Agronomics
There are two potentially viable approaches to growing hemp commercially:
growing hemp for fibre or for seed. If hemp is grown for fibre, it is sown
very densely (a seed rate of 55-70 kg/ha is standard, though for very high
quality textile fibre a much higher seed rate can be used[5]). Since hemp
grows so quickly, at this density hemp can effectively out compete weeds,
and so weed control measures (herbicides) are not needed. If hemp is grown for seed, or as a dual purpose seed and fibre cop, it is grown much less densely (typically 15-20kg/ha[6]) and
is not as effective at suppressing weeds, so herbicides will probably be
required. Hemp seed may be drilled or broadcast, though drilling is recommended
for uniformity. A standard grain drill or modified alfalfa seeder can be
used for sowing.
Pesticides are generally considered unnecessary in the cultivation of hemp,[7]
although researchers in Manitoba in 1995 reported that several pests had
to be contended with.[8] For the purpose of this paper, pesticide use will
be considered to be nil to reflect the majority of findings and hemp's
organic farming potential. Another positive aspect of the crop is that
once planted, no further husbandry is required until harvest, thereby minimizing
labour costs and energy consumption.
Hemp for Fibre
Operating Expenses:
Presently, one of the most significant costs of growing hemp for fibre
relative to other crops is the cost of seed. To ensure that seed strains
being used will meet the generally accepted THC level of <0.3%, certified
varieties from Europe will have to be imported since North American hemp
seed germplasms have completely disappeared as a result of hemp's prohibition.
Not only are the transportation prices very high (over half the cost of
the seed), but certified seed demands a substantial premium because of
current low world supply (perpetuated by the strict certification system)
and continuously increasing demand, especially from Western European farmers.
Based on recent experience, certified seed can be brought into Canada for
approximately $2700/tonne.[9] At a rate of 55-70 kg/ha, this translates
to $61.80 to $78.75 per acre. In 1998 approved cultivars are in short supply and the market prices for these imported varieties are considerably higher. Kenex, Ltd. for example is offering a variety of seeds for $7.25-$8.25/kg or $400-$575/acre.
Although hemp generally requires no pesticides or herbicides, it does have
significant nutrient demands. The figures of 120 kg/ha Nitrogen, 100 kg/ha
phosphate, and 160 kg/ha potash are used for the purpose of cost calculation.
These figures derived from Hemcore's U.K. hemp growing experience are consistent
with other research.[10] Irrigation is required if precipitation is less
than 200mm over the course of the growing period. Harvest period is critical,
since after flowering, the quality of the bast fibres starts to decline.
The operations required for growing hemp for fibre are: seeding, cutting,
baling, and bale handling. According to a number of researchers, hemp can
be cultivated using existing farm equipment, however, for harvesting some
alterations maybe required. The machinery operating, investment and depreciation
costs used in these calculations are based on Ontario and Manitoba corn
production costs, but reflect the need for more robust equipment and /or
higher repair costs due to the toughness of the crop.[11] Storage may also
be necessary, depending on the specific end use of the crop.
Projected Yields:
Claims for hemp fibre yields vary radically. Reported dry matter yields
range from 5-15 tons/ha, of which 12-40% can be bast fibre. The yields
generated by hemp depend greatly on the strain of seed being grown, and
farming practices and conditions. Seeds bred for area with a shorter growing
season, for example, will tend to flower too early, and so will have a
reduced dry mass yield. Hemcore has, for example, reported that the Hungarian
varieties they have tested have had a 70% greater biomass yield than the
French varieties. Furthermore, three years of trials resulted in average
yields of approximately 10.5 dm(dry matter)t/ha, while their first year
of commercial crops yielded only 5.0 dmt/ha. Having no seeds bred specifically
for its growing conditions, the U.K., like Canada, depends on seeds developed
for other climes, so initial commercial results are naturally relatively
low.
The natural, or "unimproved" content of bast fibres in hemp stalks
is only 12-15%. Through selective breeding programs, primarily in France,
Ukraine, and Hungary, the current average is over 20% and many strains
have been reported to yield over 30% bast fibre.[12] Only in Hungary has
any work been done on developing high yielding hybrids, and so as Dave
West points out, "the genetic load of the crop is probably quite high,
which would indicate opprtunity to significantly improve the crop's productivity."[13]
Initial results from Canadian hemp researchers reveal dry mass yields lower
than in other parts of the world. Australian farmers reported yields of
8-10t/ha, Ukrainian farmers 8-10t/ha, Dutch farmers 10-14t/ha, while in
the U.K., in contrast, commercial yields of only 5-7t/ha were reported.
