Industrial Hemp Production

Industrial hemp (Cannabis sativa L.) has a long history with humans and was often found near early nomadic settlements close to streams, possibly indicating evidence of cultivation. Hemp was traditionally cultivated as a fiber source, and most genotypes in temperate climates had very low tetrahydrocannabinol (THC) content. Hemp was transported to North America in the early 1600s and was widely grown in many parts of Pennsylvania during the 1700s and 1800s. At one time, more than one hundred water-powered mills processed hemp fiber in Lancaster County alone (Ten Things You Never Knew – PA Hemp History). Many mills pressed hempseed into oil, which was used in paints, ink, varnishes, and lamp oil. Hemp was also used to produce rope, grain bags, Conestoga wagon covers, and clothing. In the mid-1800s, the introduction of cotton as a fiber crop and tobacco led to a decline in hemp production, which continued into the twentieth century on a limited basis.

Additionally, over time, hemp types in southern Asia evolved to have higher THC content ("marijuana") and were used in the drug trade. The story of industrial hemp became linked with its high-THC cousin in the 1930s with the introduction of legislation at both at the state and federal level banning their cultivation. Concern over the use of hemp for drug purposes led to the Marihuana Tax Act of 1937. The law declared hemp and marijuana controlled substances and effectively eliminated the production of industrial hemp (with a few exceptions when fiber was needed during World War II). In the 1960s, THC was determined as the psychoactive component that causes the characteristic "high." Before that discovery, there was no way to distinguish low-THC industrial hemp from high-THC varieties, such as those used for medical marijuana.

The changing legal status of hemp since 2014 has allowed states to begin to allow hemp cultivation. In 2017, hemp cultivation was allowed in Pennsylvania after obtaining a permit under the supervision of the Pennsylvania Department of Agriculture (PDA). Industrial hemp can now be grown for seed, fiber, or cannabidiols (CBDs) extracted from the plant tissue. A new growing permit from PDA is $150.00, and the renewal of an existing permit is $50.00. Permits can be applied for online at the PDA hemp website. A hemp processing permit is also available and must be obtained before manufacturing any product containing hemp-derived components.

This publication focuses on growing industrial hemp for either seed or fiber on an agronomic crop farm that has typical tillage, planting, and harvest equipment. In most cases, industrial hemp is grown specifically for one use (i.e., hemp seed or fiber). However, it is possible to grow a dual-purpose crop, but it requires investment in more specialized management and harvesting machinery. Growing industrial hemp for CBD extraction is a much more involved process, which currently involves harvesting and drying the crop. Obtaining a contract for delivery with a CBD commercial processor is very important for risk management.

Policies Affecting the Market for Industrial Hemp

Since 1937 C. sativa has been a federally regulated Schedule I drug under the Controlled Substance Act, regulated by the Drug Enforcement Agency (DEA). A distinction between the use of C. sativa for medical, recreational, and industrial purposes was only made recently when Section 7606 of the Agricultural Act of 2014 (the "Farm Bill") was created. It cleared a legal path for industrial hemp to be grown in three limited circumstances: by researchers at an institute of higher education, by state departments of agriculture, or by farmers participating in a research program permitted and overseen by a state department of agriculture (USDA NIFA).

In 2016 the DEA, U.S. Department of Agriculture (USDA), and the Food and Drug Administration (FDA) issued a joint statement detailing the guidelines for growing industrial hemp as part of state-sanctioned research programs. Those guidelines state that hemp can only be sold in states with pilot programs, plants and seeds can only cross state lines as part of permitted state research programs, and seeds can only be imported by individuals registered with the DEA (Federal Register).

The Pennsylvania Hemp Law, House Bill 967, was passed in July 2016. This law allowed the PDA to begin an industrial hemp pilot program in 2017. Currently, farmers and institutions of higher education are participating in this program, which requires application and permits, and growing industrial hemp in accordance with research goals.

The Controlled Plants and Noxious Weeds Act of Oct 30, 2017 allowed the PDA to issue growing and processing permits for industrial hemp. Permit applications and other requirements can be found on the PDA website.

