HVADC Involvement: Hudson Valley Hemp

Last month marked the first harvest for many new and seasoned growers in the Hudson Valley who had planted seeds fairly new to the region; hemp. In 2015, New York State launched its Industrial Hemp Agricultural Research Pilot Program, permitting a limited number of educational institutions to grow and research industrial hemp. In 2017, the State eliminated the cap on the number of sites authorized to grow and research the plant and expanded the program to include farmers and businesses. Governor Cuomo also introduced and signed new legislation to establish industrial hemp as an agricultural commodity under the State’s Agricultural and Markets Law. Hemp as a for-profit crop has arrived in the Hudson Valley.

According to New York Department of Agriculture and Markets, industrial hemp production is already generating nearly $600 million per year nationally and has the potential to grow several times over in the years to come. 

Hemp, also known as industrial hemp to regulators, is the low-tetrahydrocannabinol (THC) strain of the Cannabis Sativa plant species—the same species from which marijuana is derived. As THC is the psychoactive component that gives users a “high,” industrial hemp is vastly different from its cousin. Instead of merely using the plant for drug use, hemp’s fiber, seeds, and oil are extremely valuable as raw material for food, clothing, health and beauty products, and even building materials.  Hemp-derived cannabiodiol (CBD) oil has become the most popular use within the past several years, sky-rocketing within a host of products in market peaks. CBD oil is one of the main constituents of the hemp plant and, when extracted, can be used in a wide variety of food, health, and beauty products. CBD products are also being explored in the medical segment, such as for treatment of epilepsy, inflammation, anxiety disorders, and general skin diseases.  In June 2018, the U.S. Food and Drug Administration (FDA) approved a CBD oral solution for the treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, for patients two years of age and older.

The State’s Industrial Hemp Agricultural Research Pilot Program now has 108 processors and 480 growers with over 20,000 acres of registered hemp production. Within HVADC’s footprint, of New York State licenses on file, there is one combined grain and fiber processor/grain and fiber grower; 11 CBD processing and CBD growing;  11 CBD processors; 16 Grain and fiber Growers and 103 CBD growing. Many new growers and processors are turning to Cornell Cooperative Extension (CCE) for resources on everything ranging from grain/fiber seed sources, soil and residue testing labs, hemp genetic testing services, pesticide information, cannabinoid testing labs, information on hemp diseases, hemp insurance, to a Hemp Exchange Board and more. Others have approached HVADC for technical assistance on the permitting process, market analysis, business planning and relationship building between growers and processors.

HVADC has a close relationship with CCE of Orange County and especially with Maire Ullrich, who is the Agriculture Program Leader for CCE of Orange County, and a specialist with CCE's Eastern New York Commercial Horticulture Program. This enables both organizations to support the growers in the region by capitalizing on the strengths of each entity.

Ullrich travels extensively throughout eastern New York, working with a few dozen prospective and current growers and processors and receives at least two phone calls week from those with little to no agricultural experience interested in growing hemp.  She also regularly receives calls from processors, buyers and others looking to invest, and wondering what their prospects might be. Ullrich spelled out that the stakes are high; and profit margins, still wildly uncertain.

According to Ullrich, Ben Dobson of Hudson Valley Hemp Company was the first grower in New York State, in 2016.  Dobson grew five to six varieties, and his path is one which she has been seeing occur as a common progression for traditional vegetable growers.  “Growing hemp grain and fiber is like growing field corn,” she said. Fiber and grain production crops are similar to traditional grain crops, such as corn and wheat. The fiber plants tend to grow to six to twelve feet tall without branching, while grain plants tap out at about nine feet tall and do branch.

“Now Dobson is doing CBD hemp, which is like growing tomatoes,” said Ullrich.  “We have a lot of veggie farmers in Ulster County, so naturally we are seeing a good number of hemp growers in that area.  They are already equipped with transplantors, plastic layers, and hand labor.  These farmers are just switching their tomato operations to CBD hemp. They already have the tools and resources.”  

Though rumors have it that CBD hemp can fetch up to $50,000 per acre, Ullrich advised that it does cost roughly $10,000 per acre to plant and grow CBD hemp.  At one dollar per seed or three dollars per transplant, planting 1,500-2,000 plants per acre (depending on soil type and equipment used) -- and then the costs of feeding, weeding, irrigation, plastic and harvesting-- it adds up quickly. Ullrich explained that just in plants alone, one can expect to spend roughly $5,000-$6,000.  “Each plant needs to be viable because they are so valuable,” said Ullrich.

“Processors have been requiring biomass (or the plant) to be dried and even chopped for them to take it, the farmers have taken on those processes,” Ullrich explained. Farmers are paying for post-harvest processing of chopping and drying—either doing it themselves, she said, or paying someone else to do it.  Because they are getting paid per pound and only so many tons a day can move through the extractor, the processor doing the extraction wants the most concentrated pound, so the more stripped down the better.  Ullrich said she knows of some growers storing in ag-bags, after being harvested via chopping.  In this case, the entire plant is in the bag, not just the highly valuable flowers. “But processors or extractors can be very picky—it is a buyers’ market,” she said.

