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VOL. 45 | NO. 21 | Friday, May 21, 2021

Hemp’s shaky promise

Emerging crop has been a bust for many farmers. But there is growing hope

By Tom Wood

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They are located more than 2,500 miles apart. But except for their polar-opposite population bases, there are many similarities between tiny Ketchum, Idaho (2,878 residents, the latest census figures show) and Knoxville (741,000).

Both cities sit in the heart of the nation’s largest mountain chains, the Rockies and the Appalachians, and both are near scenic entertainment/ski areas. Knoxville, of course, boasts Gatlinburg, Pigeon Forge and the Great Smoky Mountains; Ketchum counters with Sun Valley and Bald Mountain.

And both have their share of famous residents, past and present. Ketchum has been home to the likes of Oscar-winning actors Gary Cooper and Tom Hanks, author Ernest Hemingway, musicians Peter Cetera and Steve Miller, and athletes Picabo Street and Dick Fosbury. Knoxville can brag on having been home to Oscar-winning actors Patricia Neal and Quentin Tarantino, author Alex Haley, musicians Roy Acuff and Kelsea Ballerini, and athletes Peyton Manning and Ralph Boston.

Now they have one more thing in common – a stake in each state’s young hemp industry, which has experienced more ups and downs than a Dollywood roller coaster, including falling prices, market saturation and the COVID-19 pandemic.

“So, you’re looking at prices falling by 90% over a two-year period,” says Michael Sanders, president of X-tracts LLC in Joelton, who adds he is involved “in every aspect” of taking hemp from seed to shelf.

“Farmers were growing crop and they had contracts in 2019 and they thought they were gonna get $30 to $50 a pound for hemp. Today, there are people paying a dollar a pound on something that costs $4-$5 a pound to grow.”

Good news from Knoxville

Ketchum-based company Hempitecture, Inc., a rising leader in the biobased insulation industry, recently opened a distribution center in Knoxville for its hemp-based products to serve clients east of the Mississippi River.

It was welcome news in tough times for the industry.

While Hempitecture doesn’t actually grow or buy Tennessee hemp – or even manufacture its HempWool insulation and Hempcrete construction material – that could someday change, says Hempitecture CEO Matthew (Mattie) Mead.

“We’re a company that specializes in what we believe is the most sustainable insulation material on the planet. (HempWool is) a 90% hemp fiber batt, so it can be used in lieu of fiberglass, rockwool or other batt insulation products,” Mead explains. “It can even take the place of spray foam insulation.

“We work with a manufacturer based out of Canada (and) distribute this product all across the United States … with our first warehouse being Salt Lake City, which is a pretty well-located hub for the Rocky Mountains and Northwest.

“But with our growth over the last year and a-half, and with the growing popularity of this project, we’ve been looking for an ideal location to set up a new distribution center. And we chose Knoxville for a couple of reasons,” Mead adds.

Michael Sanders, president of X-tracts LLC in Joelton, has seen hemp prices rise and fall as he works to keep a steady supply for his business.

-- Photo By Michelle Morrow |The Ledger

“First off, Tennessee is super-well located to reach the Eastern Seaboard, the Southeast – even the Midwest. That was one of the main criteria. It’s a vibrant city, a vibrant area. So having a distribution center there made a lot of sense from a logistics standpoint as well as just being able to reach most of the United States.”

Tommy Gibbons, the firm’s chief operating officer, was in Knoxville a couple of weeks ago and will be moving there this fall to work on an unannounced project that could take their products to another level. Asked about his impressions of the city and the company’s future role in the state, Gibbons was upbeat and optimistic.

“It’s a cool city. I’m really interested in what Tennessee has available to companies who are trying to set up a home base there and bring business to that state,” Gibbons says.

“They seem to really have a lot of resources for bringing jobs in and then locating your business there. I think we’ll see in the near future where we could be producing our hemp-based insulation materials in both Idaho as well as Tennessee. So, I think it’s gonna be a good fit for us from multiple standpoints.”

Mead and Gibbons, both 30, have drawn national attention for their Hempcrete product, making the 2020 Forbes “30Under 30” list for manufacturing. The honor cited their “hemp-based building materials that absorb CO2 emissions and improves insulation.”

“Just being young people, I think we have maybe a little bit of a different perspective than other generations, that we’ve grown up at a time where we can see impacts on the environment,” Mead says of his company mission. “We can more closely feel them and I think it’s going to be more commonplace for people our age and younger.”

Industry in recovery

News of Hempitecture’s arrival to Tennessee’s white-knuckle hemp ride has been met with open arms from state officials, academicians studying the plant, and growers and sellers in the popular CBD market.

The Tennessee Department of Agriculture launched its hemp program in 2014 to explore the industrial uses with 49 licensed growers scattered across the state. When the Farm Bill of 2018 removed hemp from the list of federally controlled substances, Tennessee updated its rules, as well. Interest blossomed like the cannabis plant itself.

