Profits Waiting If Hemp Legalized, UK Study Says

LEXINGTON HERALD-LEADER
Lexington, Kentucky
July 4, 1998

Profits waiting if hemp legalized, UK study says
By Janet Patton Herald-Leader Business Writer

Not only is industrial hemp a good idea for Kentucky, hemp might be the best thing for the state to grow since tobacco, according to a University of Kentucky study of the potential for profit from a crop that farmers in the state have sued for the right to grow. “We believe the UK study is a landmark, watershed event,” said John Gilderbloom, a University of Louisville economics professor who wrote a foreword endorsing the study, Economic Impact of Industrial Hemp in Kentucky. “This is the premier study done on the impact of hemp.” The 18-month study released yesterday concludes that the present market for hemp grain and straw in various industries could support the cultivation of 82,000 acres of industrial hemp in the United States, and if Kentucky acts fast, a lot of that could be grown right here. “This crop is like a Rip Van Winkle, coming back to wake,” said Jake Graves, president of the Kentucky Hemp Museum and Library, which sponsored the $23,000 study.

Graves and other hemp advocates have been fighting for almost five years to farm a crop that hasn’t been grown legally in the state since World War II. “The returns from hemp fall somewhere between tobacco and other crops that are already grown in Kentucky,” said Mark Berger, director of UK’s Center for Business and Economic Research. Berger is co-author of the study with economists Eric Thompson and Steven Allen. Their study sees a profit of between $220 and $605 an acre in today’s market. “The potential depends in large part on how many processing facilities locate in the state,” Berger said. There are no facilities that can process raw hemp straw in the United States. These findings differ from a 1997 UK College of Agriculture study that did not see much of a market for Kentucky hemp. “Worldwide, the hemp market continues to shrink year after year after year,” said agricultural economist Valerie Vantreese, author of the ‘97 study. “The European Union heavily subsidizes the hemp market, but it still remains very, very small,” Vantreese said. “Last year, the total trade of hemp fiber and seed was only about $12 million.” Berger agrees that in developing countries such as China, one of the world’s largest hemp producers, the market for hemp is shrinking. “But in higher-income, more-developed, more environmentally friendly countries, it’s growing,” Berger said. Vantreese also said that a significant increase in production – Kentucky joining the world market, for instance — would depress prices.

The new study stresses that the effect as assessed is only at today’s prices, which would probably fall with competition and rise with greater demand for hemp products. Allen said the market probably will increase for products people might be willing to pay a little more for — things like tree-free paper and environmentally friendly cloth. “It has wonderful qualities, but it’s not cost-competitive,” Vantreese said. “I firmly believe that we can import from China or the European Union just as cheaply, if not more cheaply, than what we can produce it for here.” But home-grown hemp might have an advantage with lower transportation costs, Allen said. “A lot of the demand for the products is from Europe and North America.” And Berger doesn’t think competition from Europe and China would stop Kentucky farmers from trying. “If it were legalized tomorrow, I think you’d see Kentucky getting into hemp in a moderate way,” Berger said. “The economic returns are there for people to take a stab at it, especially as we’re looking for alternatives to tobacco.” Joe Hickey, executive director of the hemp co-op, said the study lays the groundwork for research to begin. “Whoever has the industry that can use hemp as a feed stock will attract the first growers,” Hickey said. “Then farmers will … get into value-added production.” Gilderbloom said the environmental advantages of hemp, coupled with the economic benefits predicted in the study, give hemp the edge over other possible alternatives to tobacco. “It’s the knockout punch for opponents to hemp, including the nation’s drug czar,” Gilderbloom said, calling director of national drug policy Barry McCaffrey “the foremost opponent now of hemp.” Gilderbloom said he hopes the study will be the spark for lawmakers to re-examine the crop, and serve as the basis for new hearings both in the state and in Congress. “We hope it sparks controversy, because out of controversy comes fact,” said Andy Graves, president of the Kentucky Hemp Growers Cooperative. He is also a plaintiff in a lawsuit that farmers who want to grow hemp filed in U.S. District Court in Ashland in May against the DEA and the Justice Department.

Andy Graves said copies of the study have been sent to national newspapers and prominent lawmakers, including Sen. Trent Lott, R-Miss. “These are the people who might be in a position to convince … McCaffrey to find a diplomatic way to change his position.” As for how much support hemp has in Kentucky’s General Assembly, “my guess is none at this point,” said Andy Graves, who farms tobacco in Central Kentucky. But, he said, it’s important for lawmakers to realize that tobacco probably has a limited lifespan. “Something else needs to happen,” he said. “We’re not and never have asked anyone to change drug law. This is not a drug crop.” Tommye Chaney of Ewing agrees. Her grandfather grew hemp on his Fleming County farm during World War II and now she imports hemp from China to spin into cloth to sell. She said the only people who don’t understand that are politicians and law enforcement officials. Chaney was one of about 35 people who came to Ashland, Henry Clay’s estate in Lexington, for the study’s release. “I talk to people in Renfro Valley,” Chaney said, “People down there are hungry for something to grow.” Jean Laprise, director of Kenex Ltd. in Ontario, said he sympathizes with the problems U.S. farmers are having getting government permission to grow hemp.

