AURI Publishes report on Growing Hemp Industry

A market for hemp-derived products is emerging in Minnesota, creating a groundswell of excitement and the need for reliable information. In response, the Agricultural Utilization Research Institute (AURI) set out to make sense of the state’s burgeoning industrial hemp industry. It did so by producing a comprehensive report, which functions as an overview of the landscape and guide for stakeholders and interested parties.

Titled Building an Industrial Hemp Industry in Minnesota, AURI believes this report will help develop commercial markets for hemp products while bringing together growers, economic developers, processors and regulators to identify the hurdles and opportunities hemp presents. The intended result is to help Minnesota’s industry capitalize on the market potential.

Already a significant economic force, industrial hemp will continue to yield benefits for those who understand its potential. Therefore, in addition to publishing the hemp report AURI continues to research and develop
materials to support the growing industrial hemp industry in the upper Midwest and beyond.

The report’s intent is to be a catalyst for continued infrastructure development of the hemp opportunities for Minnesota and networking with existing assets. Because Minnesota has many of the resources to drive innovation with this crop it can provide economic activity that will benefit farmers, business and consumers. Additionally, it identifies several product opportunities for hemp in food, fuel, fiber, feed and cannabidiol (CBD). At the same time, the report identifies emerging pathways for markets in various sectors, potential supply and demand synergies and infrastructure needs necessary to expand markets in Minnesota.

WHAT IS HEMP?

Hemp is often confused with marijuana, which is why the label commonly used to distinguish it from the drug is industrial hemp. While obtained from Cannabis sativa, industrial hemp is high in fiber and low in active tetrahydrocannabinol (THC)—the psychoactive ingredient in marijuana. First introduced to North America in the early 1600s, hemp was primarily grown for fiber as a cash crop.

The industrial hemp variety of the plant species is a viable fiber, seed, and dual-purpose crop with properties that are useful for a host of commercial purposes. Its vast potential and versatile nature make industrial hemp a popular commodity for exploration.

In 1937, the U.S. Congress passed the Marihuana Tax Act, which effectively began the era of industrial hemp prohibition. The tax and licensing regulations of the Act defined it as a narcotic drug and made hemp cultivation difficult for American farmers. As a result, it required farmers to hold a federal registration and special tax stamp to continue growing the crop.

Recently, there has been an active movement to legalize industrial hemp production. However, it wasn’t until the signing of the 2018 Farm Bill that America saw the removal of hemp from the Controlled Substances Act which allowed the production and sale of hemp and hemp products. Now that legislation has allowed markets to form, research and development of industrial hemp has accelerated. AURI has been at the forefront of exploring industrial hemp’s potential and collecting information to build a large and sustainable industry in Minnesota.

That is where AURI’s research comes in.

“With growing interest nationwide in the topic of industrial hemp, and due to Minnesota being a great location to grow this plant, we at AURI felt it was only fitting to begin educating ourselves and others on some of the key opportunities and hurdles that could affect Minnesota,” said Riley Gordon, engineer at AURI. “The passing of the 2018 Farm Bill shortly after we started working on this, really added confidence to the value of the research and work we were doing to connect with this new industry and identify opportunities for Minnesota farmers and businesses to get involved.”

AURI HEMP REPORT SUMMARY

The primary objective of AURI’s hemp initiative is to examine and analyze Minnesota’s agribusiness landscape and capacity to cultivate a viable hemp industry. The Hemp Report achieves this by contextualizing the state’s industrial hemp market and identifying both challenges and opportunities for hemp-derived products on their pathway from conception to commercialization. Work also included identifying supply and demand synergies within the state and necessary infrastructure to grow the industrial hemp industry. This holistic approach of knowledge exploration synthesizes information into a resourceful guide for entrepreneurs and interested business sectors to produce success within the new, dynamic industrial hemp industry.

CHALLENGES

The state’s industrial hemp industry has been dormant for nearly six decades, so its revival will require Minnesota to overcome a few challenges. The two significant barriers the industrial hemp industry faces are processing delays and legal/regulatory complexities. Both of these obstacles are factors slowing industry growth and are inherit in any new and developing market. Continued research and innovation by AURI and industry stakeholders will further mitigate these difficulties.

