HOPE FOR HEMP: Hemp on the cusp?
In this three-day series, The Daily Sentinel is examining the emergence of hemp as a potential cash crop in western Colorado, the technical and legal challenges associated with growing and selling it and the medical benefits some say it offers.
They came by the hundreds to the Salt Creek Ranch in Collbran in July. Some were farmers, wanting to expand their repertoire from corn and hay into a more profitable crop. Others had never attempted to grow a plant in their lives, but figured maybe they could get in on a hot new investment.
Some were looking for investors for their new ideas and had good prospects, others had money and were looking to spend.
In some ways, the second incarnation of Hemp on the Slope was like any other trade show or convention, with business cards flying from pocket to pocket, banner-lined booths with entrepreneurs hawking their products, and seminars on topics attendees wanted to absorb into their brains.
The attendees sat on bales of straw in the arena, flanked by farm machinery, tractors and combines on the farm. Little did they know these bales, made of dried hemp, were put to use as seating for the conference after the ranch’s hemp crop the previous year was tested by state inspectors and deemed to be unfit for market.
Salt Creek Hemp Co.‘s hemp crop was a total loss, a result of the plants testing 0.19 percent higher in tetrahydrocannabinol, or THC, than the legal limit for what the state has defined as the threshold for industrial hemp. Anything containing more than 0.3 percent THC is considered marijuana, and that meant their crop that tested at 0.49 percent THC was legally unable to be sold for industrial hemp purposes and couldn’t leave the property. Instead of being able to extract the prized cannabidiol, also called CBD, from the leaves and flowers and reap the financial rewards, hemp farmers Aaron Rydell and Margaret MacKenzie couldn’t sell the crop or have it leave the property.
The plants don’t know what the law is, and though it has been legal to grow what’s defined as “industrial hemp” as an agricultural crop since 2014, the pioneers in this industry are learning as they go and sometimes endure expensive, difficult lessons that end up being worth nothing more than a seat for the next generation of hemp entrepreneurs soaking up knowledge from those who are paving the way. The challenges for this industry include everything from seed to harvest, as well as the “gray areas” of federal law within which hemp entrepreneurs continue to do business.
UNIQUE REGIONAL CIRCUMSTANCES
“People talk about learning curves. This has been like learning switchbacks,” said Katey Herland, who has been working to get her hemp farm started for the past year in Unaweep Canyon.
Establishing Canyon Country Hemp and growing the plants for their extract, or cannabidiol, is Herland’s goal, and she had no idea it was going to be this difficult.
She comes from a farming background, has a degree in sustainable agriculture and has experience with cannabis dating back to growing up in the Paradox area in western Montrose County where her parents grew marijuana for personal use before it was legal.
Over the years, Herland became a cannabis proponent, worked to get Amendment 64 passed in 2012 which legalized recreational marijuana and industrial hemp in Colorado, and recently worked with a group called Grand Junction Cannabis Action Now (GJCAN), which unsuccessfully lobbied to allow retail marijuana in Grand Junction. She’s “all about freeing the plant.”
While she was personally disappointed to see doors closed to growing and selling recreational marijuana in much of Mesa, Delta and Montrose counties, she realizes now that exclusion of marijuana may turn out to be a good thing for growing the hemp industry here.
“It was an unforeseen advantage, to say the least,” she said.
The exclusion of marijuana cuts down on problems hemp growers have with maintaining the purity of their seed, since hemp and marijuana are both cannabis and can cross-pollinate easily. This causes issues with future generations of the plant having undesirable levels of THC, the psychoactive compound in cannabis that causes a high. The plants, sometimes referred to as cousins, are in fact both members of the same species — cannabis sativa — with the different varieties of plants expressing varying levels of THC and other cannabinoids.
The fact that Mesa County has kept doors shut to growing recreational marijuana has made it the prime place to foster the hemp industry, Mesa County Commissioner Rose Pugliese said to the crowd at Hemp on the Slope. She said she feels it has a place in agriculture and she’s interested in exploring the idea of adding hemp to the county’s land development code to make it an official agricultural product, as other counties have done.
REGULATION, TESTING AND ‘ULCERS’
The first step in a hemp farmer’s road to success is planting something they know will qualify as hemp upon harvest. Herland and other hemp pioneers say credible, reliable genetics are key to moving forward with building the industry.
One of the main hurdles to that is the U.S. government, which normally enforces the Federal Seed Act. However, since cannabis is still considered a schedule I controlled substance by the Drug Enforcement Administration, the U.S. Department of Agriculture won’t enforce the law that governs the quality of seeds sold in the U.S. That means the U.S. has become a dumping ground for poor-quality seeds that are unpredictable and don’t perform well or don’t produce plants with low THC levels, according to Duane Sinning, the Colorado Department of Agriculture’s Industrial Hemp Program manager and the assistant director of plant industry. That’s why many in the industry are relying on clones — or cuttings from mature plants that are rooted to make more plants — to assure they have the desired genetic material.