The USDA currently allows CBD-containing products for human use and in interstate commerce if the level of THC is less than 0.3%. If a product exceeds this level, it is considered a Schedule I drug and its sale and use are illegal. State laws regarding CBD and THC-containing products vary widely and should be researched based on your state of residence.

Industrial Hemp Uses and Products

Industrial hemp and marijuana are different cultivars bred from the same species, C. sativa. Although they are biologically related, industrial hemp and marijuana have been bred for different purposes and their traits are distinct. Industrial hemp is grown for its fiber and seeds, whereas marijuana cultivars are grown for their high levels of THC. Industrial hemp is a plant with many uses, including CBD extracts, food, fiber, fuel, industrial, and personal care. A partial list of potential uses of industrial hemp can be found below.

Industrial Hemp Plant Uses

Fibers

• Textiles: clothing, shoes
• Industrial textiles: rope, nets, carpet, tarps
• Industrial products: paper, building materials

Leaves

• Farm and landscaping: mulch, composting, and animal bedding

Hemp Oil

• Foods: oil, food supplement; birdseed
• Personal care: soap, beauty products, moisturizer

Seeds

• Seed cake
• Protein flour
• Animal feed (currently illegal)

Buds/Leaves

• CBD isolates and distillates
• CBD creams, oils, tinctures
• Smokables

For much of the last century, U.S. domestic markets for industrial hemp products have been primarily supplied by Canada and China. Europe is the largest producer of industrial hemp in the world, and over thirty countries worldwide commercially produce industrial hemp. The global market value of hemp-based products was over $1.8 billion in 2022 and is expected to grow to $16.2 billion by 2033 (Fact MR: Hemp-based Products Market).

Industrial Hemp Market Challenges

Industrial hemp is a versatile product, and the plant fiber and seeds have many potential uses. However, industrial hemp producers should carefully identify which product(s) and sales channels are available regionally before starting production, secure any necessary permits before planting, and ensure that cultivation is performed in accordance with state and federal laws. Policies about industrial hemp are likely to change at the state and federal level over the coming years.

The industrial hemp market experiences both domestic and global competition. Because of the longstanding federal policies that made the cultivation of industrial hemp illegal, the supply chains and processing and manufacturing facilities necessary to create market-ready products need to be established in the United States. Domestic industrial hemp producers will need to carefully consider the cost of transporting fiber or grain when evaluating the potential profitability of industrial hemp. Several states have studied the economic effects and resources required to develop supply chains for industrial hemp, creating a foothold in the marketplace ahead of Pennsylvania. For example, New York state incentivized industrial hemp production in 2017 by creating a multiyear $5 million fund to kick-start the industry. Other states with industrial hemp promotion programs include Kentucky, Oregon, and Colorado. Internationally many countries have long-established networks of producers, suppliers, and manufacturers in place to deliver products from field to market. The creation of U.S. supply chains and processing facilities is affected by the current low level of domestic production.

As with any business, a potential industrial hemp producer should carefully research the markets, costs, laws, and necessary supply chain partners before beginning production. However, finding current market information on sale prices and demand is difficult, which makes projections of the long-term profitability of industrial hemp a continuing challenge for potential growers.

Hemp Production

Hemp is best adapted to well-drained soils with a pH between 6.0 and 7.0. Hemp does not grow well on wet soils or those with a heavy clay content. Hemp is sensitive to soil crusting and soil compaction that can occur on these soils. Ideally hemp should be planted in May to early June in most areas of Pennsylvania. Some Canadian varieties are short season and could be planted through mid-late June and still mature before frost. Hemp is a short-day plant and will only begin to mature when the day length is less than 12 hours.

For seed production, short- or medium-height varieties of hemp are generally used that have been selected for their low THC levels. In Pennsylvania and many other states, the level of THC in industrial hemp must be less than 0.3%. Most industrial hemp seed sources have tested their varieties to meet this requirement. Varieties come in various heights, including those that are medium (6–7 feet tall), semidwarf (4–5 feet tall), and dwarf (3–4 feet tall).

