The Top 5 Business Challenges Hemp Growers Face

Columns - From The Field

Part II of this two-part series explores the most significant challenges hemp growers encounter beyond the field and how to address them.

October 2, 2020

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As a developing industry in the U.S., hemp cultivation can come with numerous challenges. In Part I of this two-part series, which ran in Hemp Grower's July/August issue, I addressed those challenges (and solutions) specific to cultivating hemp, from selecting seeds to managing pests. But the difficulties in growing hemp don’t stop at cultivation: Across the country, hemp farmers are facing obstacles that extend beyond the field.

In Part II of this special series, I explore some of the most significant challenges growers face outside the hemp field. Here are five business-related challenges hemp growers are experiencing today.

1. Stigma in some communities.

Unfortunately, a stigma continues to surround hemp and its cultivation in many municipalities. On a semi-regular basis, I get calls or emails from concerned community members about hemp growing near them. Sometimes these calls end with a better understanding of hemp and the industry. Usually, they end with the caller unhappy that they (or I) cannot go and chop down their neighbor’s plants. Sometimes I get ambushed at public meetings, where some community members show up just to complain about hemp. The public is not always kind to hemp growers or educators, but many of us try our best to address concerns. The three big complaints stem from fear of crime (theft is very real in the hemp industry), the smell, and a dislike of the plant because it is Cannabis. While I cannot control the smell, I can try to address misunderstandings surrounding hemp that can lead to theft and a dislike of the plant.

Educating communities where hemp is grown is a great way to try to dispel myths. Even some people who show up just to complain can leave with a better understanding of the hemp plant. A lot of that misunderstanding leads to giggles from the audience, which is benign. All of us in the industry are trying to tell the public that hemp is not marijuana. One of my favorite analogies is the comparison between Chihuahuas and Great Danes. They are both dogs, but they have been bred for very different purposes and therefore have different traits.

When people understand hemp is not going to get them high, they start to open up to the many other uses of hemp. Popular routes to deliver educational information involve public meetings with lots of photos of products made from hemp, field days where plants can be observed outdoors, and workshops where participants can make hemp products (for example, the Midwest Hemp Council and Purdue Extension organized a hempcrete workshop last year). While we are in a more virtual world with the COVID-19 pandemic, educational efforts have not ceased, and many educators and businesses offer webinars as well.

When educating the community, including as many members as possible, as well as policymakers, can be most effective. Policymakers can have a huge impact on the way a community views hemp, so we try to catch them up to speed on the industry.

Community education could also help reduce theft of in-field hemp plants. I have a couple theories as to why we see theft of hemp plants (mostly those grown for cannabinoids): People either think the plants are marijuana, or steal them knowing they’re hemp but sell them as marijuana. The more people who understand that hemp and marijuana are different, the less this may happen.

2. Support from banks.

Some (but not all) hemp growers have struggled with convincing a bank, payroll company or insurance agency that hemp is a federally recognized and legal crop with a developing market. This is a nascent industry, and we have a long way to go for economic sustainability, but we need cooperation and understanding from the entities that help hemp businesses get started and continue to operate. Some growers are successful with using their local banks, but even growers who have well-documented plans can be denied loans, sometimes because a bank just does not want to work with hemp at all.

So, what can a hemp grower do? Having a prior relationship with a bank has proven to be helpful when it comes to loans and transactions related to hemp. Many well-established farms that have been using the same bank for decades have been successful in securing loans for hemp.

I spoke at a statewide banker meeting at the end of last year, and the bankers were excited to learn about hemp. They are getting questions, and they do not have the knowledge nor the resources to provide accurate answers. Again, education is key: this means good communication with your bank and even requesting that they speak with an extension educator working on hemp, the state department of agriculture, or a hemp industry association member. However, sometimes a bank just will not budge. Having a backup bank in mind and securing loans before you put hemp in the ground is essential.

3. Working in a nascent industry.

The hemp industry is developing and changing, and finding success can sometimes seem like trying to hit a moving target. Breeders, growers and processors are always aiming for the next big cannabinoid or new product. We are all trying to find our place in this industry, but with changes on the regular, it can be hard to identify and hit that moving target.

This is a difficult challenge to address because growers cannot change the hemp market and what consumers buy. However, they can observe what is happening in the industry and adjust production accordingly.

Over-production of crops is common in agriculture, and hemp is no different. There seems to be no shortage of hemp available to processors, and we have seen the price of hemp biomass (as well as other hemp derivatives) plummet over the past two years.

Starting small to get your foothold and only investing what you can afford to lose could prevent serious future financial problems. Realize that this industry shifts, and you may have to adjust and adapt with it. Each year there will be a trendy new cannabinoid product, and some years it may make sense to try to jump on a trend, but doing so is assuming risks. Cannabigerol (CBG) is a good example. We are seeing even more instability in genetics with CBG cultivars this year than we have with cannabidiol (CBD) cultivars in the past couple years. Figure out what you can afford to lose, and be realistic on returns.

4. Finding reliable resources.

Finding reliable resources for production guidance, innovations in equipment and hemp markets, and pricing can be challenging and frustrating for people trying to find their place in this industry. A lot of information about the industry exists, but wading through all that information and sorting out the realistic and helpful resources is overwhelming for many people. This is where hemp industry associations, hemp farmers with multiple years of production, experienced consultants, extension educators and trusted industry publications can be a huge benefit to growers.

Reaching out to people you hear about or have seen at meetings is acceptable and is not a bother to most people in the industry. I have found that so many people in the hemp industry are open to communication and dedicated to progress—they want to talk to people about hemp!

A lot of “consultants” are popping up, but before you spend the money to hire one, look into their background and try to find testimonials and/or check references. Some can come with a hefty price tag, but great consultants are out there.

I try to avoid internet forums, especially for pest diagnostics and treatments. Turn to extension educators and university guides to help with identification and the appropriate control methods for serious pest issues. Finding sound resources can take some digging and time, but the payoff is better information and, hopefully, building a relationship for future questions.

5. Making connections.

Bankruptcies, mergers and new companies are common in this industry right now. It seems like a hemp company files for bankruptcy every month, followed by one or two (or sometimes more) hemp companies starting up. Companies merge or split into smaller companies, and employees come and go. Growers, educators and many others in this industry are trying to establish networks, but with constant flux, this can be another challenge.

I have built a large network of people who are involved with hemp, and in the time I have known them, many have left at least one company or have started their own. One thing that does not change is my relationship with them (assuming they are still working hard to progress the industry).

Establishing contacts with reliable people is important because even if they switch companies, you have an association with the person, not just the organization. With so many moving parts in the developing industry, building a strong network of people and staying in touch means you do not lose your resources.

Marguerite Bolt is the hemp extension specialist at Purdue University’s Department of Agronomy. She received her M.S. in entomology from Purdue University and her B.S. in entomology from Michigan State University. Bolt’s research has focused on hemp-insect interactions and plant chemistry.