Jack Moes, New Crops Agronomist for Manitoba Agriculture reported yields
from their first year of test of 4500-7700 kg/ha for seven different varieties,
while A.E.Slinkard of the University of Saskatchewan reported yields of
7100-9500 kg/ha. For the purposes of comparison, then a low and high estimate
of dry matter and bast fibre yield will be calculated. A low , but realistic
first crop yield of 6t/ha will be compared with realistic future yields
of 10t/ha. Such yields would very likely be achievable on a commercial
level after a few years of cultivation experience and seed breeding. Also,
a low bast fibre yield of 22% will be contrasted with a high yield of 30%,
for a range of 1.3-3.0 t/ha. This difference can be accounted for by seed
variety and planting density.
Break-even Price for Whole Stalk (Farmgate
$/tonne):
Exhibits 3 details the expected costs per acre of growing hemp, and
compares it to the costs of growing canola and grain corn in Ontario. Machinery costs are estimated using equipment intensive corn cultivation and harvesting as a comparable, and
the high demands hemp places on equipment have also been factored in. The
final figures are in line with the experience of Canadian hemp farmers,
but lower hemp farmers in some other countries. Australian farmers, for
instance, estimated their costs to grow, harvest, manage and secure their
hemp crops to be US$240/t. This figure however, includes irrigation and
storage costs, and the crop was also picked up by hand after being cut
by machine and left to ret in the field. Note that the most significant
cost of hemp relative to the other crops is the cost of seed, over half
of which is the cost of transport.[14]
Below are the prices required at farmgate for break-even, depending on
the yield of stalk realized. These prices are intended to cover ALL fixed and variable costs incurred by the farmer and are based on a medium-long term seed equilibrium price of $2.70 /kg. With the high 1998 prices of seed, cultivation for fibre with the required high seeding rates will be prohibitively expensive.
PRICE REQUIRED FOR FARM GATE BREAK-EVEN
|
Yield (tonnes/ha) |
|
6.0t/ha |
7.5t/ha |
9.0t/ha |
10.0t/ha |
| Seeding @ 55kg/ha |
257 |
223 |
197 |
168 |
| Seeding @ 70kg/ha |
274 |
238 |
209 |
178 |
Hemp for Seed
Operating Expenses:
The cost of growing hemp for seed is reduced since the seeds are planted much less densely. Although they can be planted more or less densely, a rate of 22-35 kg/ha should provide a minimum adequate foliage canopy to limit the growth of weeds, while keeping seed costs to a minimum. At these rates, at $2.70/kg the cost of seed is $59.40-$94.50/ha, at 1998 prices, the cost is $181.50--288.75/ha. The fertilizer and irrigation requirements for growing hemp for seed are comparable to growing hemp for fibre, and as with fibre, no pesticides should be required. It should be noted that at the lower end of this seeding density herbicides may in some cases be required to prevent the spread of weeds. [15]
Harvesting requirements for seed differ somewhat from fibre. Although the
primary revenue will be generated from the seed, the remaining stalks,
though of lesser quality than those grown specifically for fibre, will
also be of value and will have to be harvested. The additional operation
(hence cost) required is combining, where the combine cuts the upper parts
of the plants, and threshes and cleans the seeds. Subsequently the crop
is mown and left to ret and dry.[16]
Projected Yields:
As with growing hemp for fibre, reported seed yields vary considerably.
Seed yields, as well as the seed's oil content depend on the seed variety
and growing conditions. Average expected yields range from 0.7-1.2 t/ha,
and oil content is generally between 30-32% (though expected cold pressing oil yields tend to be in the 22-25% range).[17] Higher yields should be possible in the future as hemp has traditionally been bred exclusively for its fibre. There is potential, therefore, to breed domestically adapted varieties with higher seed and oil yielding characteristics. Future yields of 1250 kg/ha should be attainable and have been included in break-even calculations to determine a more likely long term scenario.
The yield of dry matter stalk when growing for seed will also vary, but if the planted density is at least 15kg/ha, yields are generally expected to be on the low end of the range of expected yields for hemp grown only for fibre. The fibre quality is significantly lower, however, since the plants are subject to less competition and so do not grow as tall as plants grown densely for fibre (which results in long, fine slender stalks and fibre). Also, the fibre quality declines once the plants flower and go to seed.
