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Oregon Hemp Growers Face Uncertain Future – OPB Article

Transcript and Interview from March 28, 2022.

Listen to the Interview

According to the U.S. Department of Agriculture, the market for hemp production in the U.S. was worth more than $820 million last year. Oregon is one of the top 10 hemp-growing states in the nation, with most of the cultivation taking place in Jackson and Josephine counties. But a moratorium on new licenses to grow hemp in those two counties and a crackdown by state lawmakers on illegal marijuana that has found to be grown on some licensed hemp farms have led some entrepreneurs to question the future of hemp in Oregon. Joining us to discuss the challenges their industry faces are Mason Walker, the co-owner and CEO of East Fork Cultivars, a farm in Josephine County which grows both hemp and marijuana, and Paul Murdoch, the owner and CEO of Horn Creek Hemp, a family-run hemp farm in Jackson County.

The following transcript was created by a computer and edited by a volunteer:

Dave Miller: from the Gert Boyle studio at OPB, this is Think Out Loud, I’m Dave Miller. It has been a turbulent few years for Oregon’s hemp farmers. Like many farmers, they’ve had to deal with drought, and fires, and the usual uncertainties that go with agriculture. But hemp growers have faced unique challenges as well. Prices still have not bounced back from a huge drop a few years ago. State regulations keep changing, and officials in Jackson and Josephine counties, who are worried about illegal cannabis grows, recently took advantage of a new state law to put a moratorium on new hemp licenses. For more on what it’s like to grow hemp right now, I’m joined by Mason Walker, co-owner and CEO of East Fork Cultivars in Josephine county, and Paul Murdoch, owner and CEO of Horn Creek Hemp, based in Jacksonville. It’s good to have both of you on Think Out Loud.

Paul Murdoch: Thank you.

Mason Walker: Thanks Dave:

Miller: Paul Murdoch first. So, both of your companies focus on growing hemp for flowers that have CBD, that’s as opposed to growing hemp for fiber or for seeds that you could use to make milk, for example. Is CBD where most of the money is being made from hemp in the US these days?

Murdoch: Currently, yes, that’s my understanding.

Miller: And especially so in Oregon?

Murdoch: Yes, I think the vast majority. There are some farms who are beginning to look at the other uses, but at this point, the vast majority is focused on high CBD content.

Miller: Mason Walker, how would you characterize the state of Oregon’s hemp industry today, compared to say three years ago?

Walker: Well, it’s certainly distressed. We’ve seen a pretty big pullback in planted acreage. In 2019, there was far too much floral hemp grown across the country, not just in Oregon. And that really turned the market upside down, and we’re still feeling the aftershocks from that major oversupply that popped up after that 2019 growing season. The big number is that we shrunk from about 60,000 acres in Oregon planted in 2019 to about 7,000 last year. So it’s been a pretty precipitous fall,

Miller: 60,000 acres planted, down to 7000?

Walker: That’s right, yeah. And, we could see another pull back this year. We’ll see where the data comes in, when the ODA reports its numbers, but I get the sense that there’s a pretty deep chill in the market right now. And a lot of our peers and farm friends have either drawn their acreage way way back, or gone away entirely.

Miller: So that’s an extraordinary drop. How do you explain it? What was happening before 2019?

Walker: So the lead up is pretty simple. As Paul mentioned, most of the hemp grown in Oregon and across the country is still towards flowers that are high in CBD, and CBD of course caught a craze, sort of a fad moment, in late 2018 into 2019, and that drove a lot of speculative hemp plantings that year. And unfortunately, that speculation was far outside of demand, and we wound up with an almost ridiculous amount of extra hemp across the country.

Miller: Paul Murdoch, is that glut of CBD from 2.5 years ago still being seen in the market?

Murdoch: Well, hemp has a shelf life in most forms. It has impacted the extract market. Potency tends to continue if the material is stored properly. There’s still flour in reserve for extraction use from 2019 and 2020. I think it’s getting worked through fairly well, but CBD hemp for flower use needs to be replenished about once a year, so it’s not really impacting that.

Miller: Do you feel, Paul, that the kind of gold rush mentality from a couple of years ago is over? That the farmers who saw a way to get rich quick, but maybe didn’t totally know what they were doing, that they’ve left the business?

Murdoch: Yeah, I think they’ve all sobered up. There were countless farms that were coming in, amazingly enough, without any agricultural experience, and they were overly optimistic thinking they would grow 50 or 100 or 500 acres. Those folks had a hard reality check. Even growing 20 acres is quite an undertaking, and those folks that were at that level have had stuck around more more successfully.

Miller: What is the challenge? How much of it is the growing of hemp, and how much is the harvesting and processing?

Murdoch: Well, that’s a great question, and I think a lot of people made an error in that area. So growing, planting, putting seeds in the ground, that’s the easy part. Harvesting, drying, you would have been amazed to know that there were people that planted 50 acres, and did not know how they were going to harvest, did not have their facilities reserved. That is really the difficult part. It’s a huge amount of material, but most importantly, just drying it is not the full tale. As Mason can tell you, for a really good quality product, it has to be dried and cured, and it’s a long process and it takes a lot of space.

