16 November 2001

Home processing might be key to hemp profits

Hemp is an easy to grow but

hard to transport fibre crop.

So a scheme to promote on-

farm processing has to make

sense, especially as it promises

to raise grower returns.

Andrew Swallow reports

GROWERS could be making margins from hemp that match top winter wheat returns.

But flawed EU and UK government policies have prevented farmers taking their fair share of the profits to date, says Hull-based company Hemp-Union.

By performing the first step in processing the crop, separating the fibre from the inner core or hurds, net margins would be raised from a typical £262/ha (£106/acre) to £872/ha (£352/acre) based on a modest 5t/ha yield, says technical manager Derek Bielby.

While processing on-farm allows growers to pocket both the area and processing subsidies for the crop (see table) it is the added value to the product that is the key to future farm profitability for both hemp and other crops, he believes.

Clean, good quality hemp fibre alone fetches £500/t compared with £90/t for the raw straw. If growers took the processing a stage further, for example by manufacturing insulation materials, that could be raised to £3500/ha.

The balsa-like hurds can be made into fuel logs which even after production costs and labour add £300/ha (£120/acre). Alternatively, it can be sold as a bedding material for horses.

So why hasnt this happened?

Due to its close relation to cannabis a licence is needed to grow the crop. To obtain that licence a grower must demonstrate a commercial industrial use for the hemp and that it is a low THC content, ie non-narcotic, variety.

In the mid-1990s one company controlled all these varieties in the UK, effectively giving it a monopoly on offering grower contracts. That was pointed out to the Monopolies and Mergers Commision but no action was taken, says Mr Bielby.

Also, all government support for the fibre industry was targeted at central processing rather than developing local facilities.

"That has allowed companies to exploit the farmer, offering just enough on the contract price to persuade them to grow the crop," he maintains.

What is more, the bulky nature of the raw straw means typically only 8t can be carried on a lorry. Haulage costs cripple any margin that might be made for those more than a few miles from the only UK hemp processing plant in Essex.

But that could all change, believes Mr Bielby. More low THC varieties are now available and Hemp-Union has developed a prototype PTO-driven machine that will allow growers to process hemp into hurds and fibre on-farm.

Once in commercial production the machine will cost growers about £20,000, he estimates.

"It is getting the first one made that costs the money – that is always the problem." EU funding is being sought to do that, possibly through Cornwalls Objective One status, and negotiations with a machinery manufacturer are at an advanced stage.

"Farmers have to become the producers of the fibre, not just the providers of a raw material," he concludes.

Hemcore comment

Bishops-Stortford based Hemcore questions whether any on-farm machine could produce fibre of sufficient quality to sell to a manufacturer. "£500 is a reasonable price if it can produce spotlessly clean fibre. But that is a huge if," says director, Ian Low. It aims to increase contracted crop area from 3000ha to 4500ha next spring and is offering contracts averaging £115/t delivered to its Chelmsford factory. That should give a gross margin of £400-£500/ha, says Mr Low.

Hemp from head to toe… The market for the crop is massive, says Hemp-Unions Derek Bielby.

FARM PROCESSED HEMP

&#8226 £870/ha net margin.

&#8226 Winter processing fits workload.

&#8226 Mass of potential markets.

&#8226 Political history hampering progress.

Grower returns, farm v central processing


Output Farm processed £/ha Centrally processed £/ha

Output

Straw 5t/ha @ £90/t = £450

Fibre 1t @ £500/t = £500

Hurds (as fuel logs) 4t @ £100/t = £400

Area payment* (if processed) £220 £220

Processor payment 5t @ £56 = £280

Total output £1400 £670

Costs

Licence** £8 £8

Seed 35kg @ £4/kg = £140 35kg @ £2/kg = £70

Fertiliser £50 £50

Operations/contractors £180 £180

Haulage 5t @ £20/t = £100

Processing costs £150

Total costs £528 £408

Net margin £872 £262

Figures provided by Hemp-Union. *Estimated at set-aside/cereal rate for 2002.

**£87/grower, 11ha crop/grower assumed.