Mar 01 2019 . 14 min read
Hemp’s Heyday Delivers Hefty Payday
Hemp’s Heyday Delivers Hefty Payday
With its recent federal deregulation, hemp has the potential to make cannabis look like small potatoes
With its recent federal deregulation, hemp has the potential to make cannabis look like small potatoes
“It was like a slingshot being held back and back and back and then let go and with a sudden swoosh it’s taken off way beyond my expectation—way beyond anybody’s,” explains Mike Whalen, founder and president of the Nevada Hemp Association, of hemp’s growth into a crop now being cultivated in at least 19 states.
That growth is the result of several factors. The first is the explosion of CBD (cannabidiol) products. “I thought when we first started, we would be growing 30-foot fiber varieties,” explains Whalen. “I didn’t think for a minute that CBD would explode like it has. It will be bigger especially now, more so than ever, with the average person coming around to CBD. When CBD starts getting put into Purina dog chow and Vaseline and every product you can think of, people will start to notice.”
Another big reason for hemp’s boom is the federal Farm Bills that passed in 2014 and 2018. “In the most recent version of the Farm Bill passed late last year, the most profound change is hemp being removed from the Controlled Substances Act and the legalization of hemp production in every state. As a result, hemp farmers will no longer be subject to criminal prosecution for growing hemp,” explains Nevada attorney Derek Connor of the latest Farm Bill which allows for interstate commerce, banking, access to federal water rights, and crop insurance.
“It was a very slow start with a few brave famers willing to risk everything they had on a shaky kind of law that could be interpreted one way or another and could have devastating effects,” Whalen says of the 2014 Farm Bill.
Of the 2018 Farm Bill, Whalen notes, “the protections that we have now are huge, you are not looking over your shoulder all the time. A huge weight was lifted that I equate to when prohibition was lifted. It’s that impactful.”
For Philip Northcutt, CEO of Nevada-based Sierra Gold Hemp, the biggest impact of the 2018 Farm Bill circles back to CBD. “To be honest, what it did was it brought a lot of new CBD companies to the market. And it opened a lot of people’s minds to using CBD because word got out that it was now federally legal and that was holding some people back,” he explains. “We are very blessed that this is now federally legal, and we can transport across state lines and do business in other states. It’s been amazing the response we have gotten and what we are seeing develop in the market.”
The deregulation of hemp will have enormous economic ramifications. “Hemp, from an entrepreneurial perspective, is a broader canvas in a more diverse palette. What I mean by that is if I had billion dollars to get in the marijuana business today, I would still be limited by the square foot. With hemp, it’s just the opposite. You can grow just as much as you can logistically handle. It’s allowing the industry to explode in a way that marijuana can’t do just because of overregulation,” says Northcutt, who predicts his company will produce a minimum of 250,000 liters of CBD oil in 2019.
GROUND ZERO FOR HEMP IN NEVADA
Nevada had 115 licensed hemp growers at the end of the 2018 growing season who were farming hemp on 1,883 outdoor acres and 135,688 indoor square feet, according to Ashley Jeppson, agriculturist for the Nevada Department of Agriculture. Leading the state in growing hemp with the largest number of operations with 47 growers, 882 outdoor acres, and 35,748 indoor square feet is Nye County, home
of Pahrump. Clark County follows Nye with 15 growers, 28.9 outdoor acres and 34,020 indoor square feet, according to Jeppson.
“Here in Pahrump, it [hemp] has grown pretty rapidly,” says Whalen, who adds that the rest of the state is catching up. “Pahrump is ground zero for hemp, I don’t want to toot my horn, but it was me who got the fire started right here in Pahrump.”
Whalen attributes Pahrump’s front-of-the-pack status in Nevada’s hemp arena to the area’s altitude. “I was truly inspired by visiting the local museum and learning about Pahrump’s history in the cotton industry. It was the highest quality in the world, the only better cotton in the whole wide world was from Afghanistan. Turns out we are on the same northern parallel as Afghanistan, Pakistan, Nepal and Morocco—all famous for their hash, which is amazing,” explains Whalen. “We are at the right altitude, and that’s why the cotton grew so well here. I knew right then, bam, hemp was going to be great.”
After a year of research and considering farms in Oregon, Colorado, Oklahoma, and Missouri, Sierra Gold Hemp also saw the value of doing business in Nevada, opening facilities at both ends of the state, in Pahrump and Lovelock. “Nevada is super-friendly when it comes to hemp. We got into it before it was federally legal, before the Farm Bill passed, so it was still kind of a gray area and we saw that the state of Nevada and the Department of Agriculture here was fully embracing the future of hemp, so we decided this is where we wanted to be,” says Northcutt.
