'Massive oversupply': Nevada hemp farmers scale back amid saturated CBD market

Some search for industrial opportunities to combat 'hemp recession'

While the primary driver in the hemp industry is CBD, farms like Sierra Nevada Hemp in Carson City (pictured here) see opportunities for the plant in other sectors, like construction and fabrics, says owner Mark O’Farrell.

While the primary driver in the hemp industry is CBD, farms like Sierra Nevada Hemp in Carson City (pictured here) see opportunities for the plant in other sectors, like construction and fabrics, says owner Mark O’Farrell. Courtesy Photo

By Kaleb Roedel

Wednesday, August 25, 2021

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In the summer of 2019, hemp farmers Joe Frey and Adrienne Snow saw demand booming for their crop — so much so that the founders of Western States Hemp in Churchill County had 100 acres of the lush green crop sprouting from their farmland.

A lot has changed in two years.

“This year, we have about eight acres,” Frey told the NNBW this month.

Western States Hemp is far from the only farm to dramatically scale back. From 2019 to 2020, the acreage of hemp planted across Nevada fell by nearly 70%, dropping from nearly 5,000 acres to roughly 1,600, according to the Nevada Department of Agriculture (NDA).

Over that one-year span, the number of certified hemp growers in the Silver State fell from 213 to 116. Western States Hemp, for one, has been growing since 2016, when it joined the state’s hemp-farming pilot program.

“We’re one of the only remaining hemp farms that began with the onset of the state’s program,” said Snow, who is Frey’s sister-in-law. “Most of the farms didn’t make it through ‘the hemp recession,’ if you will.”

Joe Frey is cofounder and owner of Western States Hemp in Churchill County. Courtesy photo

 

The seeds of a downturn were planted in 2018 when the federal farm bill legalized nationwide growth and cultivation of hemp. Until then, the FDA treated hemp in much the same way as its cannabis cousin: a controlled substance. The new farm bill, however, recognized the plant as having just a trace of THC, a compound that is more present in marijuana — and that produces the high associated with it.

The difference is what helped make hemp the crop of choice for cashing in on the surging market of products containing the non-intoxicating compound found in cannabis plants: CBD.

“At that time, with the risk factor removed completely, banking opened up for hemp growers,” Snow recalled. “And tons of people jumped in.”

‘MASSIVE OVERSUPPLY’

She’s not kidding. From 2018 to 2019, Nevada saw the number of hemp growers nearly double (115 to 216) and the total acreage of hemp planted more than quadruple (1,128 acres to 4,917), according to the NDA.

That explosion in hemp farming was happening in every corner of the country. In fact, the total acreage of hemp planted nationwide also grew more than four times over that year, jumping from 32,000 acres to 146,000, according to the U.S. Department of Agriculture.

“There was a massive oversupply,” Snow said. “I would say the majority of people who jumped in 2019 — subsequent to the 2018 farm bill — were already out; they were one and done. However, that oversupply is still being sold on the market today.”

As a result, prices have plummeted for trimmed hemp flower and hemp biomass, which is the remaining organic material after the flowers and seeds have been harvested.

Adrienne Snow is cofounder and business development manager of Western States Hemp in Churchill County. Courtesy photo

 

At its peak, hemp biomass was going for $22 to $25 a pound, said Frey, adding: “That same biomass, I couldn’t get rid of it for $1 a pound today.”

Trimmed hemp flower, meanwhile, fell from $350 a pound to $50 a pound, according to Snow. And CBD isolate, the crystalline solid or powder derived from the hemp plant that contains 99% pure CBD, dropped from $3,000 a kilogram to $300 a kilo, she added.

This, Snow said, is why even more hemp growers in Nevada and beyond will be pushed out of the saturated CBD market.

“At this point, none of the outputs are sustainable,” she explained. “No matter how much you cut your costs as a farmer, once this oversupply is gone, there’s no way a farm — I don’t care how efficient they are — can farm the hemp, extract the hemp, pay all the employees, and sell a kilo of (CBD) isolate for what they’re selling it for now.”

SEEKING SUSTAINABILITY

Carson City farmer Mark O’Farrell is trying to be an outlier. O’Farrell was a longtime vegetable farmer who, a few years ago, was looking to scale back his operations and focus on a smaller crop. He turned his attention to hemp, launching Sierra Nevada Hemp in 2017, a year before the 2018 farm bill opened the floodgates.