Miller: Mason, are the people who got into this and then got out, how many of them actually had agricultural experience, just not with hemp or not at that scale? And how many were completely new to this and got in way over their heads?

Walker: The way I’ve described this in the past, particularly in 2019 which was the mad year, there were three types of growers that year. There were cannabis expats or people with cannabis cultivation experience, usually in the garden scale. There were actual farmers, people with farming agricultural experience that we’re just growing a new crop in their mix. And then there were speculators, those folks that got way over their skis with no experience, the folks that Paul described well. And we’ve definitely seen the speculators almost entirely disappear, and those experienced farmers and cannabis gardeners and farmers have stuck around, the savvy ones have stuck around, they’ve just gotten a lot smaller and grow far less of a crop, and focus, like Paul outlined, on that fresh flower that needs to be replenished each year.

Miller: Mason, what does supply and demand look like to you right now? Obviously in 2019 there was a gigantic mismatch. But markets sometimes have a way to correct themselves. Sometimes it’s painful for people who are involved in those markets. But what do you see as the balance right now?

Walker: We’re starting to see a bifurcation moreso, which is promising from my perspective. We’re seeing a split between the true commodity of hemp, versus craft expressions, folks that are growing small acreage for high quality that go into different craft products. And that bifurcation has been really satisfying, particularly because us and a lot of our peers, we would describe ourselves more in that craft space, and we’re seeing a little bit more consumer sophistication and nuance being requested in the market, and rewarding those smaller growers now.

Miller: I feel like I have some sense for beef as a commodity, where commodity could end up anywhere, in frozen beef patties in a supermarket or in fast food places, and then fancier beef that has all kinds of of names attached to it, of a place or of growing practices, could be three times more expensive and could be in fancy grocery stores. What are the equivalents for commodity CBD, and the kind of craft CBD that you’re talking about?

Walker: Well, the analogy you gave is spot on. With any consumer product, you’ll naturally have the split where you can get, for instance, your milk from the very large dairy for $2 a gallon, or you can get the organic milk grown by the co-op that was grown, and those cows weren’t treated with hormone for instance, and pay $4 per gallon.

Now we’re seeing that in hemp, the only difference is that the commodity is upside down right now. Because of that long oversupply we’ve had since 2019, commodity hemp, for instance, sells for about $1.50/lb of flower. That’s one of the types of commodities. And it costs at least $4 to $5, even at commercial commodity agriculture scale. The commodity is still upside down, and that commodity serves as an index for craft producers. So the entire market is still stressed, because that commodity is so upside down.

Miller: I mean stressed is one way to put it. But Paul Murdoch, it seems like an impossible business still. If it’s so much more expensive still to grow hemp cheaply than it is to buy existing stockpiles of hemp flower, how can this business continue?

Murdoch: Well, I think that’s a really good point on the commodity side. I don’t know the exact numbers, it’s hard to get exact numbers in this industry, but I have a feeling that the reserves are diminishing. And so I think that that price for commodity hemp, or hemp that’s going to be used for extraction, I think those prices will come up, and I think there will be room primarily for the skilled agricultural folks that have a farming background. The craft product has really maintained our business through this storm, and that’s where we’re going to continue to focus. That’s a lot more fun.

Miller: What’s fun about it?

Murdoch: Oh, wandering out amongst the plants. It’s a really fascinating plant. Learning how people are using it. There’s a far greater array of uses than I ever imagined when we first started this. And candidly, working with our family. Going through the field in the evenings, checking for males, doing all those farming things. It really helps me understand why the family farm was such a popular thing when it was more viable in the mid century.

Miller: Can you remind us why, given the way you want to grow hemp, you want to check for the males and get rid of them?

Murdoch: So, the hemp plant and the cannabis plant has males and females. You do not want seeds in your flower supply. Seeds do a number of things. They’re sort of a hallmark of quality. People are looking for the absence of those. And when a flower is pollinated and starts producing seeds, it focuses on seed production rather than CBD production.

Miller: Mason Walker, my understanding is that your company has about nine acres of hemp, what we’ve just been talking about, but also one acre of marijuana for the recreational market in Oregon. Why operate in both these markets that are really different?

Walker: That’s right. They’re not so different on our farm. And it’s really fun when we have visitors come, we can stand in the middle of our field, and if you look left, you see our one acre of adult-use cannabis. In that market, we grow high CBD-

Miller: …We’re going to see what happened to Mason Walker, we lost you for a second.

Paul, to go to you for a second, one of the biggest issues facing the hemp industry in Oregon isn’t exactly about hemp per se. It’s the fear that illegal cannabis growers are using the profusion of hemp farms as a kind of cover for their illegal operations. In response to that, lawmakers have been tightening restrictions on legal hemp growers. House Bill 3000, which lawmakers passed last year, was part of that. Can you give us a sense for what it did?