FARMERS SEE A HEYDEY
“It’s already had huge ramifications for us because our phone just rings off the hook right now,” observes Northcutt of the ‘14 and ‘18 Farm Bills which have helped to boost hemp’s profile. “Tons of farmers with land call us to inquire about growing hemp.”
Jeppson at the Nevada Department of Agriculture concurs—even though hemp is not Nevada’s most plentiful crop. “Hemp is not in the top three production crops of any of Nevada’s counties, but the program has grown exponentially in the past three years,” she says. “We still receive inquiries every day.”
For good reason—to grow hemp all you need is water, soil, sunlight and seeds. According to Whalen, Nevada is becoming known as the place to grow because of the favorable weather conditions and the dryness. “The environment in Nevada is awesome for growing hemp if you have the right strains and use heat acclimated seeds. We stick with the Afghani-dominant strains which perform better in the desert,” he says, adding that cannabis breeders are coming in droves from California and Washington State to grow.
Northcutt spent last year researching propagation in Nevada. “We would test a certain number of seeds per acre in native soil and see what kind of results we would get,” he relays. “We learned that the Nevada soil is a rugged and brutal environment to pop seeds in. We learned that cuttings or clones or seedlings is the best way to go. You get a much higher success rate.
“Because the environment here is very rugged, you just can’t grow anything. The land is very alkaline, the water is very alkaline, but hemp is very adaptable. We already have cultivars who have adapted to growing here right through our 117-degree summers. Hemp is something that just about any farmer can transfer over to from say alfalfa, for instance.
“Alfalfa farmers are coming on in droves because the money in alfalfa is not that great compared to hemp. Hemp farmers are making $50,000 an acre. They are making a few hundred dollars an acre in alfalfa,” offers Northcutt. “Most farmers when you tell them that, they don’t believe you. But those are the numbers. The margins won’t be like this forever, right now it sells for around $42 a pound, if you look at a bale of hay that weighs 90 pounds it sells for about $16.”
According NvHA’s Whalen, the wholesale cost per pound for "boutique"-style premium hemp strains, cured for smoking, is about $450 per pound. “Biomass, or whole plant for the extraction market, is based on the "point system," meaning the price is completely dependent upon fair market value per CBD percentage points and fair market value is between $4.50 and $5.50 right now. For a large volume buyer, a plant testing at 10 percent CBD would sell for $45-$55 per pound dry weight for "B" grade bud, rough trim,” says Whalen.
Because of Nevada’s fortuitous hemp prices, the Nevada Hemp Association is helping farmers interested in growing pharmaceutical grade hemp. “We encourage small family farmers to get involved, and if they don’t have the finances as an Association we will work with them,” says Whalen. “One acre would be a huge amount of work for two people, so you have to figure two people per acre. It’s about $10,000 an acre to get it to harvest but you will get it back and then some. That’s why a lot of alfalfa farmers in Nevada are switching crops.”
Northcutt’s Sierra Gold Hemp offers another option for farmers considering a future in hemp. Acting almost as a landlord, Northcutt and his team at Sierra Gold Hemp provide seeds to farmers and show them how to grow it. “Basically, he holds the permit and we take the crop and we convert it to oil,” Northcutt says of providing genetic materials to farmers. “Part of our model is we provide the seeds to the farmer. But we also show him how to cultivate it, so he knows how to harvest it and so that he knows how to dry and cure it so when it gets to us, we get a consistent product in the door which makes our process more efficient.”
SERIOUSLY, YOU CAN SMOKE HEMP?
“The rumor was if you smoked hemp, you would get a headache,” explains Whalen when asked about smoking hemp. He enthusiastically explains that the headache theory is a myth and that there are many great smokable hemp strains available in Nevada.
According to Whalen, the most popular strain in the state is Cherry Wine. It has a genetic makeup of Chem Dawg, Skunk Number One and Northern Lights which was then bred with Charlotte’s Web, a renowned strain known for being CBD dominant.
In addition to Cherry Wine, Nevada’s hemp farmers are introducing new strains. “This year there are so many new strains coming out—it’s amazing. They are going into pre-rolls; I love to smoke these things. The one strain I really love is called Suver Haze, it’s fantastic. Another one is called Lifter—when you smoke it, you get flooded with CBD, it got rid of my arthritis pain.”
