Source: gurufocus.com
Hemp could be a great investment for agriculture industry
Today’s agriculture industry is seeing a surprising growth trend in hemp. It’s something of a controversial crop among farmers, since it’s also the basis for marijuana, but the plant boasts a host of health and wellness benefits.
Its popularity makes it a hot commodity for professional cultivators. Hemp is a high-value crop due to its sustainability.
The plants grow very close together, so people who grow it can maximize acreage. Because of this tight-knit growing pattern, hemp also requires little to no application of pesticides and fertilizers. The hemp chokes out other plants as well as insects.
Overall, hemp offers a range of options for both farmers and investors. It’s worthwhile to study what drives the market, both in the positive and negative senses, before you dive into the business.
Hemp offers a variant market for farmers
You might not be aware of this, but hemp is a highly versatile and useful crop. It offers a great many opportunities to farmers, particularly in the Midwest where there’s plenty of flat and cultivatable land.
“Industrial hemp is used for all types of different things: fiber-based products like rope, fabrics, some resins and plastics. There are also opportunities for possible food products, and the oils can be used much like vegetable oils,” Bill Bodine, associate director of state legislation for the Bloomington-based IFB, told the Journal Gazette & Times Courier.
“It’s not that the market will materialize overnight, but there are a lot of opportunities for growth.” The profit potential for such a versatile plant that will grow in a compact space is huge. The potential to spread economic prosperity throughout the farming regions of the nation is massive.
“We already have markets like that established in West Virginia, which could create economic prosperity in areas where we have a lack of diversity or prosperity,” Mike Manypenny, a grower with the West Virginia Farmers Cooperative, said in an interview with the West Virginia State Journal. “It creates a new opportunity for farmers and the downstream industries that can come along with it.”
Processing challenges hinder the market
Unfortunately, hemp continues to face a few production challenges, which makes it an uncertain gamble for farmers and investors. “When you put fiber on a truck, when it goes any distance past 100 miles, any profit is gone,” Cory Sharp, CEO of HempLogic, in Moses Lake, Washington told Marijuana Business Daily. “That’s been the killer of the hemp market.”
Sharp has partnered with Power Zone, a Colorado-based farm equipment manufacturer that has experience producing decortication machines. Power Zone has designed a new machine that can produce 10 tons of hemp an hour, which can be transported on trucks thereafter.
“If you talk to anybody in the hemp industry they’ll tell you there’s a huge disconnect between the producer and the end user,” Corbett Hefner, VP of research and development of Power Zone, told Marijuana Business Daily. “We just don’t have the processing…. This is a game changer.”
This development won’t solve every processing problem in the hemp industry, but it’s a good start. With time, the price for the $2 million machine will likely fall, and more hemp end products will have been discovered.
Since the market appears to be moving in a positive direction, some investors are likely to bank on its potential.
Laws still prevent mass industrial hemp growth
A key challenge that faces the future prospects of the hemp industry is legislation. Many states, including Illinois, do not allow farmers to grow hemp industrially because of its association with marijuana.
“There is some concern from the medical marijuana community that some of the products made from industrial hemp might also be made from medical marijuana,” Bill Bodine of Illinois said. "Because of that gray area, it was tough to get it all defined.”
Perceptions about hemp will probably have to change before it becomes legal in states where it’s currently not sanctioned. The Midwest poses a particular challenge for conservative legislation that prohibits the cultivation of hemp.
“The first thing we’ve got to do is educate people that marijuana and hemp are not one and the same,” Eric Pollitt, president of the Hemp Industries Association branch in Illinois, told the Journal Gazette & Times Courier. “Hemp has no drug value at all. But it can be used for a lot of other things.”
Potentially high returns for early investors
The prospect may be slow going, but as growers in Illinois and other farming states resolve to band together and educate their legislatures on the benefits of growing hemp for industrial uses, the market could take off.
Hemp is a strong plant, and it’s easy to grow. The nation’s opinion of hemp has already shifted in a positive direction somewhat; it’s probably only a matter of time before hemp becomes a huge market through which early investors will profit the most.
Disclosure: I do not own any of the stocks mentioned in this article.
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