Photo Credit: Alyssa A. Collins

Hemp for seed production can be planted in rows like corn or with a grain drill like a small grain. Because no herbicides are currently labeled for use on hemp, hemp grown in rows will require some mechanical weed control. Hemp can also be grown in a tilled seedbed like that prepared for forage crop establishment: firm, level, and relatively fine. It can also be established with no-till methods using preplant burndown herbicides to control existing weeds. Seeding rates for industrial hemp depend on the variety, but 25 to 35 pounds per acre is typical. Planting depth should be 1/2 to 3/4 inch. A dense drilled stand should provide some weed control.

Fertilizer requirements are best determined by a soil test. The Agricultural Analytical Services Laboratory at Penn State has developed fertilizer recommendations for hemp. In soil with optimum levels of P and K, recommendations for a crop with a 1,500-pound yield potential would be 150 pounds of N, 30 pounds of P₂O₅, and 20 pounds of K₂O.

Hemp can be affected by both disease and insect pests. In initial trials they have not been common but could increase with more cultivation. Several diseases have been noted including gray mold (Botrytis cinerea), white mold (Sclerotinia sclerotiorum), bacterial leaf spots, viruses, and Pythium root rot and blight during establishment. Ideally, avoid growing hemp in fields with a history of white mold (in soybeans or canola) or in wet fields where seed rot could be a problem. Many of the insects that affect other crops such as cutworm, grubs, flea beetles, grasshoppers, and aphids have been reported in hemp. In Pennsylvania research trials, only Japanese beetles have been noted in hemp, and they are only attracted to the male plants. Slugs have also been reported to damage hemp. Bird damage can also be an issue with hemp as the seed is an attractive food source. Mourning doves seem especially fond of hemp seed. Damage from deer and groundhogs does not appear to be as severe as it is in other crops like soybean.

For seed production, hemp is harvested when seeds begin to shatter. At this stage, the plants are still green and about 70% of the seeds are ripe. The seed moisture is often about 22–30%. If harvesting is delayed, yield losses can increase from shattering, bird damage, and poor grain quality. Delayed harvest can also increase the amount of fiber that moves through the combine, causing stalks to wrap and damage machinery. Avoid taller varieties to reduce the amount of material passing through the combine.

For fiber production, planting is best done using a seed drill at a rate of 35 to 55 pounds per acre, resulting in a stand of around fifteen plants per square foot. Taller fiber hemp varieties provide more competition with weeds than the shorter grain types. Fertility recommendations are slightly different for hemp grown for fiber compared to seed. At optimum P and K soil levels, 150 pounds of N, 20 pounds of P₂O₅, and 20 pounds of K₂O are recommended. No grain is developed when producing hemp for fiber and the nutrients in the leaves are recycled to the soil.

Hemp fiber is generally harvested when plants are between early bloom and seed set. First, after the hemp is cut, it must undergo a process called retting. Retting helps to break the bonds between the two types of fibers in the hemp plant, the bast (long outer fibers) and the hurds (short inner fibers). Field retting is the most common process and involves leaving the crop in the field to decompose for up to 5 weeks. Windrows are raked two to three times before harvest to dry and remove leaf materials. Next the crop is dried and baled in round or square bales and hauled to a storage facility. Then, the hemp is processed and finally separated into the bast and hurds for further processing into finished products. Individual processors may have different harvest procedures.

Photo Credit: Alyssa A. Collins

Penn State Extension maintains a website with production information, resources, and links for those interested in growing hemp in Pennsylvania and the Mid-Atlantic.

Hemp grown for CBD production is a much more intensive and expensive endeavor. CBD hemp is often grown as a horticultural crop similar to peppers or tomatoes. Often transplants are started in a greenhouse and then planted in black plastic mulch with drip irrigation systems. The unfertilized buds, bracts, and other floral materials with the highest level of CBD and terpene compounds are typically hand harvested. Plants are individually managed, often with 4' × 4' or 4' × 5' spacing for approximately 2,000 plants per acre. Extension has created a CBD production video series featuring local growers in Lancaster County, Pennsylvania. Currently CBD production is expensive and very labor intensive and has a rapidly fluctuating market. It should only be entered into with confirmed markets and established products.

