Illinois Hemp Farmers Leverage High Risk for High Profit Potential

But this year, they’re starting a new crop that became legal in Illinois only earlier this year – industrial hemp – and that’s what the mice found especially tasty.

At a cost ranging from 25 cents to $1 a seed, rodents in the greenhouse are only one of many risks Illinois hemp farmers face.

“It’s very risky, very risky,” Lawrence said during an interview on his farm.

Fortunately for Lawrence, the damage was minimal. He has hundreds of additional seedlings growing in that same greenhouse, as well as hundreds more germinating under lights in an upstairs room of the house that sits on the property.

With luck, each of those plants will grow to produce 1 to 2 pounds of flower rich in a compound called cannabidiol, which when extracted can be used to control a wide range of medical conditions, including seizure disorders.

And with market prices ranging from $80 to $100 a pound, depending on its CBD content, that makes each one of those seedlings extremely valuable.

That industry, however, became possible only in recent years. Since the 1930s, industrial hemp had been illegal in the U.S., with a brief exception during World War II, because it was classified as a narcotic in the same category as marijuana. It was only in 2014 that Congress began allowing states to authorize limited production for research purposes, and it finally was legalized in the 2018 Farm Bill, which Congress passed in December.

“Six months ago, this would have been the mother of all felonies,” Lawrence said as he looked around his greenhouse. “It’s no joke. Until the 2018 Farm Bill was signed, it was still under controlled substance territory. This would have been a Schedule I drug, but since they deregulated CBD, they removed CBD out of the Schedule I drug category.”

Lawrence said the plants are classified as industrial hemp as long as they test below 0.3% tetrahydrocannabinol, more commonly known as THC, the principal psychoactive ingredient in marijuana.

“So, we can grow a CBD crop now, as long as we don’t go above 0.3% delta 9-THC,” he said.

The Illinois Department of Agriculture began accepting applications for licenses to grow industrial hemp April 30, and as of June 10, according to agency figures, the state had issued licenses to 474 growers covering about 12,103 acres.

That’s small compared with the 11 million acres of corn the state produced in 2017, or the 10 million acres of soybeans farmers grew that same year.

In terms of income potential, however, there is little comparison. In 2017, according to the Illinois Department of Agriculture, corn production in Illinois averaged 201 bushels an acre, and it sold for $3.35 a bushel, or $673.35 an acre. Soybeans yielded about $556.80 an acre.

But some in the industry believe a quality hemp crop that’s geared toward CBD production could generate as much $90,000 to $160,000 an acre, depending on how many flowers the plants yield and how much CBD they contain.

“It’s just that the CBD craze that’s going on right now has produced some pretty tremendous stories of farmers and what they can earn on an acre of hemp flower,” said Kevin Pilarski, chief commercial officer of Revolution Cannabis in Elmhurst.

Different varieties of hemp can be grown for its fiber or to produce seeds. But for now, Pilarski said, Illinois farmers are focusing exclusively on CBD production.

For farmers hoping to cash in on that market, there also are substantial risks.

Ginger Duer, president and founder of Delta Valley Logistics – a company that grows industrial hemp in Illinois, California and Ontario – said the first of those is upfront capital investment.

“I tell our farmers to anticipate spending – from before they purchase seeds to when they have a salable biomass at the end of the product cycle, they have a product that is dried, packaged and ready to sell to a processor – $15,000 to $20,000 an acre,” Duer said. “Now, that is making an assumption that the farmer does not have a lot of equipment that they’re going to have to obtain. However, for the vast majority of farmers, you do have that equipment.”

Both Duer and Lawrence acknowledged another risk about the hemp industry: the fact that there is not yet accredited crop insurance for it.

“Every farmer out there who’s currently growing hemp is running naked,” Duer said. “But that’s causing other problems within the hemp markets because it’s making it more difficult to pre-sell their crop because there’s no crop insurance.”

In addition, she said, certified industrial hemp seeds are not yet available, which makes shopping for seeds a risky venture of its own because of what she described as “rampant fraud” in the hemp seed market.

“We’re talking about people selling seed stock that is two to three years old as ‘fresh’ seed stock, so the germination rates are 50% to 60% instead of above 95,” she said. “You have people selling seeds that were pollinated by high-THC drift in certain states and areas of the country, leading to farmers planting plants that they believe are going to be industrial hemp but are legally marijuana and have up to 6% to 7% THC by harvest.”

Lawrence, who said he bought seeds from hemp farmers in Colorado and Oregon, where production has been legal for some time, said he experienced the uncertainty of the seed market as soon as he decided to go into production.

“Imagine doing a wire transfer for $10,000 or $20,000 with somebody in another state that you’ve never met for something that was, six months ago, a felony,” he said.

In addition, he said, even though the seeds came from plants that met the standards for industrial hemp in another state, that does not necessarily predict how they will grow in the fertile soils and hot summers of Illinois.

There always is a danger, he said, that the plants will end up producing too much THC.

“Before we harvest, the state will come in and take samples, send those in and get our levels, and if it tests over a certain percent, we have to burn the crop,” he said.

Duer said she believes the hemp industry in the U.S. never will fully stabilize until there is crop insurance available and there are controlled, certified seeds available to farmers.

Lawrence, however, remains optimistic that eventually will happen.

“I’m thinking in another four or five years this is going to be just like any other commodity,” he said. “Once more farmers start doing this, especially with grain and fiber, once the infrastructure for those crops is in place for processing grain and fiber, I think this will go mainstream. We’ll have corn, beans and hemp growing everywhere.”