Canadian farmers are growing 4,500 acres of hemp this year, including Laprise’s 2,000 acres. Kenex, the largest Canadian importer of seed, has about 50 farmers under contract, and Laprise said he hopes to double that acreage next year, if the market permits. He will harvest his first commercial crop in August, when his $4 million processing plant in Chatham will begin turning 5,000 tons of hemp into meal, oil, fiber and hurds for animal bedding and matting for the automotive industry. “Even though it’s legal in Canada, it’s still not that easy,” It’s stringently regulated.” Laprise said that 10 days ago, Health Canada, the equivalent of the U.S. Drug Enforcement Administration, audited his site, checking everything from security to inventory control. “Regulatory officials understand the situation,” Laprise said. “We have an industrial crop growing that’s no different from growing tomatoes or brussels sprouts.” All Contents © Copyright 1998 Lexington Herald-Leader. All Rights Reserved

LEXINGTON HERALD-LEADER
Lexington, Kentucky July 4, 1998
Hurds could be Kentucky product
By Janet Patton HERALD-LEADER BUSINESS WRITER

Animal bedding is an example of a market for a hemp product that Kentucky might have a unique advantage in, according to the Economic Impact of Industrial Hemp in Kentucky, which was released yesterday. Hemp hurds, from the woody, pulpy middle of the stalk, are often just a byproduct of processing the plant. When the hemp fibers are removed from the plant, 68 percent of the plant — the hurd — is left. In England and France, which together grow more than 35,000 acres of hemp, hurds are primarily used for animal bedding. Because of Central Kentucky’s proximity to the thoroughbred horse industry, hemp grown and processed here would have a ready-made market, the study suggests. “In talking with people in England who’ve done this for two to three years, this is a premium product, one that’s going to be used on more high-value horses,” said Steven Allen, co-author of the University of Kentucky study with Mark Berger and Eric Thompson. “And that’s what we have here,” added Berger. Based on Jockey Club figures, Allen, Berger and Thompson estimate there are 77,000 thoroughbreds in Kentucky in any given year; 117,000 thoroughbreds in Kentucky and surrounding states; and 640,000 thoroughbreds in the United States. If 10 percent of these horses switched to the hemp bedding, with each animal using 180 pounds a week, then each year there would be a yearly market for 36,000 tons in Kentucky, 55,000 tons in Kentucky and adjoining states, and 300,000 tons in the U.S. It would take 12,000 acres of hemp just to satisfy the estimated demand for the hurd in Kentucky, and 7,000 more acres for the adjoining states. Because the bedding is bulky, shipping for long distances might erode the price advantage. Using American Horse Council figures, the authors estimate there are 4.4 million other registered horses in the United States. It would take an additional 71,000 acres to make enough bedding if only 1 percent of the horse owners switched to the hemp hurd bedding. Wood chips and fine wheat straw, the main types of bedding now used, retail for $180 to $240 a ton; hemp hurds could be processed for sale at very competitive $30 a ton wholesale. Hemp hurds are also more biodegradable than would chips or straw. “It’s much more absorbent, they say, and produces a better animal bedding,” Allen said. All Contents © Copyright 1998 Lexington Herald-Leader. All Rights Reserved

Growing Hemp Would Create Jobs, UK Report Says

THE LOUISVILLE COURIER-JOURNAL
Louisville, Kentucky
July 4, 1998 Business Section

GROWING HEMP WOULD CREATE JOBS, REPORT SAYS UK

Study offers new support for legalizing crop By Tim Whitmire Associated Press LEXINGTON, Ky. – Legalizing hemp – the controversial, non-potent cousin of marijuana – could give Kentucky agriculture a financial high, according to a University of Kentucky report released yesterday. The report by the school’s Center for Business and Economic Research said cultivating and processing hemp in Kentucky could the state up to 771 new jobs and $17.6 million in worker earnings in the current market. The study was released before an audience of hemp supporters at a news conference at the estate of early 19th-century U.S. Sen. Henry Clay. In his time, Clay was one of Kentucky’s leading hemp cultivators. Mark Berger, a UK economics professor and one of the study’s authors, said in an interview before the study’s release that hemp – which can be used in paper products and textiles, as a fiberglass substitute and as an oil in food, cosmetics and pharmaceuticals- is a viable crop. “We’re optimistic about the returns that can be earned from growing hemp,” he said. ” It looks to us as though you can earn some returns on growing hemp that are below tobacco but above other crops.”

Hemp’s opponents, particularly in law enforcement, ” have always contended that it’s not economical,” said Joe Hickey, executive director of the Kentucky Hemp Growers Cooperation Association. “This report pretty much puts that to rest.” According to the study, profits per acre from hemp cultivation could range from $220 for hemp grown for grain or straw production to $600 for raising certified seed for planting by other hemp growers. That’s less than the $1,500 per acre return on burley tobacco or the $1,000-per acre profits from dark fire-cured tobacco, but higher than returns on soybeans, hay, corn, wheat and grain sorghum, the report says. That could be good news for Kentucky farmers concerned about tobacco’s future. Disease-resistant hemp is also viewed as a useful rotation crop among grains and vegetables. Hemp and marijuana are both varieties of the same plant. But hemp typically contains less than 1 percent of THC, the ingredient that makes pot smokers high. Government officials fear hemp farming could mask the growing of marijuana. The national drug czar, Barry McCaffrey, has been adamantly opposed to legalizing hemp.

