nevada hemp production for cbd oil

After strong start, hemp farming in Nevada trying to find footing

Changes in law have had a big effect on the hemp-growing industry in Nevada, which after a strong start in 2019 is now struggling with its future.

CARSON CITY — After immense growth in 2019, Nevada’s hemp industry is still searching for its footing amid the fallout from a change in federal law.

The number of certified growers in Nevada was cut nearly in half from 2019 to 2020, from 216 to 116, and the acreage of planted hemp fell by nearly 68 percent, down to roughly 1,600 acres, according to the Nevada Department of Agriculture.

“It ain’t no get-rich-quick scheme anymore,” Pahrump hemp grower Jim McCoy said.

The federal government gave the industry a green light when it passed the 2018 farm bill and authorized widespread growth of the plant, and Nevada farmers moved quickly to tap into the booming market of products containing CBD, the nonintoxicating compound found in cannabis plants.

The number of hemp growers in Nevada, where the industry was already legal under a limited pilot program, jumped from 115 to 216 in one year, while the total acreage of hemp planted more than quadrupled from 2018 to 2019, from 1,128 acres to 4,917.

But that federal law also meant that farmers across the country could start growing, too. And grow they did.

Before the 2018 farm bill, the U.S. had roughly 32,000 acres of hemp planted. By the end of 2019, that number had shot up to 146,000, according to data from the U.S. Department of Agriculture.

That saturation of hemp products into the market sent the prices into a free fall. Prices of hemp biomass, essentially the whole plant chopped up, dropped nearly 80 percent from April 2019 to April 2020, from $38 per pound to just $8.10 per pound, according to a report from Hemp Industry Daily, which covers the hemp industry.

Now, farmers appear to be jumping off the hemp wagon.

McCoy had grown hemp outdoors in Amargosa Valley previously, but this year he moved to growing hemp exclusively in smaller amounts in his indoor greenhouse, a common trend among the shrinking number of hemp growers in Pahrump, McCoy said.

“What we saw happen here, especially in Pahrump, is people were taking their life savings, spent it all growing and ended up with nothing,” McCoy said.

Despite the growing pains, some optimism remains for the industry’s future in Nevada.

To most, the hemp plant might look a lot like a marijuana plant. And there’s good reason for that: The two are essentially the same plant, cannabis sativa.

The difference between them lies in THC potency. To be considered hemp, the plants must be less than 0.3 percent THC, the psychoactive compound that causes the “high” sensation in marijuana.

There’s another key difference, too. Hemp is legal, but the federal government still considers marijuana an illicit controlled substance. Because of that, hemp commerce can cross state lines, further increasing the competition for growers in the Silver State.

Hemp takes less water to grow than some of Nevada’s major crops, such as alfalfa, giving rise to the idea that it could become a cash crop in Nevada’s semi-arid climate.

“It does take less water, but it still takes water and it depends on the soil,” said M.L. Robinson, an associate professor and horticulture specialist at the University of Nevada, Reno Extension in Las Vegas.

“It’s not a cactus or a creosote bush,” he added.

Robinson and his colleagues are researching best practices for growing hemp and studying which strains of the plant thrive best in the desert, with the hope of helping make hemp a major industry in Nevada.

That includes looking at indoor versus outdoor growing and whether the plant can be grown as alternatives to other crops, such as cotton, which is grown prominently in Arizona and requires more water and more chemicals to grow than hemp.

CBD is the largest driver of the hemp market. But CBD production is just one of a vast variety of uses that are starting to be realized, with foods like hemp seeds and milk, clothes and other fabrics made from the plant’s stalk and even building material like hempcrete, a lightweight, concrete-like material often used in non-weight-bearing insulation walls.

Potential problems ahead

Robinson is optimistic about the industry, but both he and McCoy pointed to upcoming regulatory changes that could further dampen the industry’s growth.

Under a newly proposed regulation from the Department of Agriculture, growers who have three violations in a five-year period because their hemp crops tested above 0.5 percent THC will have their growing certificate revoked for five years.

The local regulation is being put in place as part of a requirement from the USDA’s interim final rules on hemp growing. Audrey Blondfield, Nevada’s hemp program coordinator, said it’s the department’s understanding that growers would receive only one violation if multiple crops at a single growing site test above that threshold.

In 2019, the department tested 430 sample hemp crops, and 56 of those came back above the 0.3 percent threshold to be considered hemp, while 28, or 6.5 percent of all crops tested, came back above 0.5 percent.

