Project Management Institute

High Hopes

Farmers Look to Cash in on Cannabidiol Projects

Hemp farming is reaching new highs—particularly in the United States. In 2019, the U.S. cannabidiol (CBD) market was expected to grow 700 percent to US$5 billion. It's on pace to reach US$23.7 billion by 2023.

Farmers and agricultural companies are rushing to cash in with new projects. In 2019, the United States had over 511,000 licensed hemp acres (206,794 hectares), compared to 78,000 (31,565 hectares) the year before, according to advocacy group Vote Hemp. And last year, the number of state licenses issued to hemp farmers surged 476 percent.

A shifting U.S. legal landscape has helped turn hemp into a fertile market. The 2018 Farm Bill removed hemp from the controlled-drug category and now permits broad cultivation of the crop, though under strict regulations. For instance, the hemp cannot contain more than 0.3 percent THC, a psychoactive compound.

For U.S. farmers, the allure of hemp projects is undeniable. A hemp harvest for CBD can net over US$40,000 per acre (0.4 hectares), according to market research firm Brightfield Group. “That's unheard-of in the farming community,” says Bill Billings, co-founder, Colorado Hemp Project. Based in Littleton, Colorado, USA, Colorado Hemp Project develops hemp strains and advises farmers on growing the crop.

“There's a lot of excitement in the farming community because hemp is seen as a high-return crop,” Eric Steenstra, president, Vote Hemp, told CNN. “There are many farmers around the country who are struggling to make ends meet, and they're looking for an alternative like hemp to boost revenue.”

High Risk

Yet despite the potential payoff, hemp farming projects face serious challenges. For instance, harvesting machinery specific to hemp has not yet been developed, so farmers have to rely on expensive manual labor.

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A Hemp Depot growing facility

PHOTO COURTESY OF HEMP DEPOT

“The biggest issue in this industry is harvesting, because of the lack of efficient equipment and because of labor shortages,” says Mr. Billings, who points to the dwindling number of immigrant farm laborers.

One organization, Hemp Depot, is taking control of uncertainties. Shortly after the company was founded in 2015, its owners realized they would have to contend with significant limitations: The available hemp seeds weren't always of the highest quality, extraction companies worked too slowly and there were too few manufacturers turning hemp into retail products. So, Hemp Depot launched a portfolio of projects to develop its own seeds, and it started its own extraction and manufacturing services. In 2019, the company completed a project to build a 26,000-square-foot (2,415-square-meter), US$1.7 million manufacturing facility.

“As we've run up against roadblocks that inhibit us from taking our hemp from seed to shelf, we've taken each step and brought it in-house,” says Andy Rodosevich, CEO and co-founder, Hemp Depot, Denver, Colorado.

Along the way, Hemp Depot has expanded exponentially—going from 15 hemp acres in 2017 to 650 in 2018 to over 1,300 in 2019. The organization has been able to deliver those expansion projects by using its existing sales revenue to set project budgets rather than taking out loans from private investors. “That allows us to expand without over-expanding,” Mr. Rodosevich says.

Identifying efficiencies also has enabled Hemp Depot to deliver its expansion projects. For example, a project team developed a method to modify standard harvesting equipment so that it can separate the hemp that contains CBD from the rest of the plant. The team learned that lesson the hard way, as equipment expelled too much hemp or ground it into dust. “We made millions of dollars’ worth of mistakes,” Mr. Rodosevich says.

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—Andy Rodosevich, Hemp Depot, Denver, Colorado, USA

Other hemp farming leaders will have to identify and leverage their own efficiencies if they are going to successfully execute expansion projects and thrive in a market that risks oversaturation. “Farmers think hemp is a big gold rush,” Mr. Billings says. “But it's the hardest farming you've ever done.”—Novid Parsi

Hemp's Moment

1937: With the Marihuana Tax Act, cannabis, which had been sold in drug stores, becomes effectively illegal.

1970: The Controlled Substances Act makes all cannabis, including hemp, formally illegal.

2014: With the Farm Bill, the U.S. government makes a distinction between marijuana and hemp, allowing for protected research of the latter.

2018: The new Farm Bill says hemp is no longer a controlled substance and makes it legal within certain restrictions.

Sources: Brightfield Group, Brookings, New Frontier Data, Vote Hemp

The United States of Hemp

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