“I thought it was a good chance to get in on the ground floor of getting the hemp industry jump-started here in Nevada,” O’Farrell said.

Mark O’Farrell is owner of Sierra Nevada Hemp in Carson City. Courtesy photo

 

While excited about his new hemp venture, O’Farrell has been careful not to plant too much. Cultivating just two and a half acres its first year, Sierra Nevada Hemp has never planted more than seven acres of hemp.

O’Farrell said many Nevada vegetable farmers and ranchers were converting some acreage to hemp as a cash crop, only to get burned by CBD companies that “were going to purchase their product but never came through.”

As such, Sierra Nevada Hemp is focused on quality over quantity. O’Farrell said they have honed in on unique and natural extraction processes to create CBD products that will stand out to users in a crowded market. All told, there are some 1,500 CBD brands in the U.S. jostling for market share, according to research firm Brightfield Group.

“There are a lot of people who were in it just to try to make a fast buck, so there are so many products that are just junk CBD,” he said. “The biggest challenge is that there are so many out there. It’s been a challenge getting through the local market, but we’ve been pretty successful.”

O’Farrell said Sierra Nevada Hemp averages monthly sales between $16,000 and $18,000 for its CBD products, which include oils and smokable flower. When the pandemic halted sales at local retailers, the company started using area farmers markets to get its products in front of consumers, O’Farrell said.

“Doing the farmers markets has been great, because I get to hear from people how much our products help them,” he said.

Sierra Nevada Hemp in Carson City has about seven acres of hemp planted this year, according to owner Mark O’Farrell. Courtesy photo

 

Sierra Nevada Hemp’s growing customer base encouraged O’Farrell to look into expanding. Specifically, he is seeking a commercial building in Reno to serve as a retail space and a processing facility where the company could “potentially reduce costs by making larger batches.”

“Even though we’re getting to that threshold where we could be sustainable,” he said, “we still need to look at ways to lower production costs and increase our sales quite a bit in order to be really sustainable.”

NEW HEMP VENTURES

While the primary driver in the hemp industry is CBD, there are other opportunities for the plant, according to the hemp farmers who spoke with the NNBW.

With its strong fibers, hemp historically was grown to make industrial rope, fiber and paper — until was effectively made illegal in 1937 by the Marijuana Tax Act. Many decades and legalizations later, along with CBD, hemp is used to make a range of products, from body lotion to clothing to construction materials.

“Hemp is naturally antibacterial, and it’s really durable,” O’Farrell said. “It’s an excellent material for making fabrics — there’s just tremendous potential for hemp fabric here.”

He also sees a lot of opportunities in construction with hempcrete, a mixture of hemp fibers and binders that can be used as an alternative building material or insulation.

The Western States Hemp owners also feel optimistic about hemp’s future on the industrial side. Snow, in fact, said they started as industrial growers but “there was no market or outlet” so they moved into producing CBD.

With that market flooded, Snow said they have been in conversation with textile companies and construction firms about the possibilities of hemp derivatives.

“I see the construction industry as probably being the biggest sector, monetarily,” said Snow, adding that she feels strong industrial hemp demand is still a couple years away.

All the while, Western States Hemp has stepped into an arena that few growers have entered: CBD products for livestock.

“We raise barnyard animals, we’re horse breeders,” Snow said. “And we looked at what we do, what we make, and where our knowledge set really is.”

With that, Western States Hemp, with the help of its team nutritionist and chemist, has developed CBD products directed to the equine and chicken markets that it plans to bring to market by the end of the year, Snow said.

“It’s a market we know, and we have a lot of contacts within,” she continued. “It’s a totally untapped market. I think, in time, as the legalities change, I do believe it’s going to become a commodity crop that ends up going into the animal feed supply chain, no different from corn or soy.”

NEVADA HEMP PLAN

On May 28, the federal government approved the Nevada Department of Agriculture’s plan to regulate Nevada’s hemp industry.

The plan calls for total THC testing and for all plots to be sampled and tested at the NDA lab, which is registered with the U.S. Drug Enforcement Administration.

Farmers whose hemp tests above the limit will be allowed to follow the new, loosened guidelines for disposal, such as burning or composting.

The state will charge: $900 application fee for growers; $725 application fees for growers producing exclusively nursery stock; and $5 per acre (or 33 cents per 1,000 square feet indoors) for growing hemp.

Go here to read the full 65-page State of Nevada Hemp Plan.

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