That year, there were 226 licensed growers. In 2019 that number swelled to 3,957 with growers in each of the state’s 95 counties.

But woes hit the industry like falling dominoes, and the number of state-licensed growers plummeted to 1,918 in 2020.

In 2021, there has been a slight recovery to 2,008 licensed growers operating in all but one county in upper West Tennessee.

Denise Woods, hemp program coordinator for the state agriculture department, chooses to focus on the future rather than the setbacks of the past two years.

“Isn’t that exciting? That is very exciting,” Woods says of Hempitecture’s arrival and potential uptick for industrial hemp in the state. She says the industry as a whole can learn from the past while focusing on future growth.

Highs and Lows

The fluctuating number of licensed hemp growers in Tennessee from 2015-21:

2015: 49
2016: 64
2017: 79
2018: 226
2019: 3,957
2020: 1,918
2021: 2,009

Source: Tenn. Dept. of Agriculture

“You don’t understand the value of the plant, the plant itself. The fiber portion, the grain, the seed – you know, all of that – was pushed aside by the buzz of the CBD, although I, in no way, want to underestimate the benefits of those qualities of the plant.

“I do think that the fiber, the other qualities of the plant, are making their way. They’re growing steady, they’ve stayed true to the plant and kept moving forward while other folks were distracted by the other news.

“So, it’s exciting to see what’s around the bend for fiber. One of the things that fiber has on the ball that growers for CBD haven’t been able to work out yet is all the standardization of USDA, FDA, DEA.

“Once those standards and requirements are ironed out, fiber is well on its way by having the international … their standards are already in progress. So that’s a real foot in the door that hasn’t happened yet for the other industry.”

‘Nobody has a crystal ball’

Mitchell Richmond, who since April has served as the University of Tennessee’s assistant professor in tobacco, hemp and specialty crops extension specialist, met with Hempitecture’s Gibbons while he was in Knoxville.

“I did meet up with Tommy, and he discussed a little about their products with the HempCrete, as well as the insulation (HempWool),” Richmond says, noting his area of expertise lies in other aspects of hemp.

“Now, as far as the industrial hemp side of things, we do have some trials here at UT. We’re going to be growing some hemp for dual-purpose studies with fiber and grain,” Richmond adds.

“We’ll harvest the grain and the fiber, then we’ll look at maybe as many as 15-17 different varieties and see how they perform under Tennessee’s growing conditions. (But) I have very little involvement right now with anything related to the products.”

Richmond is from Kentucky, which also has a big stake in the ever-growing hemp industry. While he has no horse in the race to get products into the hands of consumers, Richmond sees the potential for industrial hemp growth in the state.

“Nobody has a crystal ball to be able to look into the future and tell what it holds,” he says. “But if you look at the history over the last couple of years – and some of the estimations that might be coming out as far as total acreage demanded for CBD – that leaves a lot more room for the fiber and grain,” Richmond states.

“Specifically, if the industry partners that sell these products find markets that they can have a constant source of revenue for, it also opens up the market for producers to sell to them.

“It’s a very interesting crop, and I think there’s a lot more that we need to figure out in terms of how to grow it. I’m an agronomist first, so looking at products is not really my major interest. It’s how do we grow it?

“And as far as Tennessee is concerned, we can grow it well. Finding a market to sell it is going to be the next step, I believe.”

Tough times all around

Nemo Solanki prepares oils extracted from hemp at X-tracts LLC in Joelton.

-- Photo By Michelle Morrow |The Ledger

The last two years have been agonizing, not only for the experienced hemp farmers who have stuck with the plant through thick and thin but also those who jumped in on the highly anticipated “green gold rush” of 2019.

Those with little or no prior experience in hemp growing got burned when the CBD craze nose-dived, but those who stuck with it suffered, too.

“Farmers are always looking for ways to better their operations, so when hemp made its brand, you know, it had been in the state and there had been much interest for, what, four years, three years, before 2019,” Woods points out, adding that “2019 really pushed it to the forefront.

“The news latched on, the word was out and everybody was so excited. They were really, for the most part, hearing one side of the story. Of course, anytime you go into a new industry, you should be cautious and everyone knows the first soldiers are the bloodiest.

“So that 2019 hemp rush, it had its casualties. But it laid the foundation of what makes hemp such an incredible plant. It’s unchanged by that.”

Grower Ryan Rush, owner of Rush Hemp Farms in Maryville, blames the state CDB industry’s rapid rise-and-fall problems on “a lot of people” who saw it as a get-rich-quick opportunity.

“A lot of people definitely got on the bandwagon. A lot of people were not prepared for what it takes to fully take their product to market or grow a product that certain processors or end retail users would be wanting,” Rush says.

“A lot of people did find their results to be lackluster and did find those results to be not worth their time and effort. So, a lot of people did jump off the bandwagon.”