Sensitivity Analysis of Break-even Points
when growing for Seed and Fibre:
This analysis is based on a long term expected range of prices for hemp seed derived from the average market prices for comparables (soybeans and canola) from 1992-1996. Soybeans and canola reached highs of $368/t and $420/t in 1996 and had 5 year average prices of $300/t and $235/t respectively.[20]
Since hemp seed is such a rich source of protein (25%) and is rich in nutritionally
exceptional oil, these prices represent the low range of expected prices for the short term. In fact, Kenex, Ltd. has contracted hemp seed production in 1998 for $1.10/kg, more than double the highest long term estimate.
Since there is generally some loss of stalk yield resulting from the seed harvesting, low fibre yields of 5.0 t/ha are used for calculation purposes. For each seed price the resulting break-even price for the ‘leftover’ stalk is given in $/tonne. Production costs are based on a long term equilibrium input seed price of $1.35/kg at a seeding rate of 15kg/ha. A medium term input seed price of $2.70/kg cost is still based on imported seed, where transport is up to half the price of the seed. The input seed prices should therefore continue to drop over time, as domestically produced seed becomes available, resulting in a more likely long term input seed price of $1.35/kg. This would be consistent with other crops (soybeans for example), whereby the input seed cost is typically in the range of 2-2 ½ times the market price of the harvested crop. Please note that these cost of production do not include licensing fees as they are not yet known..
Long Term Break-even Price per Tonne of Stalk ($/t)
| |
|
Seed Yields (kg/ha) |
|
| Seed Price |
750 kg/ha |
1000 kg/ha |
1250 kg/ha |
| $300 |
$215/t |
$177/t |
$140/t |
| $400 |
$177/t |
$127/t |
$77/t |
| $450 |
$158/t |
$102/t |
$46/t |
| $500 |
$140/t |
$77/t |
$15/t |
| $550 |
$121/t |
$52/t |
$-17/t |
| $600 |
$102/t |
$27/t |
$-48/t |
Please note that the negative break-even values calculated for seed prices of $550 and $600/t at 1250 kg/tonne represent a positive profit from the value of seed only. Any price for fibre would thus add to the crop’s profitability.
The most important conclusion to draw from this break even analysis is that for hemp to be profitable as market prices for the seed drop to levels more in line with its commoditized competitors, it will be essential that seed yields increase and input seed prices decrease. Both are likely scenarios once domestically bred and adapted varieties become available.
For comparative purposes, average world hemp seed export prices have ranged from C$0.42 cents/kg in 1991 to C$1.26 cents/kg in 1995. Prices have been somewhat volatile over the last 10 years though much of the downward pressure on price appeared to be a result of excess world production from 1986-1990, when China entered the world hemp seed market, tripling world trade and depressing world prices by half (see figure below). As a U.S. researcher Valerie Vantreese points out, this may have important implications for significant increases in world production in the future.
In 1995, world export volume fell by 13%, while seed export prices almost doubled from C$0.71/kg in 1994 to C$1.26 cents/kg in 1995, possibly reflecting an increased demand for seed stock for planting purposes, rather than an increase in world hemp seed demand for crushing purposes.
Additional Costs and Risks
A potentially substantial and unknown variable in growing hemp commercially is the need for special licensing. The current commercial regulations are extensive, and so the costs of conforming are significant. At the present time, Health Canada has not implemented a proposed cost recovery scheme, but they are expected to do so by 1999. These cost are still an unknown.
Also, there is the additional costs of conforming to the regulation, in particular THC testing of the crops. Furthermore, as long as the granting of these permits is at the discretion of the Minister of Health, there is no certainty that a farmer will be able to obtain a license. This is a risk not only to the farmer, but is also a substantial disincentive for industry who would rely not only on the economic viability of the crop, but also on its guaranteed availability. As hemp cultivation and thus commercial licensing becomes more commonplace, these risks should subside.
Finally, assuming that the current maximum level of 0.3% THC will continue, there is a small but still significant risk of the crop testing above this legal level. If, for instance, the crop were to test at 0.5%, which has been known to happen with low THC seed vatieties when the crops are subjected to excessive stress (a hail storm for instance) the authorities would retain the right to destroy the crop, and hence all revenues (and, theoretically, criminally charge the farmer in question). Certainly this risk will be at least partially alleviated by growing only approved cultivars, but then will the seed provider become liable for any variation? If so, the resulting need for additional insurance will likely result in even higher seed prices.
next...
home