Environmental Effects

In the normal course of operations, farmers handle pesticides and other chemicals, may collect and spread manure, and use equipment to prepare fields and harvest crops. Any of these routine on-farm activities can be a potential source of surface or groundwater pollution. Because of this possibility, familiarize yourself with the mandatory regulations about the proper handling and application of chemicals and the disposal and transport of waste. Depending on the watershed where your farm is located, additional environmental regulations may need to be followed regarding erosion control, pesticide leaching, and nutrient runoff. Contact your soil and water conservation district, extension office, zoning board, state departments of agriculture and environmental protection, and your local governing authorities to determine what regulations may pertain to your operation (see PA Department of Agriculture and PA Department of Environmental Protection). Notably, each entity should be consulted before you begin production, as they can affect your ability to grow hemp.

Risk Management

Carefully consider how to manage risk on your farm. First, insure your facilities and equipment by consulting your insurance agent or broker. It is especially important to have adequate property, vehicle, and liability insurance. You will also need workers' compensation insurance if you have any employees. You may also want to consider life and health insurance and if you need coverage for business interruption or employee dishonesty. For more on agricultural business insurance, see "Agricultural Business Insurance."

In Pennsylvania hemp producers can choose Multi-Peril Crop Insurance (MPCI). Hemp is covered from the same causes of loss as most program crops. The sales closing date is the same as for agronomic crops, which in most years is March 15. Coverage levels also range from 50% to 75%.

To be eligible for the MPCI Pilot Insurance program, a producer must:

• Have 1 year of history of producing hemp
• Have a contract for the sale of the insured crop
• Fulfill the minimum acreage requirement of 5 acres for CBD and 25 acres for grain and fiber

Another potential product is Whole-Farm Revenue Protection that protects the farm income and not individual crops. Having multiple crops does reduce premium costs and may be used as a blanket or supplemental insurance in combination with MPCI. Contact your insurance provider at least 2 months before the sales closing date, which depends on the county in which you farm.

The Noninsured Assistance Program is available in areas where MPCI is not available and is sold through your local Farm Service Agency. Check with your local office to determine coverage levels and sales closing dates.

For all these programs, a hemp crop with a THC level above the federal legal level is not an "insurable cause of loss." If the crop must be destroyed, the production is also not eligible for production history purposes.

Private insurance options are available as well. Keep in mind that private insurance coverage is not subsidized by the federal government. You will be responsible for the entire premium, but it may be a good option as it can be customized to your operation. You should research several companies to determine which program or product best suits your operation.

As with all insurance products, be sure your salesperson explains the coverage and premium costs. Do not sign any documents without understanding all the details. For more information about insurance products, see the extension Risk Management and Insurance website.

Other important risk management considerations for industrial hemp are distance to market and market access. Make sure you know if there is demand for your crop within a reasonable distance of your farming operation. Transportation costs can rapidly reduce the profitability of growing any crop. Contracting with industrial hemp processors before planting would be a good way to make sure that you have a destination for your crop after harvest.

Sample Budgets

Included in this publication are three sample industrial hemp budgets: one for grain production, one for fiber production, and one for CBD production. A budget for the establishment of a cover crop in the year before planting is also included below. Because of the growth characteristics of the hemp plant, producers must decide to grow the crop either for grain production or for fiber production. As stated, CBD production more closely resembles a horticultural crop and plastic mulch and irrigation are typically used. Because no pesticides are labelled for use on industrial hemp, conventional tillage practices are used to prepare the seedbed and help control weeds. The cost of a rye cover crop for soil erosion control and weed suppression is also included in the budget.