Rush adds it wasn’t just those well-intended folks who complicated the situation.

“You also had a lot of big-money players come into Tennessee and not do so hot because they just didn’t have the right business plan,” he opines. “Or you had a lot of people also got into this who maybe were not the most enthusiastic about this plant. That can also maybe kind of steer companies in the wrong direction and not knowing what they’re doing or appreciate the kind of positions they are in.

“That definitely showed in some big companies’ end game plans and they fell apart within a year or two years starting up and opening up out here. It definitely got rid of some people on the bandwagon as well – which I’m not going to say is a bad thing.”

How rough has it been?

Rob Mock, owner of Urban Horticulture Supply in Chattanooga, is a licensed grower, supplier and retailer. He says the 2020 global pandemic hit their industry particularly hard, but that problems existed before the pandemic.

“What I’ve seen with the pandemic, I guess the industry as a whole, I know it started off with what I would consider a lot of capital, a lot of fragmented industry capital with not a whole lot of regulation,” Mock says.

Some of the products available at Stones River Apothecary in Joelton.

-- Photo By Michelle Morrow |The Ledger

“So that allowed too many types of different people to grow and cultivate, and what you’ve seeing, basically, was a flood of people learning how to grow cannabis. And basically, dumping a substantial amount of capital into growing hemp for the hope of selling it.

“A lot of people jumped in with no clear avenue of who was going to buy it. So, there was kind of a rush to produce a product – and back then, it was pretty much biomass that was considered for oil production – and then there was a flood to process it and then there was a flood to get a little bit of the product to consumers.”

Mock offers an explanation of how drastic the last two years have been:

“In the beginning of the 2016 and even the 2017 seasons, biomass was trading for $20 a pound, which, you know, was relatively good because you consider one or two plants can produce a pound of biomass,” he explains.

“You can do 1,500 to 2,000 plants per acre, so there are very large amounts of money being exchanged for the biomass. In that next year – at least as a wildfire over pretty much the whole United States – everyone produced extremely well.”

But then in late 2019, the hemp-pendulum began to swing the other direction.

“They grew as much as they could, but that same year it basically crashed. And it crashed because we out-supplied the market,” Mock says of the biomass for oil extraction, which he said fell from $20 a pound to $1-$5 a pound.

Dreams never materialized

Joelton’s Sanders has seen people facing financial ruin because their plans never came to fruition. The hemp industry has “a very challenging question with a lot of parts and pieces,” he says.

“There has been a systemic process of artificial commoditization in a nascent industry before it ever matured,” he explains. “That’s sometimes inexplicable as to why these visions are made the way they are.

“Things have gotten so bad for farmers, processors and even some of the product companies at this point that is almost the question of sanity about why people should continue in this business.”

He pauses and chuckles slightly. Laughter eases the pain as he recalls a recent conversation with a Maryland farmer.

“(That’s) a little levity but not much … because it’s that serious. I see people who are impacted,” he says. “The farmer I was meeting with almost lost his farm to hemp and growing hemp on the promise that it was going to bring great fortune.

“His story is not unique. I’ve heard it over and over again – people calling me literally in tears or very upset that they’ve been promised monies for their crops that never materialized. And then there are a lot of other things that are going on with the industry that caused this artificial commoditization.”

Blame, finger-pointing and name-calling have grown like weeds as things have gone from bad to worse the last couple of years.

“We call it the race to the bottom – everybody trying to be cheaper than everybody else instead of focusing on what’s important … which would be some kind of sustainable model for all of us so that farmers, processors and retail brands could all make money.

“There’s been a lot of intrusion in our market by opportunistic brokers and other people who cause commotion. So, it’s a very complex explanation that, you know, would require a book-length explanation to make any true sense out of it,” Sanders says.

Optimism amid despair

The hemp industry is hoping it will bounce back when the pandemic fades.

“I believe that’s where Tennessee is really going to thrive, in the CBD market, the craft cannabinoid market and, hopefully, eventually, marijuana market,” Rush says.

That also includes the industrial aspects that Hempitecture is trying to capitalize on with its Knoxville distribution site.

“There are other companies that are working on the fiber and the seed, and there’s other construction applications,” Sanders says. “I think those are wonderful because that was the actual intent of the industry when we got started. This was an industrial crop with industrial uses and the whole thing with CBD was supposed to be an afterthought.”

Hempitecture officials Gibbons and Mead would certainly agree with that.

“I think it’s really important that people know about these building materials happening, and it’s exciting what’s going on Tennessee,” Gibbons says.

“For us, as cliche as it sounds, every day is Earth Day,” Mead says. “It’s doing things that are good for the environment, and this business is designed to, you know, be harmonious with the natural world, and so that’s really our goal.”

That’s also the message from state officials Woods and Anni Self, the plant certification director for the state.

“We have a friendly regulatory environment in Tennessee,” Self says.

“I think we’re very excited about the direction of the hemp program,” Woods adds.

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