“We understand industry concerns regarding this rule, and we are working hard to ensure our hemp program meets federal mandates while also remaining adaptable to our state’s needs,” Blondfield said, adding that the rule was written to be flexible in case the federal government adopts more lenient regulations.

But for Robinson and the university, which is certified to grow the same as farmers, that rule leaves little room to experiment as they look into which strains and strain combinations will grow best in Nevada while meeting hemp’s strict THC requirements.

Despite the price drops, the dip in hemp growing and the increasing regulations, Robinson still sees a future for hemp in Nevada.

Robinson envisions a time when hemp growing can be a bit of a “cottage industry,” where people grow their own hemp plants to make herbal salves, balms or other hemp-based products.

“I think that it has potential, or I wouldn’t be working with the hemp industry,” Robinson said. “But I think we have to look at it as what kind of hemp products or crops are we going to grow here and get off the bandwagon from growing for just one type of product in CBD. There’s thousands and thousands of products that you can develop with it.”

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

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

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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.”

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.

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.

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’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.

With the Farm Bill's passage, Nevada growers see new opportunity for hemp

Tucked away along the Utah border, White Pine County — with a population of a little more than 10,000 — is heavily reliant on mining and resource management jobs to support its economy. As in so many rural regions, elected officials have sought to diversify the local job base.

To do so, White Pine is turning to an unlikely candidate: Big Hemp.

Hemp is not the only part of the county’s diversification efforts. Richard Howe, the chair of the County Commission, named other possibilities: renewable energy, recreation and tourism. For now, though, hemp has taken center stage with a project to build a massive organic grow operation. Once built out, it will span 2,800 acres about 60 miles from Ely, the county seat.

“It’s a different way for White Pine County to look at economic development,” Howe said.

When asked whether he ever imagined that some of his constituents would want to turn to hemp farming, he responded “absolutely not.” Like many Americans, Howe had always associated hemp with marijuana. Learning more about it, he has come to see it as a different product — and an economic opportunity for the county. Howe sees a big market for hemp. The crop is used in a number of food products, including granola, tea and even beer , and is also processed to isolate CBD, a non-psychoactive cannabis compound taken as medicine.

What else changed Howe’s mind? He said the 2018 Farm Bill played a big role.

Signed by President Trump in December, the 2018 Farm Bill legalized hemp production in the eyes of the federal government. Until this year, the Department of Justice had regulated hemp as a Schedule I drug, despite the fact that hemp is a distinct form of cannabis from marijuana that contains a low concentration of THC, the chemical responsible for marijuana’s high.

Farmers had long-awaited the move. Industry observers told The Nevada Independent in April that the legalization of hemp could alleviate some of the challenges that come with operating in a legal gray area.

Hemp growing under Nevada’s pilot program in the high desert of the Great Basin. (Courtesy of the Nevada Department of Agriculture)

Although hemp was regulated at the federal level, a previous Farm Bill carved out a loophole allowing states to authorize its cultivation and sale if it served as research for the industry. Nevada and more than 30 other states took advantage of that opportunity. In 2015, the Legislature voted to create a hemp pilot program. Because hemp was classified as a Schedule I drug, the program came with a set of restrictions. Hemp could only be bought and sold within the state, which placed a cap on the market and demand. If growers purchased seed from other states, they did so at their own risk.

In legalizing hemp, the 2018 Farm Bill removed many of those barriers. Product can now be shipped across state lines with less fear that the government might clamp down on the growing industry. And federally managed water can now be used to irrigate hemp fields. That could be good for Nevada hemp farmers — but it also means they might face more competition.

“We’re going to see a lot of economic shift as the program evolves throughout other states,” said Ashley Jeppson, who oversees regulation of hemp production for the Nevada Department of Agriculture.

Joe Frey, a Fallon-area rancher and owner of Western States Hemp, said the federal bill will have a noticeable effect on moving product, financing and getting access to traditional agricultural instruments like crop insurance. Frey, whose family has farmed in the area for more than a century, said his company had been denied loans and or bank accounts for its hemp business.

“It’s going to be very significant,” Frey said in December. “Not all of the significance of it will be evident right away. In time, I think it’s going to have a big impact on the industry.”

