By USDA Agricultural Research Service and Economic Research Service for Karl Stauber, Under Secretary for Research, Education and Economics
Background: In North Carolina, Kentucky and other tobacco producing states, there has been and increasing interest in alternative crops. Tobacco producers are interested in diversification because of questions about the future of that crop. In 1986 and again in 1994, burley tobacco production quotas were cut. In the 1970’s, the United States accounted for 16-17 percent of world tobacco production and 20-21 percent of world tobacco exports. By the 1990’s, the US share of world tobacco production had declined to 9-10 percent and the US share of world exports dropped to 12-13 percent. Health concerns and rising retail tobacco costs have led to a decline in American per capita cigarette consumption from 7 pounds of tobacco in the 1970’s to 4.5 pounds in the 1990’s.
In spite of a long term decline in real tobacco prices, US tobacco production, which is controlled by a quota system, produces a very high return per acre compared to other crops. Although tobacco farms are relatively small in states like Kentucky and Tennessee, they are very important to the agricultural economy. In Kentucky, for example, while tobacco accounts for only 6 percent of farm acreage, it accounts for over 50 percent of crop receipts and almost 25 percent of all farm cash receipts from livestock and crops.
Although few alternative crops can be expected to yield high returns comparable to tobacco, industrial hemp fiber for paper and textile production has been suggested as a possibility. Industrial hemp is a bast fiber similar to flax, jute and kenaf. Bast fibers tend to have high production costs because they are only a small portion of the plant stem and must be separated from the rest of the stem before they can be used in textile or paper production. A report examining the possibilities for industrial hemp and other bast fiber crops such as kenaf in Kentucky was released in June 1995 (“Report to the Governor’s Hemp and Related Fiber Crops Task Force”). The executive summary of the Kentucky report is attached as an appendix. That report highlights the uncertainty about the economics of industrial hemp.
The Economics of Industrial Hemp Production: The latest US experience with hemp dates from World War II when hemp was grown for fiber in Kentucky and other states. Today there is only a very small market for hemp fiber in the United States; about $30,000 of hemp fiber and yarn was imported from Europe and Asia in 1994. In recent years, European countries including the Netherlands, have conducted research on industrial hemp as a possible fiber for textile and paper production. There are small specialty pulp mills in Britain, Spain and Eastern Europe which process flax, hemp and other specialty fibers. Researchers in the Netherlands suggest that industrial hemp probably is not competitive in European specialty paper markets but is being considered as a fiber supplement to recycled paper pulp. Field trials have shown industrial hemp can be grown in Britain but the economic use of the fiber has yet to be established. Few estimates are available for modern production and processing costs and the market potential is uncertain.
The Kentucky report, drawing on European research on hemp, US research on kenaf and personal communications with researchers, gives a wide range of estimates of returns per acre for hemp fiber production. The estimates, relying on information from several informal sources, seem to be based on combinations of the highest and lowest prices and yields quoted. These estimates, shown in the chart below, compare the range of returns for industrial hemp fiber with average returns per acre for other Kentucky crops, including tobacco.
The chart shows a very high return per acre for tobacco and suggest that specialty vegetables might also produce quite high returns per acre. Some Kentucky tobacco growers are apparently expanding into specialty vegetable markets. The estimated return per acre for industrial hemp ranges from negative to positive. Thus, while industrial hemp could be economically viable in Kentucky, profitability compared with other crops is highly uncertain, given available information. Production and processing trials would be needed to establish the economic viability of industrial hemp production.
Kenaf as a Possible Supplement Crop in Tobacco Producing States: North Carolina is No. 1 in tobacco production. Given normal early rainfall, kenaf should do well there and yields should be competitive (4-6 tons/acre or higher), in not quite as high as further south under ideal conditions. Kentucky, No. 2, is already experimenting with kenaf. Dr. Morris Blitzer, an agronomist at the University of Kentucky, thinks kenaf would be an excellent crop to supplement tobacco, but not replace it. Kenaf will be a much lower return crop, to be grown on hundreds rather than ten of acres. From the yield standpoint, South Carolina and Georgia definitely should be in a position to grow kenaf. Growing and harvesting conditions will have to be established for each area. However, there are major problems:
a) tobacco is highly profitable on small farms 10-50 acres. It could be difficult to aggregate a number of isolated small farms and grow, harvest and process kenaf at a low enough cost to sell into pulp and other kenaf markets.
b) Kenaf is a relatively new crop. Product and processing technology for kenaf based pulp and for about six other markets have been developed, but the markers must be established in each geographic area (since the core fraction is very low density and expensive to ship).
Based on information from the Mississippi Fiber Cooperative, minimum capital of $1,000,000 to $2,000,000 will be required for post harvest processing (for an area of about 6,000 acres) to separate the kenaf into the two factions (bast and core) which serve different markets. Returns per acre of kenaf are a small fraction of what they are for tobacco.
Potential Markets for Bast Fibers: Currently, there are two markets for bast fibers like industrial hemp, specialty textiles and paper. Like linen, hemp fiber for textiles is a niche market. Cotton still accounts for 98 percent of the natural cellulose fibers used for textiles. Although hemp textiles wrinkle, their strength, high moisture regain and perceived comfort have a certain appeal as a fashion item. US Mills do not currently have the equipment to convert hemp fiber into yarn. Also, production costs for hemp textiles appear to be high relative to other fibers. A New Jersey textile importer stated that it currently costs about $15/square meter. This suggests that at current prices and with current technology, industrial hemp has significant competition in the specialty textile market from other natural fibers such as flax. Due to changing fashion trends, specialty fiber markets for textile production tend to be cyclical. A fiber like linen has been “hot” some years and “off” other years. Still, from a marketing viewpoint, a small and growing demand does exist for “natural fiber” from consumers who are told of the high chemical and pesticide use associated with cotton production.