PROCESSING DELAYS

Due to industrial hemp being illegal for decades, there has been little progress in improving processing — how to most effectively and efficiently harvest the crop. There is no universal protocol or agreed upon method of processing, and this lack of uniformity makes a difficult path for commercialization. Equipment for processing is very expensive due to numerous processing methods currently employed. As demand for industrial hemp increases and market acceptance is defined, aligned commercialization pathways will form and its anticipated there will be a reduction in processing delays.

LEGAL/REGULATORY CHALLENGES

The regulatory environment for industrial hemp is complex, controversial and still taking shape. This is due to the infancy of the crop. New legislation and rules are consistently made, amended and vary greatly from state to state. To complicate matters further, industrial hemp has numerous applications and uses in numerous sectors, which requires the involvement of many regulatory bodies and administrations in its production and sale. Oversight and enforcement of these unique policies can hinder efficiency and lengthen timelines. As the commercialization of industrial hemp becomes more widespread, the regulatory environment will become more synergistic, with industrial hemp stakeholders and its authoritative bodies interacting more cooperatively.

OPPORTUNITIES

Hemp has a diverse variety of applications, offering many opportunities for the industrial hemp industry. AURI identified and analyzed many of them in the process of compiling its new hemp report.

“While several challenges exist in developing the market opportunities due to the infancy of this crop, a wide range of opportunities and entities in Minnesota and the region are enthusiastic and committed to making this a success,” said Shannon Schlecht, executive director at AURI. “Minnesota is well positioned to be a market leader due to the many innovative producers and businesses that reside here and the state’s close ties to Canada where the industry has advanced over its 20 years of legalization.”

FOOD

Industrial hemp’s seeds and oil content are useful in food production. Hemp seeds offer a high nutritional appeal, containing between 25 to 30 percent protein, insoluble fiber, omega-3 fatty acid and traces of other beneficial fatty acids.

Fresh hemp seed oil can also serve as a substitute for olive oil, walnut oil or butter when stir frying and sautéing meats and vegetables on the stove. Hemp oil also works well as a salad dressing or additive to smoothies or shakes.

CBD OIL

Many in the hemp industry say the CBD Oil sector is the largest growth area for the crop. Consumer demand for CBD Oil is driving development and investment. Industry analysts predict that by 2020 CBD Oil will be a $22 billion-dollar industry in the U.S. for food, supplements, beverages, medicine and tinctures.

FUEL

Hemp coproducts offer opportunities to the renewable energy market. Hemp flour and cake have high energy content. Hemp hurd pellet fuel blends with other natural fuel commodities such as wood or corn for use in residential or industrial pellet burner systems.

FEED

Hemp coproducts such as hemp cake, hemp hulls, and the high protein hemp flower and stem can provide an excellent source of protein and energy to help support the growing livestock industry.

FIBER

Hemp hurds and fibers are unique raw materials that have hundreds of potential applications. Businesses in several key industries in the state can benefit from the use of biobased materials made of hemp as an alternative to existing materials.

“The market will continue to grow especially in the CBD area as well as the fiber area,” said Harold Stanislawski, AURI’s project development director.“The feed and human food area has the potential to grow as the feed markets work toward animal feed approvals, and the food market continues to innovate with new products. Hemp food protein is non-allergenic, and non-GMO which gives it market appeal.”

MOVING FORWARD (WHAT’S NEXT?)

Publication of the hemp report does not mean AURI’s work with farmers, processors and businesses is over. According to industry experts at New Frontier Data, a cannabis market research firm, federal legalization could triple the overall hemp market to $2.5 billion by 2022, with $1.3 billion of those sales from hemp-derived CBD products.

The market assessments identified during the research for the hemp report are helpful, but it is also clear that there is a significant need for more research and collaboration in the hemp market.

AURI is committed to working with the hemp industry by providing value-add research, laboratory analysis, business and technical services, and a network of science and business professionals.

“AURI will work with all value-add innovations in advancing the needed infrastructure to buildout this sector,” said Stanislawski. “With only a little more than six months since the passage of the Farm Bill, Minnesota entrepreneurs have already made investments in this industry in the CBD, food, and fiber arena. For example, AURI has purchased a hemp fiber decorticator which will be a valuable asset in advancing the fiber sector and characterizing Minnesota hemp fibers for various markets. “

To obtain a free copy of AURI’s Building an Industrial Hemp Industry in Minnesota,

Visit auri.org/research-reports/hemp/

 

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