Fast-growing hemp industry seen as $22B US operation in next three years

By Elaine Thompson

 Telegram & Gazette Staff 

In a rush to jump into the now legal booming multibillion-dollar hemp-derived cannabidiol (CBD) industry, nearly 70 people in Massachusetts — six in Worcester County — have pending applications for licenses to grow or process the new high-money crop. Other owners of tens of thousands of acres of preserved agricultural land are betting on a bill that’s working it’s way through the state Legislature that will allow them to join a business that’s expected to be worth $22 billion by 2022.

“The demand for CBD products is exploding. At the moment the demand is far outpacing the supply,” said Heather Darby, a hemp expert at the University of Vermont Extension who has advised agricultural officials and prospective hemp cultivators in Massachusetts. “Farmers and businesses are scaling up production quickly and moving from producing an acre to producing 50 acres.”

About 1,500 to 2,000 hemp plants can be grown per acre generating between $40,000 and $50,000, according to information provided by Brightfield Group, a Chicago-based cannabis research firm. There is more than half a million acres of farmland in Massachusetts.

The state legalized commercial hemp, a nonpsychoactive member of the cannabis species, in the 2016 law that also legalized recreational marijuana. The following year, Gov. Charlie Baker signed legislation allowing hemp to be grown commercially. The Massachusetts Department of Agricultural Resources, in 2018, established a program and issued 13 licenses. A total of 75.84 acres and 40,280 square feet were licensed for hemp cultivation in 2018. Out of that 21.06 acres and 15,050 square feet were put into production for CBD, marketed to have therapeutic benefits for humans and animals.

One of the licenses issued last year went to a grower and processor in Worcester County, High Purity Natural Products in Southbridge.

The floodgates opened in December after the president signed the 2018 U.S. Farm Bill , which changed the classification of hemp from a Schedule I Controlled Substance to an agricultural commodity, making it legal to grow for the first time since 1937. Two requirements are that the hemp has no more than .3 percent THC (tetrahydrocannabinol) and producers must be licensed by their state or the U.S. Department of Agriculture.

As required by the federal farm covenant, the USDA is in the process of establishing regulations and guidelines, including review of each state’s program and a process to monitor and regulate the production of hemp in states and for Indian tribes that do not have an approved plan.

The USDA, however, does not expect to issue a final rule until the fall of 2019 to accommodate the 2020 planting season.

In the meantime, MDAR will continue to operate its commercial hemp program under existing state law, while it works to comply with regulations promulgated by the USDA.

An MDAR spokesperson said the agency is working to issue new licenses and renewals of 2018 licenses as soon as possible.

No hemp on APR land

The CBD market is expected to grow from $619 million in 2018 to $22 billion by 2022

Per acre, 1,500-2,000 plants generate about $40,000 to $50,000

Hemp-derived CBD has more than 2,500 applications

In 2018, Massachusetts issued 13 hemp licenses

As of March 21, 66 (6 in Worcester County) pending licenses to grow and process

Owners of farmland that is part of the Agricultural Preservation Restriction program have to wait until proposed legislation is approved that would add hemp to the list of things allowed to be grown on the land.

The APR program started in 1979, the first in the nation, preserves agricultural land in perpetuity. In addition to the owner having to pay significantly lower property taxes, the state pays the owner the difference between the “fair market value” and the “agricultural” value of their farmland.

The activities conducted have to fit within the definition of agriculture or horticulture as defined in the 61A statute. Horticultural uses currently allowed include fruits, vegetables and other food for human consumption, as well as feed for animals, tobacco, flowers, trees, nursery or greenhouse products, and ornamental plants and shrubs. There are currently 73,348 acres on 922 farms in the program.

State Sen. Adam G. Hinds, D-Pittsfield, a lead sponsor of the bill to allow hemp to be grown on APR land, said he is very confident that it will pass. Language in the bill is included in supplemental budgets filed by the governor in February and by the Senate earlier this month. It is currently in the Joint Committee on Cannabis Policy.

“The new legal hemp industry is creating a number of economic opportunities statewide, and we want to make sure local farmers are able to participate,” the senator said. The bill is supported by the Massachusetts Farm Bureau Federation.

Mark Amato, president of the Marlboro-based MFBF, said farmers started expressing interest in growing hemp as soon as it was legalized in the federal farm bill. Some farmers, he said, are hoping the new crop will help to diversify their struggling agricultural operations.

“There are some segments of the industry that’s really struggling badly,” Mr. Amato said. “Anytime a new market for a new product opens, that’s a new opportunity to generate revenue on farms ... We will have to see how things shake out in this Wild-West scenario.”