In a lawsuit pending in federal court of Lexington, Hickey’s group and several would-be hemp farmers contend that federal law enforcement agencies and the Drug Enforcement Administration have overstepped their bounds in outlawing industrial hemp cultivation. Mark Farrow, the deputy commissioner and general counsel of the state Department of Agriculture, said his agency would have no comment on the UK report until it had a chance to read it. Hemp was an important crop in Kentucky throughout the 19th century and early in this century, but was banned in 1937 when the federal government outlawed marijuana. Berger cautioned that, given the current demand for hemp products, legalization of hemp is not a magic solution for farmers looking to get out of growing tobacco. “The size of the market that exists right now is nowhere near the size of the market for tobacco,” he said. “Some farmers might just grow hemp (only), but it wouldn’t be a lot of farmers.” Still, Hickey believes hemp’s future is wide open. “The opportunities go nowhere but up from here,” he said, comparing industrial hemp to the underdeveloped plastics industry of the 1920’s and 30’s. “What I want people to understand is that this report is as conservative a report that could be written,” he said. “Being this conservative, it can’t be shot down.”

The authors of the report seem to agree, writing that “technologies are under development, that may allow industrial hemp products to compete in bulk commodity markets. The economic impacts that would occur if these technologies were found to be commercially feasible would be substantially greater those identified in this report.” Berger said the study’s objectivity was not affected by having its $23,000 cost paid by a pro-hemp organization. “The reason that they come to the university is that they can get the most objective study that is possible,” he said. “We’re not a consulting firm that is beholden to them. They pay for the study, but the editorial content of the study is in our hands.”

Farmers Will Release Hemp Study This Weekend

LEXINGTON HERALD-LEADER
Lexington Kentucky July 1, 1998
FARMERS WILL RELEASE HEMP STUDY THIS WEEKEND

Study to examine profits, costs of controversial crop
By Janet Patton Herald-Leader Business Writer

Kentucky farmers who want to grow industrial hemp hope a July 4 weekend event becomes their Independence Day.
On Friday, the Kentucky Hemp Museum and Library will release the results of an 18-month study of the crop’s economic viability. Invited to the 3 p.m. unveiling are celebrities who range from President Clinton and Gov. Paul Patton to drug enforcement czar Barry McCaffrey and U.S. Attorney General Janet Reno. “This is really an issue of freedom to farm,” said Joe Hickey, president of the Kentucky Hemp Growers Cooperative Association. Andy Graves said the July 4 weekend is symbolic of farmers’ desire for the freedom to grow hemp. Graves is one of the plaintiffs in a lawsuit that would-be hemp farmers filed in May against Reno and the DEA. The federal response is due July 15.

The $23,000 study, done by economists at the University of Kentucky’s Center for Business and Economic Research, covers a lot of new ground, said the researchers, who were surprised at how little previous data had been generated. “I think everybody else is going to kind of be kind blown away when they read it,” Hickey said. For the release of the study, the hemp advocates picked historic Ashland, Henry Clay’s estate, where it’s said the Great Compromiser once grew hemp himself. Today’s potential hemp farmers are seeking a compromise, too ? one reached with the government that would allow the growing of industrial hemp. “It’s like any economic study,” said Graves. “This is a credible business college, credible people that put this together, unbiased. “We want people to stand up and disprove what the study says if they’re so smart. The only way to disprove it is to grow it and sell it,” he said. The study is expected to give a clearer picture of the economics of the industry. “The idea was to look at the economic potential of hemp for the state economy of Kentucky,” said Mark Berger, one of the study’s authors.

“To look at the size of the existing market for hemp and do some scenarios for potential size of the market … compared with the returns of what farmers could get instead of corn and tobacco.” Berger said the study is very conservative in its estimates. “We didn’t engage in any unneeded speculation about what the market would be like,” he said. To assess the market, co-authors Eric Thompson and Steven Allen traveled to the hemp-growing nations of England and Germany. The two also talked to hemp growers and processors in China and France, the countries that grow the most hemp. The study does not address law-enforcement concerns involving marijuana versus industrial hemp, which has little worth as a drug crop, hemp advocates say. To gauge the cost of a detection program to discourage growing illicit plants, the economists looked at Canada, which is just getting into its second crop. Canadian farmers, who typically grow at least 25 acres of hemp, pay about $50 each to cover the costs of a 10-year background check and plotting of geographic coordinates for satellite photos of fields, said Thompson. “We were dealing with enough speculation as it was, and here’s a place that’s doing it,” Berger said. “We were convinced by that (that the prohibition on growing marijuana can be enforced).”