Forging ahead

Mike Wessels has seen cannabidiol, an active ingredient derived from hemp, provide relief to people around him from pain and insomnia. His wife, Lyn Wessels, tried cannabidiol, also known as CBD, to help her sleep and relieve back pain, and started sleeping through the night. His father-in-law, Dan Griffin, who had severe pain that required trips to the emergency room, now uses CBD instead of opioids and makes fewer trips to the hospital.

Wessels serves as president of Wessels’ Farms, an ornamental and produce business in Otisville, New York, that produces feminized hemp seed and grows seedlings and clones for CBD farmers. Over the winter of 2018-19, he partnered with a 300-acre field grow and joined a co-op that grows about 800 acres of hemp in total.

“I do know every day that I’m producing a product that’s going to help a lot of people — I truly believe that,” Wessels says. “And I’m a very grounded type of personality. I don’t hunt for gold or anything. I’ve been a farmer all my life. This is real.”

Hemp is a cannabis plant, but contains less than 0.3% THC (Delta-9-tetrahydrocannabinol), the psychoactive ingredient that produces the high associated with marijuana. CBD is a separate cannabinoid in hemp that research suggests can help treat epilepsy, insomnia and chronic pain.

The 2018 Farm Bill federally legalized hemp production in the U.S. — more than eight decades after it was made illegal — although some states have not legalized it. The bill also exempts CBD from Schedule I drug classification if it is extracted from hemp grown following all legal guidelines.

Post-legalization, greenhouse growers across the country are capitalizing on the new opportunity. Hemp can be grown for fiber or grain that is used in commercial and industrial products, or for CBD that consumers may ingest or apply topically.

Many growers are taking the latter route, as growing hemp for CBD pays more than fiber or grain, according to cannabis research firm New Frontier Data’s Hemp Business Journal. In October 2018, New Frontier Data predicted that the U.S. legal medical cannabis market will grow to $12.5 billion by 2025.

Growing hemp for the CBD supply chain can be profitable for those who have infrastructure and experience and prove rewarding as research continues to show the health benefits of CBD. But growers also share that it can bring many challenges, both in production and the need to navigate a constantly shifting industry with the occasional shifty character.

Growing challenges

For 30 years, Wessels successfully grew an estimated 600 to 700 different varieties of seedlings across the Northeast United States. Working with hemp, he says, is much more difficult. The hemp side of his business is developing this year, but in 2018 (his first year growing hemp), he says he didn’t succeed.

“There are many different levels in hemp where you can fail,” he says. “It’s a plant like no plant in the horticulture business we’ve ever grown. It adapts to its environment positively and negatively in that it can change its color depending on the weather, depending on the environment, it can hermaphrodite, all these things. So, you have to be incredibly attentive to detail. It’s not for the faint of heart.”

Hemp must also be harvested and dried immediately afterward — both processes require significant labor. “If you have to hand-dry it and you have to hang it, it takes a tremendous amount of warehouse space or whatever space it takes to dry that,” Wessels says.

Ken Hammarlund, owner of Hammarlund Nursery in Esko, Minnesota, grows hemp both in a greenhouse and outdoors. He also notes challenges with growing hemp, such as hermaphrodites pollinating the valuable female crops that produce CBD.

“If you don’t catch all the hermaphrodites and they send a little bit of pollen out, then they ruin multiple plants nearby that now are not able to produce CBD — they produce seed instead,” he says.

Robert H. Deibel III, owner of Robert H. Deibel Greenhouses in Crestwood, Kentucky, is in his fourth season of growing hemp clones for CBD hemp farmers. He estimates that he dedicates about 25,000 square feet to hemp production every year.

The biggest difficulties with the crop, he says, have been filling out the associated paperwork for the government and being limited on the use of pesticides and fungicides, most of which are not labeled for hemp production.

“That’s probably the biggest stress — trying to figure out what to do when you do have a pest infestation,” he says.

The greenhouse vs. outdoor question

Wessels says that producing feminized seed and growing seedlings or clones makes sense in a greenhouse, but growing hemp plants for CBD processing and extraction is best done outdoors. Many greenhouse growers are limited in production space compared to field farmers and need to produce high yields to compete with outdoor operations.

“I think you can make more money than, say, growing bedding plants, but I don’t think it’s a huge, huge revenue jump,” Wessels says of growing hemp for harvest.

To produce hemp, greenhouse growers need to buy more equipment such as blackout systems and lights, and pay higher electric bills, Wessels says. They also need to provide heavy air movement to their hemp crops while proactively preventing the pollination that can easily heighten with that air movement.

Growing clones, Deibel doesn’t need to worry about his hemp plants pollinating because he keeps them in vegetative growth. “I do have some that I let go ahead and flower so that I could do some in-house testing for the varieties I’m growing so that I can show farmers what oil level I was able to produce and what THC level I had as of Oct. 1,” he says.