Farmers are not the only ones interested in being a part of the lucrative new industry. Business people and entrepreneurs such as the owners of High Purity Natural Products at 64 Mill St. in Southbridge, also want a piece of the pie. The company is the only one of the 13 commercial hemp operations licensed in 2018 that is located in Worcester County.

Worcester County hemp licensee

Two of the owners, Joel D. Rines , 41, of Southbridge, and Michael D. Matton, 51, of Sturbridge, have a dual license ($500 annual fee), allowing them to both grow commercial hemp and process it for cannabidol or CBD for health and wellness products for the human and pet markets. The license also permits them to process part of the plant to be used for building materials, something they plan to do in the future.

Mr. Matton said six years ago, he and others on his team began building extraction and processing equipment for the hemp industry.

“When the state began offering (licenses) we jumped on board. We wanted to be involved in this very hot industry,” he said by phone recently.

Last year the company grew a few hemp plants in part of the 3,000 square feet it operates in the old mill building. They also processed hemp from other licensed growers into wholesaled CBD products marketed to relieve pain and anxiety and other therapeutic remedies.

This year, they plan to expand their business into an additional 12,000 square feet of the building and grow plants on farmland in Southbridge that they say is isolated. Licensees are required to post several signs at growing fields with contact information for the grower and the MDAR, as well as notification that the plants are hemp. State police and local police are also given information about hemp operations. The state does not address odor issues that may arise. The town also would not be able to do anything about odor of hemp, which has the same strong skunk smell as marijuana. Board of Health Director Andy Pelletier said that according to state Chapter 111, for a farm operated under best practices, noise, dust and odor can not be considered a public nuisance.

The Southbridge entrepreneurs are looking ahead to eventually producing other hemp products, including “hempcrete.” The nontoxic material used for construction and insulation is made from a mixture of the center of the hemp stalk, lime and water. It is resistant to mold, fire and pests.

Mr. Matton said with the planned expansions, he and his partners hope to create “hundreds of jobs” in the Southbridge area over the next three to five years.

Dozens file hemp applications

As of March 21, the MDAR had 66 commercial hemp applications to grow and/or process commercial hemp. Another applicant did not specify either. At least six applicants are from Worcester County: Robert Doherty, Angel Farm in Dudley (grower); Mark Fanelli of Fitchburg (grower); Nial DeMena, Manna Molecular Science in Worcester (processor); Gian Renucci, Peace Out Consulting in Dudley (grower); Ashley Howard, Heavens Harvest Farm in New Braintree (grower and processor); and Demers Hill at Westplace Farms in Spencer (grower). An attempt to reach some of the applicants was unsuccessful.

“I think that tells you there’s a lot of interest,” state Sen. Anne Gobi, D-Spencer, said of the growing list of applicants. She is a co-sponsor of the legislation to allow hemp to be grown on APR land. Nearly half of the preserved agricultural land is in her district, which mostly spans Worcester, Hampden, and Hampshire counties. Ms. Gobi also chairs the Joint Committee on Environment, Natural Resources and Agriculture.

She was surprised to learn recently of several benefits of growing hemp, including that hemp helps to heal poor quality soil. Hemp plants were used to decontaminate soil after the 1986 nuclear reactor explosion in Chernobyl, Ukraine.

“I think there could be a number of benefits we aren’t looking at yet. Besides the economy, there are environmental benefits as well,” she said. “Anything, in my opinion, that promotes agriculture and keeps land in agriculture, obviously is good as well.”

Hemp has been grown all over the world for centuries and is known to have more than 25,000 possible applications. The primary market in the U.S. is CBD, marketed as having therapeutic properties, though there is little scientific research about its effectiveness, safety and appropriate dosing.

Brightfield Group, a cannabis research firm, said the U.S. CBD market hit $619 million in 2018 and is expected to grow to $22 billion over the next three years — largely due to the 2018 Farm Bill — outpacing the rest of the cannabis market combined.

VT hemp specialist

Ms. Darby, a soil specialist for the University of Vermont Extension, where she is the lead agronomist on the UVM industrial hemp research program, has advised agricultural officials and prospective growers in Massachusetts on best practices and the challenges of growing the crop.

Vermont legalized the growing of hemp in 2013. But growing didn’t start until the 2014 Farm Bill that permitted states that already had industrial hemp programs to set up research and marketing projects at state entities such as agricultural agencies and universities.

She said there is a lot to learn about hemp and a lot of opportunity to explore many of its uses and compounds. While CBD is booming right now, like almost every agricultural product or commodity, it will likely reach some kind of max demand, probably in about four to five years or so, and then level out. As production costs come down and supply is met, the price paid at the register and revenue for farmers will follow suit, she said. People with good business sense are probably already starting to do research to determine what the next big hemp-derived market will be, Ms. Darby said.