Sinning himself cannot tell the difference between hemp and marijuana plants, despite years of experience with cannabis. The truth is that the THC limit created to distinguish hemp from marijuana was done by humans, and there are no reliable physical characteristics of the plants that indicate what THC levels they will produce.
So the state Agriculture Department has developed a rigorous testing program that requires hemp growers to register their acreage, give GPS coordinates of their crops and subject themselves to unannounced visits and testing. Before harvest, inspectors arrive and cut the top 2 inches of flower from randomly selected samples of the crop, and use those samples to determine THC levels with chemical analysis. If the crop tests higher than 0.3 percent THC, it “went hot” and cannot be classified as industrial hemp.
This testing, which is only a small part of the regulatory process for hemp under the state Agriculture Department, is important because it protects the industry from being a haven for marijuana growers and assures federal officials that the industry is a legitimate agricultural venture, used for textiles, food products and rope, not for drugs, Sinning said.
In most cases, the crops that test higher than 0.3 percent THC are nowhere near the levels desirable for marijuana, Sinning said, which are more like 20 percent THC. But his department has alerted law enforcement when that has happened in the past, he said.
Overall, he doesn’t believe people are using the hemp industry as a cover to grow pot.
“If I were going to do an illegal marijuana grow, why would I tell the state, who is likely to come out and test at any time? Why would you put yourself on the radar?” he said, noting that he tells the Drug Enforcement Agency the same thing during their visits. Sinning said he feels the hemp industry is very self-policing, and the attitude is that those who are building the industry don’t want marijuana growers ruining their chances at having a viable industry.
DEA representatives visit Sinning’s office at least once a year, and they talk about the gray areas of the law that bother them. Sinning refers to them as “ulcers,” and one of the ulcers the federal officials have is in not obtaining copies of all the agency’s records and lists of registrants.
“They ask to look through our records every year,” he said. “And we don’t allow that.”
However, if local law enforcement officials or DEA agents call with a specific address of a grow, inquiring as to whether the location is registered as a hemp-growing operation, Sinning’s office will confirm that for them.
“We’re just trying to protect our registrants,” Sinning said.
If inspectors find obvious marijuana plants during routine inspections, they will notify law enforcement, Sinning said, but the agency cannot be used by law enforcement to gain access to samples or perform tests.
Last year, the agency tested 90 percent of the hemp acreage growing outdoors in Colorado, Sinning said. Roughly 1,230 acres of hemp grown outdoors did not meet the THC guidelines that year.
Most of the crops that have exceeded the THC limits in testing have been due to genetics, Sinning said. Last year, the majority of hemp that tested hot was from a variety called Colorado Gold.
Rydell and MacKenzie’s unusable crop last year was a costly lesson; the seed alone cost almost $8,000.
“We worked all year for nothing,” Rydell said.
This year, they invested in clones with reliable genetics for their 14,000 plants.
They’re very open about their successes and failures, and say the sharing of information is important to build a solid foundation for the hemp industry.
Their candor is something others in the industry find refreshing, as there is a tendency for some to be secretive, a characteristic common to the cannabis world overall.
“Here, everybody doesn’t lay all their cards on the table,” Rydell said. “But we have to work together, and it’s not cutthroat. The Front Range is a mess.”
He and MacKenzie are working to form relationships within the industry, to help everyone succeed and build on that success, and they cite negative perception of cannabis and lack of understanding of the many uses of the plant as hurdles for the industry, among other things.
“Education has always been about 95 percent of what it takes to make hemp grow, just due to the fact that we’re fighting 80 years of misinformation,” Rydell said, referring to the propaganda against cannabis perpetuated during the “Reefer Madness” era in the 1930s. This came before the U.S. government actually encouraged farmers to grow hemp for the war effort during World War II, for rope and other military materials, with campaigns called “Hemp for Victory.”
LOCAL HEMP PIONEERS
Herland credits Rydell and MacKenzie for helping to build the budding Western Slope hemp industry, mentoring others and bringing together knowledge and expertise as well as helping mitigate financial risk for others who want to get started, from obtaining the right plants to harvesting.
Several unofficial cooperatives have formed, and the one with Salt Creek Hemp Co. at its center involves as many as 10 farmers from Loma to Montrose, including Herland’s place near Gateway.
She couldn’t afford to get her hands on hemp plants with reliable genetics this year, but had a verbal agreement with Salt Creek Hemp Co. to obtain plants through them, and she would provide the labor to grow and harvest the hemp and then Salt Creek would receive 50 percent of the yield. The out-of-pocket costs were prohibitive for Herland, and she estimated she would have paid between $30,000 and $40,000 for the plants for her operation. Obtaining a bank loan or other traditional financing wasn’t an option, as most financial institutions won’t deal with farmers who grow cannabis due to federal regulations.
