Join / Renew Now / MyIFB Log In

Stay Updated

CCFB News» April 2020

Hemp facing competition to be economically viable

04/05/2020 @ 8:00 am | By Kay Shipman,Farmweek

Illinois’ industrial hemp acres skyrocketed within one year, but the fledgling crop and licensed growers face challenges to achieve economic viability.


USDA Economic Research Service (ERS) recently released a nationwide study on the economic viability of U.S. hemp legalized in 47 states by December 2019.


Hemp’s long-term economic viability will hinge on competition with domestic crops for acres and with foreign hemp and hemp products for U.S. markets. Its economic viability also depends on the regulatory environment, market information and transparency.


The state point person for hemp, Jeff Cox, head of the Illinois Department of Agriculture’s (IDOA) medicinal plant bureau, does not envision hemp overtaking Illinois corn and soybeans.


“Illinois is a row crop state, and it will continue to be,” Cox said. He pointed to the jump from slightly more than 1 to 21,000 Illinois acres within a year, and added, “The interest is there. We will see hemp growing in Illinois.”


Still, farmers lack hemp-growing experience, equipment, infrastructure, markets, risk protection and research compared with corn and soybean production.


Will competition for Illinois farmland push hemp to less fertile areas and marginal conditions? Cox and Phillip Alberti, University of Illinois Extension commercial crop educator, stress that scenario would be detrimental.


Many Illinois growers grew hemp for cannabidiol (CBD) that needs fertile soil with little weed, pest and disease pressure because they currently lack pesticides and herbicides, according to Alberti. “You have to put it (hemp) on the best ground,” he said.


Given the high cost of hemp seed and inputs plus the amount of labor and storage needed, “we’re not looking at growing hundreds of (hemp) acres,” Alberti added.


Illinois fees competitive


A factor working in Illinois’ favor is the competitiveness of state fees. The USDA study reported widely varied state fees, including charges for applications, licenses, sampling and THC (tetrahydrocannabinol) testing. State fees can influence regional and end user competitiveness. Some fees “could potentially render hemp unprofitable for grain and fiber where margins are tighter,” the study stated.


Without a state lab, Illinois doesn’t charge fees for sampling or testing, relying on third parties to compete for that business, Cox explained.


“In Illinois, we are the most competitive for licenses for growers and processers,” Cox said, adding IDOA officials had studied other states’ programs. A three-year Illinois grower license on unlimited fields and acres costs $366 per year.


Compare that to Kentucky, which charges $400 per year per field on top of an application fee.

Other states’ fees range from $5 to $100 per acre, “but we (Illinois) didn’t want to get into that, so it’s a flat fee. I’m most proud of the license fee structure,” Cox said.


Hemp processing unresolved


Viability also depends upon development of a processing sector.


Currently, Illinois has a dozen CBD processors in operation, primarily in the Chicago area, according to Cox. CBD processors obtain crude oil from hemp biomass extraction.


No hemp fiber processors are operating in Illinois. However, entities have applied for licenses and “claim to be up and running in the future,” Cox said.


The USDA study projected the processing sector will develop unevenly as markets evolve. The authors cite growers’ need for current information on processor locations, capacity and prices. Using Canada’s early hemp market as an example, the study suggested production and imports of CBD hemp will outpace demand, putting downward pressure on prices.


Foreign competition likely


Illinois hemp growers can expect stiff international competition, especially if hemp for CBD or other uses proves profitable. Both Canada and Europe have established hemp infrastructure, management expertise and markets, while the U.S. lacks input standardization and market information, exacerbating risk, the study pointed out.


No U.S. federal or private hemp seed standards exist as they do for corn and soybeans, but such standards are needed for well-functioning markets, the study stated. And with hemp’s different uses, separate standards may be needed for different strains of hemp seed. Meanwhile, Canada and the European Union have lists of approved hemp cultivars.


USDA approval of state plan


In Cox’s view, the state’s biggest current challenge is developing a state program plan for USDA approval and “that will take time.” Cox has said USDA officials have answered Illinois’ questions and are willing to work with the state. Illinois hemp rules remain in place for the 2020 growing season.


Extension’s Alberti offered, ”Each state needs to find an equilibrium of what it can handle.”


On Oct. 31, USDA published interim hemp program rules that apply to growers. The public comment period closed Jan. 29. Cox said he hopes to file Illinois’ plan by late spring or early summer before an Oct. 31 approval deadline.


Compared to Illinois existing rules, USDA proposed THC sampling and testing rules are different. Another difference is a proposed federal 15-day harvest rule, requiring harvest within 15 days of THC testing.


As for hemp’s economic future, “it can be profitable,” Alberti said, “but you have to know all the ins and outs of all phases.”


Need hemp license? Get going


The Illinois Department of Agriculture (IDOA) is ready to receive online applications for industrial hemp licenses — preferably not all at once.


Jeff Cox, head of the IDOA medicinal plant bureau, recommended individuals don’t wait to apply for 2020 production licenses.


“We’re going to have a lot of applications in four to eight weeks. We’re going to get hit hard,” Cox recently told FarmWeek.Click here for an online application or renewal. The application fee is $100.

The license fee for each noncontiguous area or indoor cultivation center is $375 for one year, $700 for two years and $1,000 for three years.


Applicants need to supply GPS coordinates for the field or fields, acreage, variety and/or strain of hemp to be planted and the crop’s intended use as seed, fiber or cannabidiol.

Discover What We Do Everyday For You

Sign Up For Our Newsletter