Some large, established greenhouse operations are growing in their protected environments, including ornamental growers ColorPoint in Kentucky and Illinois, and N.G. Heimos Greenhouses in Illinois, as well as British Columbia-based produce grower Village Farms.

In a story published in Greenhouse Management’s August issue, Steve Sloan, senior director of mergers and acquisitions for ColorPoint, said the business’ profit margins decreased to a “frighteningly low level” before it decided to fully convert to hemp. (Other growers like N.G. Heimos and Village Farms just added the crop.) “We had little choice but to pursue higher margin options to stay in business,” he said.

Hammarlund Nursery added its hemp production for CBD in 2019 to diversify. The operation offers nursery and garden center products as well as landscape installation. It diversified its offerings once before, when it began growing tomatoes to help reclaim business it lost from the Great Recession, compete with nearby big-box stores and combat a shrinking customer pool.

In mid-August, Hammarlund finished its first hemp crop in a 75-foot-by-30-foot greenhouse. He also planted about 220 hemp plants outside this year, on roughly a third of an acre. After discovering some male plants and culling them, he was down to about 210 hemp plants outside before harvesting at the end of September.

“I just applied, really, my [greenhouse] tomato-growing method to my hemp, which worked actually pretty well,” he says. “And this year, the space that I dedicated to hemp and tomatoes — the hemp is going to appear to produce more income than heirloom tomatoes, but not a significant amount.”

Acquiring funding, product and customers

Novices to the cannabis industry will have to do their due diligence to weed through bad actors and those whose inexperience can derail a project, Wessels says. When he started growing hemp, he linked with both investors and customers who said they had knowledge and money, but they didn’t pay up or provide much help. According to Wessels, a lot of people in the industry and those trying to get into it, are attempting a money grab — some of them, he says, from underground cannabis markets.

The burgeoning hemp industry is different from the established ornamental industry, Wessels says. “You buy impatiens seeds, they germinate and you grow it on,” he says. “You buy your seed from Ball Seed or Syngenta or whoever — that was the norm. There’s no norm anymore. You don’t know where to get your seed from.”

Now, Wessels works with more trustworthy investors and customers. “I have succeeded, I have figured it out,” he says. “But yeah, there’s still buts in there. You have to be able to sell the product, also, and sell it to people who have the money to pay for it.”

You have to be incredibly attentive to detail. It’s not for the faint of heart.” — Mike Wessels

Like Wessels’, Hammarlund’s entry into the industry also came with some quick thinking. Originally, he was growing for a buyer in the Twin Cities. But the company notified him that it didn’t need his product anymore. He says he then found a processor customer right away in nearby Duluth. “I am fortunate I did find a buyer, so I did sell my product, so I’m happy about it,” he says.

A massive complaint in the CBD market took root in September, when a CBD company sued a seed producer for $44 million. According to the lawsuit, HP Farms promised Elemental Processing 6.4 million feminized seeds but 70% of the seeds were male. Male plants are not only of no help but are a hindrance to growers, pollinating female crops and setting them into seed production.

Other networking questions remain for many growers, including how to get funding, as banks cannot legally work with the cannabis industry. However, this may change, with the U.S. House passing the Secure and Fair Enforcement (SAFE) Banking Act in September, which, if passed in the Senate, would allow for more cooperation between the cannabis and financial sectors.

An industry in flux

At the moment, there is no shortage of interest in CBD. Last year, Anheuser-Busch InBev announced a $50-million investment to research nonalcoholic CBD and THC beverages for the Canadian market, which legalized recreational marijuana in October 2018. And in March, Jelly Belly founder David Klein launched Spectrum Confections, a company that sells CBD jellybeans.

In 10 years, Wessels predicts that major coffee companies could sell coffee with CBD. “It’s hard to gauge how it’s all going to play out,” he says.

There have been some developments in the U.S. government’s approval of CBD medicine as well. For instance, in 2018, the FDA approved Epidiolex, an epilepsy-treatment drug containing CBD from GW Pharmaceuticals subsidiary Greenwich Biosciences. GW previously brought another cannabis-derived product, Sativex, to market outside of the United States.

Wessels cites the drug industry as a possible strong influence on the CBD market. “Either they’re going to get totally involved in the CBD and be producing products for it and making money off of it, or they're going to do a power play politically and try to force it out because they know that it does work in a lot of different areas,” he says.

On the grower side, Deibel says he will continue to grow hemp for the foreseeable future “as long as the prices stay where they are or don’t drop out,” he says. “I’ve already had inquiries for next year.”

To Hammarlund, the crop is worth admiration and respect, and requires a little humility.

“It’s one of those plants where you have to be very diligent — you have to be a lot more precise to make it work, so you have to be watching, watching, watching, watching,” he says. “You’ve got to talk to them, you’ve got to seed them. They tend to have a personality more than, I think, a lot of other plants. But it’s very, very interesting. And if you are a plant grower, you’ll find that you actually will develop kind of a love for the plant.”