A lot of what happens in the hemp industry will depend on the federal government, she pointed out. The FDA is now involved in regulating some products, including the approval last year of the first CBD product for certain types of epilepsy. The FDA said the approval was based on adequate and well-controlled clinical studies.

“It’s hard to say what’s going to happen. Right now, it’s an open market. People are trying to work as fast as possible to meet that high demand,” Ms. Darby said.

In Vermont, hemp is replacing hayfields, and some vegetable farmers are putting in acres of hemp to diversify their operation. There is also about a half-dozen processing facilities that have opened.

“People think there’s a lot of money to be made ... big profits. That may be true, but you have to have a crop to be able to obtain a profit,” Ms. Darby said. “If you haven’t prepared your soil properly or you don’t even know how to grow plants, your chances of success might be quite low. It’s a new crop whether you’re a farmer or not.”

Some farmers in Massachusetts are worried that if MDAR doesn’t quickly approve new licenses and renewals, they won’t have a 2019 hemp season. The law prohibits the purchase of hemp seeds until after a license is issued. And, the seeds must be acquired from a distributor that has been approved by MDAR.

William St. Croix, who leases about 10 acres from a farm in Ware to raise pigs and goats, said he’s working with a group of farmers in Central Massachusetts to try to start a hemp co-op. Some of them are throwing the towel in for this season because they don’t think they’ll have seeds to grow by Memorial Day, the traditional start of crop planting in Massachusetts.

“They’re (MDAR) stalling and dragging their feet on this,” he said. “All the farmers are looking to start their seeds. The tomatoes and cukes are already started. If we have to start from seed in May, we’re already three months behind. By July, the heat will be more intense, and the success rate will be a lot lower.”

There is also concern about big-money investors from outside the state dominating the new industrial hemp industry. At least one of the 13 2018 licenses went to a group from Colorado, one of the first states to legalize marijuana, and one of the biggest processors of hemp. A second one has a name similar to a large hemp company in Kentucky. Both states are two of the country’s top producers of hemp.

“Some people feel like they don’t have a shot ... that the table is slanted. It’s hard to say it’s an even playing field,” Mr. St. Croix said. “I try to have faith, but to see the big players and then the small stakeholders bewildered how they’re being left out.”

Ryan MacKay, who owns a farm in Holden and is president of the Worcester County Farm Bureau, said he has received a couple of calls from farmers who said that while selling their goods at a market in Boston, they were approached about selling their land.

The same thing is happening in Vermont. Ms. Darby, with the state’s industrial hemp research program, said some business people are working with the farmers who already know how to grow. A few have come in and bought up farmland. She said outsiders will probably find Massachusetts even more attractive because, unlike Vermont, recreational marijuana is legal.

“Money does talk. And, when people are down on their luck — right now farmers are struggling — and if they are offered a lot more per acre than they would in their lifetime, it’s probably foolish to not sell.”

Sen. Hinds said that’s something he and other state officials are keeping their eyes on. He said the hope and intent is for state residents to benefit the most. MDAR, however, does not ask applicants about connections to hemp businesses outside the state.

“While we might see some increase in jobs from outside investment, I’m elected to represent my constituents to make sure those who want to benefit can,” the Berkshires legislator said.

Hemp history

Sheffield farmer Ted Dobson, who advocated for Sen. Hinds’ legislation so he can grow marijuana and hemp on his APR land, said it’s interesting that big business helped suppress the crop in the early 1900s, and now big business wants to dominate it. 

Some histories of hemp date to the Stone Age, but it has certainly been used for centuries throughout the world for its therapeutic properties, to produce paper, rope, textile for garments, as well as a component in shipbuilding and for human consumption.

It was allowed and encouraged to be grown industrially in the U.S. beginning with the Jamestown Colony, until a national racial-based propaganda campaign about marijuana, “the evil weed,” being used by Mexicans and blacks led to its prohibition as well with the passage of the Marihuana Tax Act (spelled the Mexican version with an “h” at the time) of 1937. During World War II, the government encouraged farmers to grow it primarily for rope and textiles, but rescinded permits after the war ended. Big businessmen like the Duponts and Hearsts, who were heavily invested in paper made from trees and synthetic materials took part in making hemp illegal because they did not want to compete with the hemp products, according to online histories, including Global Hemp.

“It’s all the big money people that are taking it over now as quickly as possible. Massachusetts is just a small player,” said Mr. Dobson, who plans to sell his 35-year-old organic mesclun salad greens business in order to grow cannabis. His son just opened a hemp processing facility in New York. “Money people only care about money. They’re taking this away from agriculture and making it a monetized commodity.”

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