Edna couple navigates economics of hemp business

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EDNA — It’s been a smoother year for husband and wife Bowen and Fairleigh Rose, but much of the hemp business still has areas waiting to sprout.

A saturation of rainwater and a saturation in the market caused a relatively slow start for the hemp production business in the Crossroads. As more research on the agronomics of hemp is conducted by researchers and business owners, the hemp and CBD business is a Texas industry still with unknowns in production and business practices.

“If we feel we’re coming to a problem, God opens doors for us,” Fairleigh Rose said.

The couple has two strains of hemp growing indoors under lamps and three strains outside. Across a three-acre field, the couple has one acre of about 2,000 to 3,000 seeds planted. In about two months, the couple will harvest their new round of hemp to make into retail products they then sell online, at pop-up shops and to “boutiques and quality places.”

Setting prices and receiving stable revenue for their products is still a challenge for Rose Cannabis and other hemp businesses across Texas.

“The thing that is concerning for me as an economist, when thinking about hemp, is that the volatility is there and is similar to some other crops. But the investment in hemp is so much greater on a per-acre basis,” said Justin Benavidez, assistant professor and extension economist at the Amarillo extension office.

When hemp was first legally grown in Texas in 2019, he said, hemp sold for about $4 per percentage point of CBD. It is now selling at about 25 cents, in the range of about 10 to 30 cents per percentage point of CBD.

Dollars per percentage point of CBD is one of the common measures of hemp in Texas because unlike many agricultural products, a common, federally set commodity or futures contract system has not been established.

Futures contracts for commodities are one of the main price protections, Benavidez said, to protect against price volatility. While the commoditization of agricultural products directly impacts the harvested plants, it also helps to protect against drastic or unexpected changes to the price of products produced by those plants.

Figuring out pricing for those retail products can be difficult, Fairleigh Rose said, so they have worked with others in the industry to find the suggested retail price for their products.

The cobweb model, an explanation in economics, can explain the volatility in the brief 21st century hemp market, Benavidez said.

In this situation, a new product enters a market with an oversaturation of producers. The excessive supply then lowers the price and then persuades some of those producers to stop producing. Once there are fewer producers than when the market initially began, supply lowers and price can rise, he said.

This phenomenon cycles until the “real” market price is found in the free market.

As of 2021, Benavidez said this is the first year he expects there to be fewer hemp acres in production — pointing to the first iteration in the cobweb model when producers begin leaving the hemp market.

“I think the potential is still there for hemp to be a reliable part of a crop rotation for farmers that know how to grow it,” he said. “Eventually, we may see hemp be a profitable part of a rotation.”

Future sectors Harmon said he anticipates the industry expanding into could include construction materials, plywood-like products, textile processing and energy from biomass — possible markets the Roses said they also think the industry could include.

Regulation changes and the stigma from hemp are other barriers, Harmon said, to the industry’s growth.

“I grew up thinking marijuana killed people,” he said. “When I learned that it didn’t, it seemed like there was definitely something there. What I discovered here was just a crop, and it just has tremendous potential to benefit and disrupt numerous industries.”

The challenges to Texas hemp come as worldwide supply chain challenges still impact the economy across industries, Benavidez said. This also comes as research is outstanding on best growth practices, and how many products can be produced from hemp.

“I would argue we have years to go before we’ve got a solid body of literature built on hemp from seed to consumption,” Benavidez said.

Next in the couple’s production process, the Roses will send leaf and stem samples to be tested for less than 0.3% THC as well as nitrogen, phosphorus and potassium levels to indicate the plants’ health.

Looking toward the forthcoming cycles in their seed-to-sale business, Bowen Rose said “I really hope there’s more to come.”

Geoff Sloan reports on business and breaking news in the Crossroads region. He received his Bachelor’s in international relations with minors in journalism and French from Texas State University. Reach him at gsloan@vicad.com or @GeoffroSloan on Twitter.

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