Source: NORTH CAROLINA A&T STATE UNIV submitted to
THE ECONOMICS OF HEMP PRODUCTION AND RESEARCH: IMPLICATIONS ON FARMERS IN NORTH CAROLINA
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
NEW
Funding Source
Reporting Frequency
Annual
Accession No.
1025235
Grant No.
2021-67024-34612
Project No.
NC.X2020-06198
Proposal No.
2020-06198
Multistate No.
(N/A)
Program Code
A1641
Project Start Date
Apr 1, 2021
Project End Date
Mar 31, 2025
Grant Year
2021
Project Director
Quaicoe, O.
Recipient Organization
NORTH CAROLINA A&T STATE UNIV
1601 EAST MARKET STREET
GREENSBORO,NC 27411
Performing Department
Agribus, App Econ & Agrisci Ed
Non Technical Summary
Hemp production is expected to become a lucrative business for farmers in North Carolina in the near future. However, economic risk assessment and production practices for plant growth and disease prevention is still largely unexplored. Farmers experiencing market failure post tobacco era are willing to try new crops that have the potential to keep farms in business and remain profitable. The perceived financial incentives hemp promises have heightened interest among existing and new farmers alike. Farmers in North Carolina are getting into hemp production without having a full understanding of the economic viabilities and the risks associated with hemp production. There has not been any precise economic analysis of hemp production in North Carolina due to the lack of data. Also, hemp diseases which is a major risk factor, are better prevented than managed because of fast spread, whenever it occurs. The economic uncertainties and the lack of tested production practices constitute a complex and critical sustainability problem that requires multi-dimensional and interdisciplinary collaboration to find holistic and sustainable solutions. This project seeks to identify why farmer go into hemp production, determine the profitability of hemp farms, identify potential risks associated with hemp production and test unique nutrient combinations that will enhance plant growth and reduce disease incidence. Results of the research will present baseline knowledge needed to understand the economics of hemp production and ways to reduce risks and make hemp production profitable and sustainable for farmers in North Carolina.
Animal Health Component
0%
Research Effort Categories
Basic
100%
Applied
(N/A)
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6016220301050%
2121730116050%
Goals / Objectives
Farmers experiencing market failure post tobacco era are willing to try new crops that have the potential to keep farms in business and remain profitable. However, farmers in North Carolina are getting into hemp production without having a full understanding of the economic viabilities and the risks associated with hemp production. This project seeks to identify why farmer go into hemp production, determine the profitability of hemp farms, identify potential risks associated with hemp production and test unique nutrient combinations that will enhance plant growth and reduce disease incidence.
Project Methods
The project will use mixed methods to address the specific objectives. The data collection for the study will consist of the following steps:Interviews with key stakeholders knowledgeable of North Carolina agriculture and hemp production.Case/pilot studies of five successful hemp farms to help us identify the socioeconomic reasons why small farmers are willing or not willing to participate in hemp production.Main survey for the study: Following the outcomes of the case or pilot study, we will design, pretest, and administer an IRB approved survey to a random sample of about 200 farmers.Data Analysis will be as follows:Objective 1: Determine socioeconomic factors influencing farmers' willingness to participate in hemp production: A qualitative response regression model will be used to identify the factors influencing small farmers' willingness to participate in hemp production.Objective 2: Determine profitability of hemp production and responsiveness of hemp supply to the price of hemp, prices of other related products, and hemp input prices: We will model two (2) economic choices: (1) farm operation with hemp production; and (2) farm operation without hemp production. We will conduct a Cost-Benefit Analysis (CBA) to determine the optimal choice and develop a simulation model to analyze and predict the optimal choice of a farmer at various hemp product prices. We will also estimate a log-log hemp supply function.Objective 3: Identify the potential risk factors associated with hemp production: We will first estimate a Cobb-Douglas model for hemp production and then use the estimated output elasticity of the most important input for increasing crop yield (e.g. fertilizer) to estimate the risk aversion coefficient for each hemp producer. We will estimate a Tobit regression model using maximum likelihood procedures to identify the potential risk factors associated with hemp production.Objective 4: Test spent mushroom waste as organic fertilizer and disease prevention in hemp production: In this experiment, spent oyster mushroom substrate, and its combinations with NPK fertilizer will be added to the soil for cultivating hemp. Seven treatments will be randomized in 3 replicates, with plots 10 by 50 feet in each treatment. ANOVA models will be used to analyze the data collected and tested at p≤0.05.