Whalen lays the good genetics found in Nevada’s hemp strains at the doorstep of former U.S. Senator Harry Reid. “We got the best genetics available and they came in through Harry Reid,” he explains. “That was one of Harry Reid’s last acts as senator, he picked up the phone and called the DEA on our behalf and said let them have their seeds and we got them.”
Northcutt, who has been in the cannabis industry for decades, also used to think smoking hemp was folly. “It’s always been a smokable flower, but nobody did it because it was laughable because when you smoke it, you don’t get high from it. Turns out because of the high levels of CBD, if it’s the right kind of hemp, it’s going to taste very good and its gonna give you a high dose of CBD which people with anxiety say gives them instant relief,” explains Northcutt, who continues, “because it’s a new market, there’s not a lot of people producing smokable flower. It sells for about $7 dollars a gram so that makes it worth it for someone to sell smokable flower. Whereas a couple of years ago, if you would have told me smokable flower was a thing or hemp, I would have laughed at you.”
Northcutt sees a host of health benefits stemming from smoking hemp with the biggest involving cigarettes. “I imagine it’s going to be quite popular for smoking cessation. We are producing a hemp cigarette now. We are still prototyping it. It looks like a pack of cigarettes, they are filtered, they are bio-degradable, but you can pull that thing out and if your eyes are closed, it feels like you are taking out a cigarette and lighting it. People are using it to wean themselves from nicotine,” explains Northcutt.
“Nobody even knows you can smoke hemp pre-rolls. People can smoke hemp pre-rolls for their health and because people like to smoke it’s taking care of their jones, replacing that nicotine need because it calms you down,” explains Whalen, who notes it has obvious medicinal qualities too. “I had a toothache once, rolled one up, took four hits, and it was gone. In two minutes, it was gone,
100 percent gone. Infection was still there but my toothache was gone.”
Whalen also adds that there are so many people who don’t want to get stoned, but they like the relaxation effects. “You hear people say over and over again, I don’t like to smoke pot because it makes me stupid, it makes me goofy and gets me paranoid. They don’t like the effects. With hemp their aches and pains kind of go away.”
There’s a social aspect to it too, notes Northcutt. “People can smoke it and it has that cannabis smell, but they aren’t getting high from it. So, you can still function, you can go out and socialize with people and not get too high from cannabis. Some of the stuff they are selling nowadays you might not want to smoke before hitting a party,” Northcutt offers with a laugh.
HEMP’S HOPPY EFFECT ON CONSUMERS
Beyond smoking it, hemp will find myriad ways to become a part of consumers’ daily lives. “My prediction is in three years you won’t be able to find a dogfood on a shelf that doesn’t have CBD in it,” says Northcutt. “It’s gonna be everywhere because the difference between the two markets is marijuana is for a market of people 21 and over who want to get high. Hemp and CBD is every person in the world and half the animals too. There isn’t a person in the world who is getting too much CBD in their life. This is something that people have had historically in their diets that has been artificially removed during the last 81 years.”
In spite of the soon-to-be ubiquitous potential of hemp, there’s a huge shortage of CBD-only strains in Nevada, according to Whalen. “Good luck finding it. Go into a dispensary and ask for it, it’s very hard to find. They can’t keep it on shelves in dispensaries. There’s a shortage for the smokable kind for right now,” he acknowledges.
In the current market, Whalen says most hemp is being extracted to fill CBD vape pens. “That’s what is driving the market right now because there’s a huge demand. As far as the processors go, right now there is not enough processors. There is a huge bottleneck to get all of this [hemp] material and very few people to squeeze it all into this oil,” Whalen says.
This is where Sierra Gold Hemp comes into the picture. One of the main components of Sierra Gold Hemp’s business model is extracting oil for CBD companies. “Our main customers are other [processing] laboratories and people who have CBD companies,” says Northcutt. “We have a lot of companies with [processing] labs who turn it into isolate or distillate. Some companies take the whole spectrum oil and turn it into dog biscuits or tinctures or whatever they want to do with it.”
As hemp continues to evolve into a major industry, many believe it will eventually dwarf cannabis. Northcutt describes hemp as a Styrofoam block that’s been held under water artificially for too long. “If you hold a big Styrofoam block underwater and let it go, it’s not just going to rise to the surface, it’s going to pop up out of the surface, it’s going to break the surface tension and fly into the air,” he says. “Hemp is the same thing. It’s been artificially suppressed, and all of sudden we are seeing all kinds of innovation in machinery, in harvesting, we are seeing innovation in genetics, extracting, processing products—this industry is going to explode in ways none of us can even imagine.”