USDA Industrial Hemp in the United States

Conclusions

Current markets for bast fibers like industrial hemp include specialty textiles, paper, and composites. Hemp hurds, the inner woody portion of the plant stem, are used in various applications such as animal bedding, composites, and low-quality papers. As joint products, finding viable markets for both hemp bast fiber and hurds may increase the chances of a success- ful business venture. Hemp industry sources and some academic studies cite many potential uses for hemp fiber and hurds. However, for these applications to develop or expand, hemp will have to compete with current raw materials and manufacturing practices. The U.S. market for hemp fibers is, and will likely remain, a small, thin market. Changes in price or quantity could be more disruptive and have a greater adverse impact on market participants than would be the case in a larger market.

Since there is no commercial production of industrial fiber hemp in the United States, the “size” of the market can only be gauged from hemp fiber and product imports. The near-term, low-end size of the U.S. market for hemp as a textile fiber might be defined by considering the domestic production and acreage required to replace imports of hemp fiber, yarn, and fabric in 1999. Assuming a potential U.S. yield of 1,550 pounds of fiber per acre and using linen yarn and fabric conversion factors, the estimated import quantity of hemp fiber, yarn, and fabric in 1999 could have been produced on less than 2,000 acres of land. Given the average size of farms in the United States (near 500 acres), just a few farms could have supplied the hemp fiber equivalent of 1999 import levels.

As a specialty bast fiber, hemp’s closest competing textile fiber is linen. A longer term, high-end size of the potential U.S. market for hemp fiber could be defined as domestic production and acreage required to replace hemp and linen imports. The hemp fiber required to replace the equivalent level of hemp and linen fiber, yarn, and fabric imports in 1999 could have been produced on 250,000 acres—roughly 40 percent of 1999 tobacco acreage, 5 percent of U.S. oat acreage, or 0.4 percent of wheat acreage.

Despite the similarities between hemp and linen, there is no industry consensus as to how closely the markets for the two fibers are allied. But since hemp fiber imports were just 0.5 percent of linen imports during the first 9 months of 1999, the near-term market

potential for hemp in the United States for domestic textile production is closer to the low end of the 2,000- to 250,000-acre production-equivalent range. Moreover, the absence of a thriving textile flax (linen) production sector in this country (despite no legal bar- riers) suggests that hemp, flax’s close cousin in fiber uses and in production techniques, will be unable to sustain adequate profit margins for a large production sector to develop.

Thompson et al. (1998) estimate imports of hemp seed into North America at 1,300 tons. Given yields in Germany of about 1,000 pounds per acre, it would take 2,600 acres to satisfy the demand for hemp seed. As with fiber imports, it would take only a few aver- age-sized farms to meet this demand. Hemp seeds can be used directly as a food ingredient or crushed for oil and meal. Hemp seeds and flour are being used in nutrition bars, tortilla chips, pretzels, beer, salad dress- ings, cheese, and ice cream. The market potential for hemp seed as a food ingredient is unknown. However, it probably will remain a small market, like the mar- kets for sesame and poppy seeds. Some consumers may be willing to pay a higher price for hemp-seed- containing products because of the novelty, but other- wise hemp seed will have to compete on taste and functionality with more common food ingredients.

Hemp oil is being used as an ingredient in body-care products, such as lotions, moisturizers, and shampoos, and sold in health food stores as a nutritional supple- ment. The market for hemp oil is limited by a number of factors. First, mechanical crushing produces a lower oil yield than crushing combined with solvent extrac- tion. Nor does hemp oil undergo degumming and bleaching as do many other vegetable oils. Some con- sumers prefer an oil that has been processed without chemicals, but others may dislike hemp oil’s color or taste. Second, the oil is high in unsaturated fatty acids, which can easily oxidize, so it is not used for frying, must be kept in dark-colored bottles, and has a limited shelf life. Third, to be used as a salad oil, it will have to be tested by the U.S. Food and Drug Administration and found “generally recognized as safe.” Last, as a drying oil, hemp would have to compete on function- ality and price with current raw materials, such as lin- seed and tung oils, in established industrial markets.

Several States have published reports or authorized agronomic and economic feasibility studies of hemp production. The four reports summarized here have

Industrial Hemp in the United States USDA • 25

focused on different aspects of supply and/or demand. Their estimates of hemp costs and returns reflect these various focuses, as well as different assumed produc- tion practices and costs. However, the widest range of estimates exhibited among the reports is for stalk and seed yields and prices—not surprising given the uncer- tainty about hemp production and current and potential hemp markets. Overall, hemp production was prof- itable only at the higher end of estimated yields and prices. It seems questionable that U.S. producers could remain profitable at the low end of the estimated net

returns, particularly given the thinness of current U.S. hemp markets.

The market for hemp products might easily be over- supplied, as in Canada where the 35,000 acres of hemp produced in 1999 was seemingly more than the market could handle. The Minneapolis Star Tribune quotes the general manager of Kenex Ltd., Canada’s biggest hemp processor, as saying “It’s given us one hell of a glut of grain and fiber. There’s been a major overestimation of the market that’s out there” (von Sternberg).

26 • USDA Industrial Hemp in the United States