm fads that emerge after prices crater for traditional crops and livestock. He pointed to the emu and ostrich craze in the eighties and nineties, when some farmers bought into marketing claims that meat from the exotic birds could compete with pork, beef, and chicken, only to discover that demand never developed.

But he added that he hopes hemp “establishes and it becomes an alternative. More options is just a better situation for our farmers.”

For now, Texas farmers desperate for a new crop will have to wait for higher prices on hemp. “Our margins and prices are in the tank and so’s farming,” said Owen. “We’ve got to chase the markets, so we went out on a limb and tried it. We didn’t win, but that ain’t saying we ain’t gonna try again next year.”

Source: https://www.texasmonthly.com/news/hemp-farming-texas-cbd/