To obtain the most value from the long hemp fiber, the outer layers of the stalk must be removed, a process known as decortification. Cost-effective mechanization for this has not been available. Using Canada as a model, profitable opportunities to date have been largely limited to seed and oil production.
“In the end, fiber production is going to depend on a processing plant being fairly close and willing to pay a high enough price to entice farmers to switch over to grow it,” Halich said.
The hemp oil processing chain is fairly well established. Maynard, however, spoke with a representative of a Canadian processing company who said even a large oil customer that might use 30,000 pounds of hempseed oil per year would support only 96 acres of production.
“None of the processors with whom I spoke — and some of these are well established companies in Canada — none of them thought it was going to be an activity that would produce large numbers of employment or require large numbers of acres,” Maynard said.
For about 15 years in the middle of the 19th century, Kentucky was one of the major hemp producers in the country, until cotton and imports of other materials became more popular. During World War II, industrial hemp production peaked for the manufacture of rope and twine for the war effort. Kentucky, with its 52,000 acres, claimed about 10 percent of the market share.
“While our study, under the most optimistic scenarios does show some promise, the current market for industrial hemp products would only generate hemp sales and jobs in the short-run that would be relatively small compared to the rest of the Kentucky agricultural economy,” Snell said.
The study is a reminder that should regulations relax and hemp production be allowed, Kentucky producers cannot assume they will automatically corner the U.S. market; other states will enter the market, as well.
“If hemp proves to be profitable in the short-run, without barriers to entry, the emergence of new producers from other states and nations could easily result in over-supply and price volatility, which could erode long-term profits to levels comparable with other row crops,” Snell said.