Murdoch: Well, House Bill 3000 was a reaction to the proliferation of illegal grows. And I’m talking not just about those that were under the guise of hemp farms, but also just blatantly illegal grows. It gave all of the agencies that were negatively impacted the resources that they needed desperately to battle this. And this was not an unwelcome thing for the legitimate farmers as well. The illegal grows have caused us immeasurable harm, both in terms of resources like water and that sort of thing, but also in PR, because the public tends to lump us all together, and it makes everybody look bad.

Miller: Mason Walker, where have you seen the effects of illegal growth? Both in terms of PR as Paul is talking about, and in terms of ecological or labor or any other issues?

Walker: Yeah, last year was really tough for our community in Southern Oregon. It was pretty apparent that the measure and scale of organized crime really elevated. We saw a lot of water theft. We saw human rights abuses with large immigrant workforces being asked to stay in squalid conditions and greenhouses without bathroom facilities. We saw people cutting trees down in riparian zones, and really just not following any basic state laws, and destroying the ecology of Southern Oregon. It was a rough year for the community, and as we’ll be discussing here I’m sure, a number of new laws were passed in response to that, that will have pretty significant impacts on the hemp industry.

Miller: One of the most recent ones was a state law that then commissioners in both of your counties, Josephine and Jackson counties, took advantage of earlier this month. They declared an emergency, which led the state to say okay, we will not grant any hemp growing licenses for 2022. Mason, what effect do you think that’s going to have?

Walker: Well, unfortunately, I don’t think it addresses the root of the problem in Southern Oregon. I think the folks that go through and get their legitimate hemp growing license with the Department of Agriculture are not, in large part, the bad actors that we’re talking about, the folks that are completely occupying space outside the law and abusing our environment and people’s human rights. And so unfortunately, I think it’s a little bit of a misguided law. I’m a little disappointed that it happened, because it does feel like a step back for the legitimate hemp industry, and just being treated as a federally legal beneficiary, and instead being vilified.

Miller: Paul, I’m curious, as Mason was saying, he’s saying it’s both unfair and unhelpful, that it’s not fair and it’s not going to work. Do you have a solution you think would work to prevent these illegal grows without cracking down on legal ones?

Murdoch: Well, I wish I had the answer. I will say that last year, it was very apparent which the illegal grows were. I mean they were not hiding, they were right next to the highway. It was clear from licensing GIS Maps who had a permit and who did not. And we didn’t even have the ability to go after those folks, by the water master, by code enforcement, they’re of course putting up structures without any permitting. And so I think 3000 is really the one that should get things done if everything comes together, and gives the agencies the resources that they need.

Miller: That’s House Bill 3000 from last year, that among other things, it would have them go in and do testing of the cannabis plants to test for THC levels.

Murdoch: That’s correct. And last year, I do know that there were some hemp farms that were fronts for cannabis, and it was just a matter of tightening up the testing. So when they show up at our place, any legitimate farm is going to say fine, go test, do what you need to do. The illegal ones did not allow them access. And so the agencies had to go through an administrative search warrant kind of process, which took time.

Miller: What would you like to see, Paul, at the federal level, from the FDA or whoever, to help boost the market for your products?

Murdoch: Well, I think the biggest challenge for us currently is the amount of THC that’s allowed. If you’re going to grow high CBD hemp, it’s gonna typically come in well below the 0.3% for Delta-9 THC, but there’s another component, THCA, which is somewhere around 0.5% to 0.7%. So not enough to be any sort of psychotropic effect, but it really is part of the plant. And currently they’re restricting everything to 0.3%, and I think a 1% would be much more reasonable.

Number two is to really change the laws to reflect how people are using it, which is that they are consuming it in food, even though that’s not currently allowed in terms of the law.

Miller: Mason Walker, what do you hope and what do you fear the hemp industry in Oregon could look like 10 years from now?

Walker: Well, I think the most optimistic vision would have hemp be a major provider of economic activity and living wages in the generationally impoverished rural parts of our state. I think it really can be an incredible agricultural resurgence platform. That would be my most optimistic view 10 years down the road, where hemp is the new timber or something like that for the state of Oregon.

A more pessimistic view would have a series of maybe well meaning but misguided regulations really stack up, like the more recent moratorium that was allowed to go in place in Josephine and Jackson County, and other sort of layered rules that just make it impossible for Oregon have farmers to compete in what is a global commodities market. And that would be possible both through regulation, but also through uncertainty. Uncertainty is really difficult for businesses, and we have a lot of uncertainty in this market still, even though we’re five years into the federally legal market for hemp. And I’d love to see just a little bit more stability and predictability in the market.

Miller: And Paul Murdoch, to go back to where we started, what about the possibility of Oregon farmers going big on hemp not for flower, not for CBD, but for fiber or seeds?

Murdoch: Well, I think there’s a lot of interest in that currently, especially in the larger agricultural areas, with much more acreage. And unfortunately, I think that the legislation kind of put a kibosh on that for a bit. And I understand why it was put in place, but I think it undermines what could be a really great crop for Oregon,

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