The specialty and recycled paper market is a second possibility for industrial hemp and other agricultural bast fibers. The more important paper fibers compete on quality characteristics, with cotton being predominant among non-wood fibers, then flax and then niche specialty fibers. Specialty paper markets include currency, cigarette papers, filter papers and tea bags. Manufacturers are willing to pay more of specialty fibers when there is a quality reason to do so. For example, abaca fibers retain their strength and form when set, commanding a high price. Rising wood prices and regulatory practices have promoted the growth of recycled pulp and paper. Therefore, a potential growth market exists for agricultural fibers as an additive to strengthen paper made from recycled materials.
A third potential market, that of fiber resin composites, is still largely in the development and early commercialization state. In combination with various resins, flax, kenaf, jute, hemp and even wheat straw can be used to make composite board. These could compete with wood based fiber board on the basis of easier processing and superior strength. Hemp fibers could be desirable in this market because of their length and strength. Development work on composites made using agricultural fibers is underway in companies and research institutes in Europe, Canada and the United States. The USDA Forest Service’s Forest Products Laboratory is the leader in this field.
Research Implication for Hemp and Other Bast Fibers: Research is being done on industrial hemp and other natural fibers in Europe where industrial crops are actively being encouraged. Canada is investigating the production of industrial hemp as well as the use of other agricultural fibers for the paper and textile markets. While USDA keeps abreast of developments abroad, research would be needed in several areas if hemp fiber crops were to succeed commercially in the United States. USDA is conducting research on kenaf which is currently being grown on a small scale. For hemp, crop and fiber yields would have to be increased to bring down costs. Research would be needed to develop modern hemp fiber harvesting and processing methods. Now, hemp fibers are generally quite labor intensive in the harvesting and processing stage. For example, hemp fiber is produced in China, Hungary, Rumania and Spain where labor costs are low. Uses for co-products would have to be found to make the processing operation profitable. Pulping properties would have to be explored under American processing conditions. In summary, while production, processing and marketing methods are well developed for cotton, wool and synthetic fibers, significant investment would be needed to make industrial hemp competitive in the textile, paper and composite markets.
Legal Constraints on Industrial Hemp Production in the United States: Although there are varieties of hemp with very low narcotic content, all hemp production in the United States is strictly regulated. Hemp (Cannabis sativa L., and Cannabis Indica) is classified as a schedule 1. controlled substance, regardless of its narcotic content, under the Controlled Substances Act as amended. Regulatory authority is vested in the Office of the Attorney General, and is carried out by the Drug Enforcement Agency (DEA). Cannabis permits are restricted to researcher and police analytical laboratories. DEA is opposed to any consideration of hemp as a legitimate fiber or pulp product. Permit holders are required to maintain strict security and records pertaining to stored or cultivated cannabis. The Kentucky report contains a memorandum summarizing the University of Kentucky’s investigation into the possibility of obtaining a license to grow industrial hemp for research purposes. The memo states “DEA’s interpretation of these matters discourages any attempt to conduct field trials at a reasonable cost. The cost of fencing alone would prohibit anything but a very small research plot. Under these conditions, it would be virtually impossible to collect useful, realistic agronomic or economic information about hemp production.”
Any effort to legalize hemp production for paper or specialty textiles could encounter stiff Congressional and Administration opposition. The DEA regulatory opposition to industrial hemp production is based upon:
a) the difficulty in distinguishing legitimate hemp with low narcotic concentration from illicit cannabis, and
b) the perception that industrial hemp advocates have a hidden agenda of favoring legalization of marijuana.
Sensitivity is such that the White House Drug Enforcement Office should be contacted before USDA staff attend meetings on industrial hemp or get involved with research programs.
- Legal issues currently preclude research into the viability of industrial hemp fiber production in the United States.
- Textiles and paper pulp are the two markets for which hemp fibers have been considered. Aside from the legal issue, the limited information available suggests that industrial hemp fiber profitability is highly uncertain. Experience in Europe has not yet proven the economic viability. Unless the economic viability of industrial hemp production is evaluated by serious field trials and pilot scale processing in the United States, hemp fabrics and paper uses will likely remain a very small niche market which is satisfied by imports.
- North Carolina and Kentucky are actively considering other crops to supplement tobacco production. Kenaf is actively being considered in Kentucky along with vegetable crops. However kenaf will yield much lower returns than tobacco.
Estimates of Net Returns Per Acre for Kentucky Crops
Tobacco = $1,050
Tomatoes for Processing = $775
Wheat (+Def Payments) and Soybeans* = $175
Soybeans = $100
Average of Existing Crops = $175
Corn (+Def Payments) = $75
Hay and Silage = $100
Fiber Hemp – Low Fiber Price/Yield = $200
Fiber Hemp – High Fiber Price/Yield = $500
Source: Report to the (Kentucky) Governor’s Hemp and Related Fiber Crops Task Force, pg. 33.