Herland’s goal was to plant 5,000 plants this year — and the small, CBD-producing variety of hemp can be planted closely, at approximately 1,000 plants per acre. But problems with labor and machinery resulted in her getting 2,900 plants in the ground late in the season. Then there were difficulties with the plants starting to flower before they had developed root systems, a survival mechanism that made for a challenging growing season. Her story is not unique, and the losses are something farmers just have to absorb, as crop insurance is not an option due to federal regulations.
“I think this year was like the Gold Rush, everybody just kind of went in full bore, learning as we went,” she said. “Everybody kind of got humbled.”
In the end, Herland estimates a good crop of hemp grown for CBD could net anywhere from $10 to $20 per pound wholesale for the flowers alone, harvested, dried and shucked into bins. She estimates a one-pound yield of product per plant.
Aside from the startup costs, there are other costs at each stage of the process to consider — harvesting, processing and extraction if CBD oil is the desired end result, which can cost as much as $45 per pound, Herland said.
The industry is ever-changing and price markets are volatile, and members of the hemp community are still figuring out what people will pay and what their products are worth, which is a huge challenge.
“It’s still, as we call it, a new frontier and it’s still in the infancy stage,” said Don Coram, a Republican state senator who is a partner in Paradox Ventures, a startup hemp research and development business in Naturita that is harvesting 14,000 plants this season in western Montrose County. “It’s probably not for the faint of heart.”
If he had to give others advice on how to go about entering the industry, he would urge caution. “Go into it with your eyes open,” Coram said. “And don’t invest any more money than you can afford to lose.”
HOMES FOR RAW PRODUCT
Processing and extraction facilities are also few and far between for farmers in the area, and though they can find brokers to purchase their hemp wholesale, some want to take the raw agricultural product to the next level. That means extracting oils or, in the case of hemp varieties grown for fiber, separating the different parts of the plants for rope, textiles or building materials.
But there has to be a place for that to happen, and it doesn’t exist here yet. However, a company called Hemp Adobe, which uses hemp for building materials and was approved for the Rural Jump-Start Program, is relocating to Montrose. Hemp Adobe owner Kevin Hodge has announced he wants to purchase as much hemp as possible from local farmers. However, he only wants a specific part of the plant, the inner stem called the “hurd” from the stalk of the hemp plants grown for fiber, which amounts to about 10 percent of the plants. Farmers who have invested in CBD-focused varieties are growing short, bushy plants that resemble mini Christmas trees, and these aren’t as well-suited for building materials as the tall varieties of hemp.
Dustin Jensen, who has been working in the hemp industry for about three years with the same group loosely affiliated with Salt Creek Hemp Co., and a plant ecologist named Mike Villa, who has been active in the medical marijuana industry, are in the beginning stages of starting an extraction business called Speedy Extraction in Grand Junction. At this point, they’re looking for a 15,000-square-foot building that could accommodate the machinery used to extract oils from hemp, and Jensen said he has commitments from investors to help fund at least what he calls a “soft opening” to accommodate local farmers who have committed to bring their product to him. Eventually, he wants to build a $5 million facility that includes a $1.2 million extractor, but initially his business plans call for handling 500 to 1,000 pounds of hemp per day.
Herland sees recruiting farmers and establishing reliable production as being the first hurdle for the local hemp industry, as a sort of “build it and they will come” kind of scenario.
“We know the market is there, the problem is there aren’t enough producers to guarantee a consistent product, and have enough to fulfill contracts,” she said. “As soon as we get that in place, that changes the whole game.”
“In order for his industry to survive, there needs to be thousands and thousands of acres,” Rydell said, noting that he’d like to see several thousand acres of hemp in western Colorado.
Rydell and MacKenzie said there are a lot of things that need to come together — the reliable genetics, successful farming, transporting products to processing facilities, building those processing facilities, and having enough hemp to keep it all going at the same time.
“We have a lot of people who want to get going but they don’t have a starting point,” Jensen said. “At some point there has to be a jump start,” which could be the opening of his extraction facility, he said, which will give farmers a place for their crops and a way to make some money to expand their operations into hemp for fiber or other products.
Jensen called the extraction facility a “stepping stone” for the industry, which can expand into producing thousands of other products from hemp.
“In my eyes, we’re going to turn this whole area into an area of innovation or hemp products, the Silicon Valley of hemp,” he said, but he acknowledges that’s a ways down the road and right now, the industry needs a way to move forward here.
“People talk about putting the cart before the horse or whether it’s the chicken or the egg that comes first here,” he said. “We’re almost at the point where we need the horse and the cart and the chicken and the egg to travel all together at the same time.”