In 2018, HVADC was approached by Eran Sherin, the founder and CEO of both NY Hemp Source and urbanXtracts, who was looking for farmers interested in growing hemp. Sherin was in the early stages of developing a multi-faceted hemp growing, processing and product development company. After speaking with Sherin, HVADC Deputy Director Mary Ann Johnson contacted Ullrich to identify growers in Orange County, Sherin’s target geography. Johnson and Ullrich were able to facilitate a meeting with several growers leading to a partnership with S&SO Produce Farms to grow approximately 18 acres in the first year of business for NY Hemp Source, LLC.

George Sewitt is Senior Vice President, Operations at both NY Hemp Source and urbanXtracts. They partner with Mark Rogowski of S&SO Produce as their main grower, however there are  nine additional farmers under their co-op umbrella. NY Hemp Source holds the grower and processing license/permit with the NYS Dept. of Ag and Markets and urbanXtracts is the operating/management company for NY Hemp Source, Sewitt explained.

“We use a revenue share co-op program with our farmers; we offset some of the farmer's risk as well during the breeding and planting season. Everyone shares based on sales,” explained Sewitt.

Though Rogowski grows their product, Sewitt explained they wanted to make the same plant clones available for other growers outside the co-op, so they can buy the clones outright for a certain price and they are on their own; or urbanXtracts can sell it to them and finance part of the cost and when they are done growing it, urbanXtracts would sell it for them.

 “This was not a great year weather-wise for harvesting,” said Sewitt , although he did note that that urbanXtracts’ cultivars are bred to excel in the soil of Orange County’s Black Dirt region.  

urbanXtracts uses “human grade” Ethanol for the extraction process, said Sewitt, explaining how using better-grades will lead to greater success. They are starting by selling four to six CDB products, in bulk or as private labels, and will be incorporating a QR (Quick Response) code in packaging that will further explain the product ingredients and sources.

Ullrich cautioned for growers to become as well educated as possible before investing. “Nationally, there was eight times as much CBD hemp planted in 2019 as there was processing capacity,” said Ullrich, describing the bottlenecking which has occurred here in the Hudson Valley as well. “Processing is expensive to get going, takes a long time, yet you have a crop of hemp in a year.  Unless you are building a small processing plant, you cannot have it completed in a year. Here in New York, just to get the permits on the ground, that’s a year-long process, unless it’s on an approved site that’s ready to build. It is one to two years from when a processor can start doing what they have to do; the equipment is expensive and takes a lot of floor space.”

Ullrich emphasized the absolute necessity of having clear understandings, agreements and detailed contracts to protect all parties, since in many instances, something goes wrong and the grower is left holding the proverbial bag. 

“The processors might ask for someone to plant 50 acres of it and they will have plant ready in October, but by then they are not done building, or don’t have the money to buy the biomass, or have even disappeared,” she said, adding that there are a lot of farmers with a lot of plants that they might not be able to dry considering the equipment and space requirements for the large-sized crop. Or, she said, some processors might actually have the dryer, but it’s under capacity. “Not only might a grower not have a buyer, but they might not even have a way to preserve the crop.  “During the gold rush, who made money…? The shovel companies. Equipment companies selling stuff and then it doesn’t deliver as it should.  Maybe a processor bought something that doesn’t work—or it is only doing a tenth of what they said it should—equipment does not always work as it should.” Ullrich illustrated her point: “Remember, if you buy a corn-chopper, you have 15 neighbors who can tell you which choppers work better, with which corn. I call this ‘institutional memory’.  We don’t have anything like that here.  We don’t know what machines work best or not with which varieties.”

Ullrich said the farmers who control their own processing -- either in total or as part owner of a processing plant – should be better positioned, as they have control over their costs, prices, operations and inventory.  “All the bad things that could happen, will not happen to them, they are entirely integrated,” said Ullrich. “The producers I worry most about are the ones who put in a ton of acreage and the processor did not materialize, or, is holding the price hostage.  What they thought when they ordered their seed in January, well now, it’s maybe half that.  Where they thought would make $20,000-$30,000 per acre, now they are going to make $2,000-$4,000.”  She said that a grower with more than ten acres planted is “big” and some have more than 70 acres.  “If farmers don’t get more profit than they do on tomatoes or cucumbers or onions, they will go back to those things.  If it’s not as profitable as something else they can do, and then they are out. Big guys will drop down and do less, little guys who cannot afford to take that hit, had extra expenses or did not expect this by not planning for labor or other issues… well that little bit of profit will never materialize because it’s still out in the field…  those farmers will be likely be done.”

HVADC’s Johnson emphasizes that while there is significant potential in the burgeoning market, there is also risk, but that forming long-term relationships and writing solid partner agreements can mitigate the downside. Both HVADC and CCE Orange County have been assisting growers by making introductions for strategic partnerships and offering suggestions for resources such as attorneys savvy in both contract, and ag law.

Farmers shouldn’t pay too much upfront for anything, said Ullrich, and advises growers to pay half or less upfront to either seed companies or processors.  “No one should be pre-paying entirely for anything.  It’s a version of cat-fishing. And when they are getting paid for the biomass, it should be at least fifty percent, in hand, when it drives off the farm and leaves. I am hearing stories about not getting paid at all or being held ransom…  The people we are dealing with have no reputation yet—this is only year two.  Even if they are bad guys, no one knows it yet.”

For more information about the type of technical assistance HVADC can provide, please visit https://www.hvadc.org/who-we-can-help. For more information for hemp or CBD growers or processors, please visit https://hemp.cals.cornell.edu/about/extension/. 

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Photo Source: US Agriculture & Markets