But the Farm Bill won’t eliminate all of the headwinds facing growers. Although there is potential to make money off of hemp, Frey said some price estimates for hemp in Nevada were inflated. In April, one farmer told The Nevada Independent the going price for hemp hit $350/pound. Frey said that expecting to get paid that much for hemp was often unrealistic. He also said his company has struggled to find “honest buyers” to transport the crop.

Joe Frey, the owner of Western States Hemp, examines his crop. (Courtesy of Western States Hemp)

During the last two years, Frey said brokers have approached his company to enter into about 50 or 60 deals but only two have come through. Buyers, he said, often promise great prices only to inexplicably back out of a deal, making it difficult for Western States Hemp to sell its product. It’s an issue unique to selling hemp, said Frey, who also grows alfalfa, corn and triticale.

“We are chasing our tail every day looking for honest buyers to pay a fair price,” Frey said.

Frey encountered those problems under the state’s pilot program, a contained market in which growers could only sell their product in Nevada. In an open market that allows for transactions across state lines, there is concern that hemp prices could fall even further.

“It’s a two-edged sword,” said Clark County Commissioner Tick Segerblom, who sponsored the hemp legislation as a state senator. “In Nevada, we were creating [our] own industry.”

Nevada, Segerblom worried, could lose out to states like Kentucky or Wisconsin, where there is more water to irrigate hemp crops. Kentucky has one of the largest pilot programs for hemp, and its politicians, including Senate Majority Leader Mitch McConnell , pushed hard for the Farm Bill.

Even before the Farm Bill, interest in hemp had skyrocketed in recent years. Between 2016 and 2018, the numbers of growers registered with the Nevada Department of Agriculture rose from 13 to 116. In 2017, Nevada hemp was grown over 17,170 square-feet in indoor facilities. By the end of 2018, that number had grown by 1,272 percent. The same is true for the amount of hemp irrigated outside. In 2017, hemp was grown on just 490 acres. In 2018, the number was 1,880.

“I think there is some interest in it, and it’s growing,” Doug Busselman, an executive vice president for the Nevada Farm Bureau, said of the industry last week. “The Farm Bill, making it more of an open market, is going to expand that area of interest, at least for the time being.”

Rusty Jardine, the general manager of the Truckee-Carson Irrigation District said growers have continued to express interest since the Farm Bill’s passage. The irrigation district, which helps manage the water flowing through the Truckee Canal between Sparks and Fallon, discussed hemp cultivation at its board meeting next week. But Jardine echoed the sentiment that even with the Farm Bill, growers face hurdles, including the fact that hemp seed can be pricey.

“It’s tough,” Jardine said. “It’s a tough crop to grow.”

A “U.S. Property” sign near Derby Dam, which diverts water to Fernley and Fallon. (Daniel Rothberg/The Nevada Independent)

For the irrigation district, though, the Farm Bill should have immediate effects. Until the measure passed, growers were usually not allowed to irrigate hemp crops with water managed by the U.S. Bureau of Reclamation, a federal agency that oversees the Truckee Canal and other waterways across the West. With the legal change, Jardine said in an interview last week that farmers should now be able to divert canal water to grow hemp.

“Reclamation is accommodating the change of the law,” Jardine said.

Senators have asked the agency to clarify its hemp policy in public guidelines. In January, Montana Sen. Jon Tester and Colorado Sen. Michael Bennet wrote a letter to Reclamation Commissioner Brenda Burman asking the agency “to update its policies to ensure hemp producers can access their water.”

Under the new federal legislation, hemp will still be regulated to a greater degree than other crops such as alfalfa or cantaloupes. The law says that hemp plants cannot contain more than 0.3 percent THC, or they will be considered marijuana. State regulators, in concert with the federal government, will remain in charge of regulating hemp cultivation and testing THC levels.

“There is a lot of learning that still needs to be done,” said Busselman, who listed a range of variables from identifying appropriate seed to deciding how to market the crop. “It’s going to be an evolution process, as opposed to the light switch went on and everyone can run now.”

When the White Pine County project, known as Silver Lion Farms, comes online later this year, it could significantly increase the amount of hemp grown and sold in Nevada. Tracy Saville, its CEO, said the company has partnered with a big-name consumer agricultural brand.

Silver Lion Farms plans to begin planting seed in April and has entered into agreements that could be used to pre-sell most of its product. The company, which Saville said is fully financed, expects to grow crops in areas that used to produce alfalfa as well as build a 250,000 square-foot greenhouse.

The end goal: produce about 7 million pounds of organic hemp in the Nevada high desert.