Progress 04/01/21 to 03/31/22

Outputs
Target Audience:This project seeks to evaluate the economics of hemp production and its implications on farmers across the state of North Carolina. Since the hemp industry in North Carolina is in the early stages and still evolving, this project essentially targets all types of hemp growers in the state (hemp fiber, floral hemp, and hemp grain). The target audience includes large growers, small growers, individual growers, and growers in co-ops, regardless of their race, ethnicity, and socioeconomic status. The aim is to accumulate locality-specific research data on hemp production which farmers can use for commercial production in the various eco-geographic conditions across the State. Policymakers, North Carolina county and university cooperative extension agents, educators, and governmental agencies will also benefit from the findings of this project. One aspect of the project involves preliminary studies of hemp growers and hemp extension professionals. The results from the preliminary studies will assist in the development of an extensive field survey questionnaire of hemp growers to determine factors influencing 'farmers' willingness to grow hemp, profitability, and risk factors associated with hemp production. The other aspect involves on-farm hemp production and laboratory testing to deliver scientific-based and practical knowledge about production practices to farmers. Efforts during year 1 included (1) a review of the objectives of the project by the research team; (2) developing a preliminary study questionnaire for hemp growers and hemp extension experts; (3) facilitating interview sessions for the preliminary studies to gain a better understanding of why farmers go into hemp production; what makes hemp profitable or unprofitable; and the potential risks associated with hemp production; (4) transcription and qualitative analysis of some of the preliminary data which involves:(i) Organizing and comparing notes to ensure clarity and consistency of information; (ii) Preparing interview transcripts for analysis by listening to recorded interviews and reviewing notes and transcripts; (iii) Preparing report of the individual focus group in a question-by-question format; (iv) Identifying emerging themes by the question; and (v) Comparing and contrasting results of individual focus groups. Changes/Problems:Although the research team has made significant progress based on year 1 activities outlined in the project timetable, the team encountered significant challenges due to the Covid-19 pandemic, social distancing, and travel restrictions. The preliminary studies were designed to be in-person focus-group discussions. As a result of the Covid-19 pandemic, the research team had to digress from organizing in-person focus groups to virtual focus group discussions. In order to reach participants, researchers enlisted the assistance of cooperative extension. Due to the pandemic, cooperative extension offices were closed and as such, the agents could only be reached via e-mail, voicemail, or cellphone. Response times from agents were very slow, which caused our timelines to be pushed out. Also, by conducting the preliminary study focus groups via Zoom, participants had to be somewhat knowledgeable about Zoom and have an electronic device, thus decreasing our participation size. The research team will continue to adjust to restrictions and follow guidelines in order to facilitate the project objectives. What opportunities for training and professional development has the project provided?The project has created some training and professional development opportunities for the project members. Opportunities for personal development during the first year included training on Qualtrics, a web-based questionnaire design, that will help researchers to develop and distribute web-based questionnaires in addition to the paper print questionnaires. The researchers will continue to receive additional Qualtrics training which will be helpful in the main field survey. Additionally, due to the Covid-19 pandemic and social distancing restrictions, the research team had to move from in-person preliminary focus group studies to virtual focus groups. As such, we had to watch Zoom training videos to become proficient in utilizing the Zoom application. We also had to train some of the farmers who were not familiar with using the zoom application. The grant also has opportunities to train at least one master's student and one doctoral student that will be associated with the project in field data surveys, on-farm hemp production, and laboratory activities. Since we did not begin on-farm production and laboratory activities, we were not able to onboard any students during year 1 of the project. However, Year 2 of the project will involve students. We were also able to offer informal training on USDA's Value-Added Producer Grant to help them with implementing value-added activities for their hemp products. How have the results been disseminated to communities of interest?During this reporting period, results for the preliminary study have not been finalized for dissemination. Data analysis for the preliminary study is in progress and will be completed for dissemination in year 2. Although we have not officially disseminated our preliminary findings, the preliminary focus group study during year 1 served as an information session for other non-hemp growers. During the preliminary study, the hemp growers who participated in the preliminary study had also invited other farmers who had an interest in growing hemp but had not started growing hemp yet at the time of the study, to come and just listen to the experiences of other hemp farmers. The project team allowed the non-growers who showed interest to attend but they were not allowed to contribute to the discussion since they did have any experience or knowledge of hemp. At the end of the focus group session, the non-growers who participated expressed their gratitude for participating and also for the valuable information they had gathered from the hemp growers who participated in the preliminary study. In addition, this project has generated some interviews and newsletters. What do you plan to do during the next reporting period to accomplish the goals?The research team intends to finalize the qualitative analysis of the preliminary data obtained from the hemp growers' focus group discussions and hemp extension experts' interviews. We intend to fully develop a manuscript and publish the preliminary findings. We will develop the main survey questionnaire for IRB approval; pre-test the questionnaire after IRB approval; recruit hemp farmers and begin fielding the survey questionnaires. We will also begin on-farm hemp production and laboratory experiments. In addition, we will organize a training workshop for existing hemp growers and farmers interested in growing hemp in the near future. During the training workshop, we will disseminate our preliminary findings.