All budgets use custom hire for most of the field work, which could be more economical for small-acreage growers. If you have your own equipment, substitute your equipment costs for the custom hire costs. The sample budgets should help ensure all costs and receipts are included in your calculations. Costs and returns are often difficult to estimate in budget preparation because they are numerous and variable. Therefore, you should think of these budgets as approximations and make appropriate adjustments in the "Your Estimate" column to reflect your specific production and resource situation. In particular, carefully estimate your cost for delivering the crop to the processor. The potential profitability of any crop can be quickly eroded by transportation costs if end users are not present in the local market.

More information on the use of crop budgets can be found in "Budgeting for Agricultural Decision Making."

You can make changes to the interactive PDF budget files for this publication by inputting your own prices and quantities in the green outlined cells for any item. The cells outlined in red automatically calculate your revised totals based on the changes you made to the cells outlined in green. You will need to click on and add your own estimated price and quantity information to all of the green outlined cells to complete your customized budget. When you are done, you can print the budget using the green Print Form button at the bottom of the form. You can use the red Clear Form button to clear all the information from your budget when you are finished.

Sample Budget Worksheets

• Industrial Hemp - Cover Crop Budget
• Industrial Hemp - Grain Production Budget
• Industrial Hemp - Fiber Production Budget
• Industrial Hemp - CBD Production Budget

Initial Resource Requirements

Grain Production (based on 10 acres)

• Registration fee: $150.00
• THC testing per acre: $10.00
• Total capital: $600.00 to $800.00
• Equipment: Cultivation equipment (if grown in rows)

Fiber Production (based on 10 acres)

• Registration fee: $150.00
• THC testing per acre: $10.00
• Total capital: $600.00 to $800.00
• Equipment: Cultivation equipment (if grown in rows), mower, rake, baler

CBD Production (based on 5 acres)

• Registration fee: $150.00
• THC testing per variety: $210.00
• Total capital: $9,000.00–$10,000.00
• Equipment: Irrigation system, bed shaper, plastic mulch layer, tractor and wagon, small mower

For More Information

Agricultural Marketing Resource Center. 2022. "Industrial Hemp

Baxter, W.J. 2022. "Growing Industrial Hemp in Ontario". Ontario Ministry of Agriculture, Food and Rural Affairs.

Cherney, J. H., and E. Small. 2016. "Industrial Hemp in North America: Production, Politics and Potential". Agronomy 6(4): 58.

Congressional Research Service. 2018. "Hemp as an Agricultural Commodity."

Drug Enforcement Administration. 2014. "Drug Scheduling".

Empire State Development. 2017."Governor Cuomo's Plan to Jumpstart New York's Industrial Hemp Industry,"

Federal Register. 2016. "Statement of Principles on Industrial Hemp."

Kaiser, C., C. Cassady, and M. Ernst. 2015. "Industrial Hemp Production," University of Kentucky, Center for Crop Diversification.

McPartland, J.M. 1996. "Cannabis Pests,". Journal of the International Hemp Association 3(2): 49, 52–55.

Pennsylvania Department of Agriculture's "Industrial Hemp Information".

Pennsylvania Industrial Hemp Council

Purdue University. "Hemp Production"

Small, E. and D. Marcus "Hemp: A New Crop with New Uses for North America,". In J. Janick and A. Whipkey (eds.), Trends in New Crops and New Uses. ASHS Press, Alexandria, VA, 2002. p. 284–326.

Stark, L. Hempstone Heritage I: In Accordance with Their Wills. Hempstone Heritage Publisher, 2005.

Thayer, C. 2017. "Industrial Hemp: From Seed to Market" Cornell Cooperative Extension.

USDA-NIFA. 2016. "Industrial Hemp".

Prepared by Jeffrey Graybill, extension educator, Lancaster County; Greg Roth, former professor of agronomy; Jayson Harper, professor of agricultural economics; Heather Manzo, former extension educator, Agricultural Entrepreneurship and Community Economic Development; Alyssa Collins, assistant professor and research associate director, Southeast Agricultural Research and Extension Center; and Lynn Kime, former senior extension specialist, Department of Agricultural Economics, Sociology, and Education.