Organic Broadcaster

FL Morris inspects hemp plants growing at Grassroots Farm near Monroe, Wisconsin, in August 2020, a month before harvest. She markets her crop through the South Central Wisconsin Hemp Cooperative, which she heads. Photo by Rebecca Jaworski

Farmers find CBD hemp industry’s first years rocky, but hang onto hope for future

By FL Morris

Certified organic CBD hemp grows really well in our region—you could almost say it grows like a weed. Since the 2018 Federal Farm Bill allowed the production and distribution of hemp products with a limit of 0.3% THC (tetrahydrocannabinol) for the first time in more than 50 years, the marketplace has exploded, but not to the benefit of farmers.

After the farm bill was signed at the end of 2018, there was a year of absolute frenzy in Wisconsin, where I live and farm. This sudden change in federal law was accompanied by big risks taken by bold entrepreneurs, including Midwestern organic farmers. Throughout the growing season of 2019, I witnessed long-time and would-be farmers of all kinds assembling in Wisconsin and Northern Illinois by the hundreds. The atmosphere was always rich with questions, ranging from topics of hemp production, post-harvest handling, processing, products, marketing and sales, regulation, organic certification, and how the plant affects the human and animal body. The answers were less common.

Now it’s the summer of 2021 and what has unfolded in the country, specifically in the Wisconsin hemp industry, is disappointing to many small farmers and start-up businesses, but also all too predictable. Farmers are officially getting pennies on the dollar while many manufacturers, distributors, and retailers enjoy handsome profits. Sound familiar? One could say the hemp industry’s story has taken a similar path as that of the dairy industry, except that the many decades of poor policy, greedy corporate behavior, and removal of farm subsidies has been compressed into 18 months.

Despite exactly when you jumped into the hemp industry, where, and what size you are now, very few CBD producers and companies have not been affected by the sudden oversupply of raw product and drop in prices almost immediately after the rise of COVID-19. Consumers may have seen retail prices slide a bit, but prices have remained high enough for many folks to stick with their affordable and effective ibuprofen, valerian tincture, and arnica for relief from various ailments that CBD is also known to address. In short, some in the supply chain are raking in the cash, while some others (farmers) are losing money to offload a slowly degrading raw product.

“I started growing CBD hemp in 2018, the first year it was legal to do so in Wisconsin,” said Kattia Jimenez of Mount Horeb Hemp, LLC. “Growing hemp and selling it to a processor was our goal. Cut to 2021, I am now in the retail business due to oversaturation of biomass, and lack of infrastructure and FDA regulation.”

Currently, all federally legal markets are limited by the fact that CBD sits in a gray area somewhere between supplements, medicine, and food. While the USDA was quick to regulate farmers and their crops, the FDA has been turtle-slow at regulating the actual products created with CBD. We are all waiting for the FDA to wrap up its research and discussions about CBD—with hopes they deem it safe for infusion into food, beverages, and pet products.

Cooperative Model

Certified organic CBD hemp products can be sold at much more affordable prices at the same time farmers and other supply chain partners can be paid fairly. We know this because we are living the numbers at South Central Wisconsin Hemp Cooperative (“South Central Hemp”).

South Central Hemp was formed as a cooperative in Wisconsin by 5 co-founders, including me, Steve Acheson, Steph Krueger, Sam Guttierrez, and James Cassidy on Feb. 14, 2019. We could see the avalanche of out-of-state competition and poor-quality and expensive CBD products populating shelves.

My experience has shown that not unlike small-scale vegetable production, the key to a financially successful certified organic CBD hemp operation is a strong business-to-business relationship and/or strategic product development for direct sales and niche marketing.

The co-op model takes a shared need and mission and puts it into a collaborative, efficient democratic decision-making setting. In our case, co-marketing CBD hemp products under one brand offers strength in numbers and the benefits of shared resources. South Central Hemp would like nothing more than to achieve its goal of bringing more producer members into the fold.

Roadblocks

Something I wouldn’t dream of leaving out of a hemp industry update is the complicated, pricey, and downright unfair behavior of online payment processing companies (PPCs) for small and start-up CBD hemp operations. Setting up your business to sell legal CBD products online is nothing like jumping onto your farm website and adding a pre-generated piece of code and button to sell a dozen eggs or a CSA share. I’ve done that many times; it takes about 5 minutes per item. Our co-op co-founder, marketing director, and 2020 MOSES Changemaker recipient Steve Acheson could write a substantial book at this point about the saga of establishing online payment processing for the co-op. Without a lengthy explainer, allow me to list a few of the issues small CBD hemp companies face:

  • FDA regulations on CBD medical benefit claims
  • Restrictions in working directly with local banks and credit unions, website hosts, and many national PPCs
  • Minimum monthly sales numbers to qualify for credit card processing
  • Sudden and permanent “blacklisting” by PPCs for (often inadvertently) violating their terms and conditions
  • Poor customer service from hemp PPCs
  • Age 18+ sales factor
  • Inflated fees

This is the reality of an unpredictable, evolving new market previously under prohibition, and it’s part of our co-op’s DIY story to still be working on getting our products available to the online consumer a year later.

The challenges of online sales is one of the reasons Deb Tuttle of Glacial Loam Farm, LLC, in Evansville, Wisconsin, stopped growing hemp this season.