Impacts
What was accomplished under these goals? The major goal of this project is to use multidisciplinary efforts that will enable us to generate primary data to analyze and understand the economics of hemp production, how to reduce risks, and make hemp production profitable and sustainable. The specific objectives of the project include: Determine socio-economic factors influencing 'farmers' willingness to participate in hemp production; Determine the profitability of hemp production and responsiveness of hemp supply; Identify the potential risk factors associated with hemp production; Test spent mushroom waste as organic fertilizer and disease prevention in hemp production Below are the activities the research team outlined in the project timetable for year 1 as well as the completion rates as of this reporting period: 1. Meeting with stakeholders and County Extension Agents: 100% Completed. 2. Case study focus group interviews for farmers: 100% Completed. 3. Data analyses (transcription and qualitative analysis of case study data): 60% Completed (On-going). (i) Organizing and comparing notes to ensure clarity and consistency of information. (ii) Preparing interview transcripts for analysis by listening to recorded interviews and reviewing notes and transcripts. (iii) Preparing a report of the individual case study in a question-by-question format (iv) Identifying emerging themes by the question; and (v) Comparing and contrasting results of individual focus groups 4. Site preparation; generation of nursery hemp seedlings; and outplant seedlings in the field: Not Met * *This activity has not begun yet because the research scientists are in the process of satisfying the requirements for procuring and using a USDA hemp license. Production will begin as soon as the process is completed. In year 1, we developed a preliminary study focus group questionnaire to evaluate farmers' attitudes towards hemp production. The questionnaire was submitted to and approved by North Carolina A&T University's IRB. The preliminary study and focus group interviews for hemp growers were conducted, recorded, transcribed, and are currently being prepared for qualitative analysis. We also interviewed hemp extension experts at North Carolina Agricultural & Technical State University and North Carolina State University. The results from the preliminary studies will assist in the development of an extensive field survey questionnaire on hemp growers to fully address objectives 1, 2, and 3. The preliminary data that have been transcribed and analyzed so far show that North Carolina farmers had anticipated hemp production in North Carolina while they were not yet eligible to grow hemp in North Carolina. Some of the farmers indicated that they were very instrumental in persuading their legislators to support and pass a hemp production bill in North Carolina if there was a chance for the legislators to do so. All the farmers who participated in the case study knew that hemp is a new industry in North Carolina and the early years of hemp in North Carolina were going to be tough and a learning curve but they were convinced that if they stuck to it and survived, the reward (profit) was going to be great. With that mindset, several farmers decided to go into hemp production when the North Carolina hemp bill was eventually passed on October 31, 2015. Many farmers had expected the North Carolina Commissioner of Agriculture to support them with a start-up fund but that did not happen. Interestingly, the absence of state start-up funds did not deter farmers from getting into hemp production. Rather, it brought some farmers together to start co-ops in order to share the start-up cost. Others also started very small and funded their hemp business out of pocket. One of the farmers who participated in the preliminary study indicated that farmers were advised not to plant more than they can afford to lose. "But most farmers did not listen" he added. The participants indicated that many farmers outgrew floral hemp for CBD in the first year (2018) and blew it. He added that the high demand for CBD in 2017 incentivized a lot of farmers to grow hemp for CBD. In 2018, farmers overgrew hemp for CBD, the markets were flooded, and processors made promises that they could not follow up with. Another farmer also indicated that, instead of farmers growing smaller quantities (about 1 acre) and making money, they grew several acres in the hundreds and they lost everything. He added that North Carolina alone grew a lot of hemp for CBD in 2018/2019 enough to supply the whole country. Farmers exhibited a lot of gold-rush mentality in the earlier years of hemp for CBD. Currently, a lot of farmers growing floral hemp for CBD have left the hemp industry. A vast majority of those that grew in 2018 and 2019 are definitely not growing now. Another farmer indicated that they were receiving almost $40 per pound for floral hemp (CBD) when it first started; but now, the price for floral hemp (CBD) is around $2 per pound. Although floral hemp for CBD was an economic bust for many farmers, farmers think hemp for grain and fiber has a great future especially if the National Hemp Feed Coalition can get hemp products approved as animal feed ingredients. Currently, farmers in North Carolina do not produce hemp for grains primarily because there is no processing infrastructure in place in North Carolina for hemp grains. The situation is the same for hemp fiber - no processing infrastructure in place. One major thing the farmers highlighted was that they were lacking knowledge about the hemp industry. They heard about the opportunities and followed the hype without seeking knowledge to understand the hemp industry. One farmer claimed that people were telling them how much money they could make but no one educated them on how to make it. According to the farmers, they did most of the research themselves because the universities were behind in the beginning stages. Farmers still do not have adequate knowledge about how to grow hemp; seed density, how to process hemp; the best equipment depending on what the farmer wants to do.

Publications