Connecticut farmers growing industrial-hemp to meet industry demand for cannabidiol, or CBD, could earn a profit of up to $12,000 per acre, a new study shows.
Hemp-derived CBD has become a mainstream phenomenon since the passage of the U.S. Farm Bill in Dec. 2018, which legalized hemp with some conditions. Advocates have promoted hemp’s health benefits — treating insomnia, depression or anxiety — but there’s little clinical research that proves CBD’s effectiveness.
Still, CBD hemp, a non-intoxicating substance, could reap farmers in-state an estimated profit of between $5,086 and $11,11,656, depending on fixed costs, local prices, CBD content and total dried flower harvested, among other variables, according to UConn’s Zwick Center for Food and Resource Policy and Department of Agricultural and Resource Economics.
That’s based on an estimate that it costs roughly $19,000 to grow hemp due to $12,719 in variable costs, which change with the level of production, and $6,570 in fixed costs. Depending on prevailing local price, UConn researchers say farmers would earn about $24,300 annually in revenue per acre.
“Ultimately, the profitability of this enterprise will depend on technical abilities of individual farmers (yield and CBD content) as well as external market forces, predominantly CBD prices,” the researchers said.
Hemp is used to produce numerous commercial and industrial products, including clothing, shoes, food, paper, bioplastics and insulation, among other uses.
Jeremy Jelliffe, a researcher in UConn’s Department of Agricultural and Resource Economics in the College of Agriculture, Natural Resources, and Health, was lead author on the study.
Jelliffe said he expects that local prices will continue to decline this year due, in part, because of the large amount of CBD hemp on the market.
Although the price for CBD hemp is not as high as some may have hoped, he said that tight margins are nothing new for farmers.
“The ones who make the most money are the ones who can do it most efficiently, produce the best quality, and market it at a premium,” Jelliffe said. “Farmers know that is how it works no matter what the crop is and they are all trying to produce the best they can. They balance this with the price they expect to be able to get.”
In May 2019, Connecticut lawmakers approved a bill creating a pilot program authorizing the production and sale of industrial hemp.
The state Department of Agriculture has issued dozens of licenses for prospective hemp growers — giving them the opportunity to tap into the still-fledgling global industry that recorded $1.1 billion in retail sales in 2018, according to New Frontier Data.
But while some lawmakers and farmers in Connecticut see hemp as a cash cow, many of the state’s dairy farmers say that the odds of hemp becoming a major revenue driver are slim.