“I decided not to grow in 2021 because my current inventory is still high,” Tuttle explained. “This is due to a combination of COVID-19 and the challenges of marketing a product in a new industry, not to mention the roadblocks of CBD online sales.”

Many may also remember hearing farmers cry foul on the intense regulation of our hemp crops in the field. In terms of THC-level compliance, nearly all of the risk in production still falls on the producer. It’s important to note that, despite THC content in a hemp plant, all cannabinoids (the name for unique plant chemicals produced exclusively by the cannabis family that includes THC, CBD, and countless others) can be isolated and/or removed during processing and manufacturing steps. Wisconsin Farmers Union addressed this in its 2021 Policy.

“Wisconsin Farmers Union calls upon DATCP [the state agency tasked with regulating hemp production] to increase the allowable THC content of hemp, as tested in the farmer’s field, from 0.3% to 1.0%, with the exception of hemp destined for raw flower sales direct to the consumer. In order for hemp with 0.3%-1.0% THC content to comply with the current federal standard, THC can be removed or diluted to federal compliance levels through state-certified extraction processes,” the policy stated.

There has been some progress in THC threshold compliance within the revised USDA Hemp Final Rule. However, farmers are still taking a big risk at the mercy of nature, science, government regulation, and seed suppliers to grow this crop with under 0.3% THC content. Farmers, through their state or tribe’s Hemp Program, can now follow a federally approved remediation process on-farm with hopes to achieve a compliant THC test and avoid destroying their crop. Remediation and further testing are optional after a failed compliance test of the part of the plant with the highest THC concentration.

Wisconsin Department of Ag, Trade, and Consumer Protection (DATCP)’s hemp program guidelines now include the ability to mix the harvested components of the plant (flower tops, secondary flowers, and leaves or simply chopping the entire plant stem and all) to help lower overall THC in test results. Below is a snapshot just of the fees for testing—there are additional fees to produce hemp—from DATCP’s website:

  • Pay a $250 initial sampling fee for each lot sampled by DATCP.
  • Pay a $300 sampling fee for each remediated lot sampled by DATCP.
  • Pay a $200 retest fee for each lot where a new sample is not required.

A CBD/THC/full cannabinoid test from a professional third-party testing company is running about $50/test.

It’s worth repeating that we have a long way to go to create an equitable, reasonable, safe, and fair Midwestern and U.S. CBD hemp industry. I am optimistic, as we see more progress than setbacks in hemp-related news of the past few months, at least from a crop regulatory standpoint. I am optimistic that hard work, collaboration, and diligence will pay off. Hemp is a bridge-builder, politically and on the neighborhood level. In my world, hemp has proven to bring folks together, despite a highly competitive and volatile market and a challenging regulatory environment that lacks long-term research to guide it.

Hemp’s Unique Traits

FL Morris hangs CBD hemp to dry in her high tunnel at Grassroots Farm in southern Wisconsin. The crop, harvested in September 2020, was sold as biomass.  Photo by Rebecca Jaworski

For us, growing certified organic CBD hemp was not a marketing decision as much as a default production approach to growing any crop, and a lifestyle. Learning more about the unique traits of the CBD hemp plant further solidifies the necessity of organic production practices, as the entire cannabis family of plants are “bioremediators.” They absorb chemicals and other toxins from the soil directly into the body of the plant—which makes me wonder if three years without chemical application on land is enough to keep residues out of CBD hemp plants. In my opinion, this is an urgent question for researchers to solve.

“Consumers would benefit from more education about the importance of Certified Organic CBD Hemp production and products,” Glacial Loam Farm’s Tuttle said. “There is so much to know it can be overwhelming. However, they have the power to impact what products and practices succeed by how they spend their dollars.”

Unfortunately, as a result of the under-regulated CBD hemp products market, coupled with the general lack of enforcement dollars, many CBD companies are falsely using the term organic on product labels without certification. Organic production of CBD hemp is a consumer safety issue.

Hemp also presents an undeniable opportunity to physiologically clean up polluted soils. CBD hemp’s cousin, fiber hemp, could aid in removing chemical residues and heavy metals from fields at a large scale and be used in markets and products that do not compromise consumer safety.

Inequity

A glaring injustice of the U.S. hemp and cannabis story, be it CBD or THC, is the demographics of who is making money now in cannabis and hemp (majority white male-identified), juxtaposed with those who have been historically and disproportionately incarcerated for marijuana-related crimes (People of Color, namely male-identified). Add my voice to the choir asking that the federal prohibition of cannabis be lifted and that we move forward with reparations-minded, equitable cannabis policies. However, as it stands, many individuals, including farmers, are permanently barred from participating in the new legal hemp industry due to past felony drug charges. It’s important to acknowledge with any “hemp update” that there is much work to be done on all levels to create equity in hemp and cannabis in this country.

I’ll close with the following thoughts. Many skeptics have cautioned against believing CBD hemp to be a silver bullet for small farm profitability. These first couple years of the developing industry, for many, are proving that sentiment true. That is, until the red tape lifts and the markets stabilize. My personal, non-monetary takeaway from this last few years’ experience is realizing the power and capacity of cooperation throughout the full supply chain—co-op to co-op, producer to worker to consumer—that’s the real silver bullet.

 

FL Morris grows CBD hemp at Grassroots Farm in southern Wisconsin and is a founding member of the South Central Wisconsin Hemp Cooperative.

 

From the July | August 2021 Issue

 

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