An Early Mover In The Industry Seeks Helpful Answers For Hemp Farmers

In the short while since last December’s passage of the 2018 Farm Bill, the market has started to make dramatic shifts. Cannabis companies like Canopy Growth Corp. CGC have decided to go all-in on hemp, and existing hemp producers have begun to ramp up their production capacities.

How has the hemp industry adjusted to its newly minted legal status? The Hemp Business Journal caught up with Joe Hickey, Atalo Holdings, Inc.’s founder and director of corporate relations, to inquire.

Atalo Holdings is one of Kentucky’s largest hemp producers. In late 2018, the company announced a partnership with GenCanna Global Inc. (with which the company shares a location) whereby the company would help GenCanna scale its hemp production operations in exchange for a strategic investment.

Hickey said Atalo Holdings has been inundated with questions from customers since the Farm Bill was signed into law. “The phones just won’t quit ringing. I probably have 15 to 20 calls that I haven’t been able to return from yesterday alone.”

Hickey added that in order to meet growing demand for hemp, Atalo Holdings has had to dramatically increase its production capacity. Last year, before the Farm Bill’s passage, the company had roughly 60 farmers in its grower group that cultivated about 700 acres of hemp. For the 2019 growing season, however, the company is looking to increase its grower group to between 250 and 300 farmers, seeking to cultivate between 8,000 to 12,000 acres.

Most of the farmers Atalo Holdings aims to hire are former tobacco farmers who have struggled in recent years due to falling demand for that crop. Despite the pivot toward hemp, Hickey says that most of the farmers have expressed little reluctance in making the transition.

“These guys were tobacco farmers,” Hickey said. “They know how to work in a regulated industry.”

For the most part, Hickey is optimistic about the future of hemp as an agricultural product, but noted two issues on the horizon which could pose difficulties.

Testing Troubles

Hickey’s first concern regards the lack of uniform testing standards. Under the new law, hemp producers are required to submit their crops for testing by a certified laboratory concerning potency and THC concentration. Yet, the law lacks concrete details, instead leaving the testing standards to be decided by respective states.

Hickey warns that the lack of uniformity can lead to inconsistent lab results and increased inefficiencies along the supply chain.

“There’s no protocol in place where every lab is using the same testing techniques,” he explained. “We send out tests and end up getting differences in lab results that are as high as 25% [because] no one is doing it the exact same way.”

Supply-Side Blues

More than the testing issues, Hickey worries about oversupply. Since most of the regulatory legwork has been left to individual states, no caps exist on how much hemp can be cultivated per licensed grower. In states where farmers are required to secure sales contracts before their crops can be grown, it is not a problem. Yet, faced with states allowing no cultivation limits (such as Kentucky), the risks of over-saturating the market become unavoidable.

“You’re just building it up for failure,” says Hickey. “It’s a brand-new market, it’s a brand-new crop, and to go out there and just say ‘Hey, anybody do what you want with it!’ is ludicrous.”

Hickey fears that a lack of safeguards against overproduction could have disastrous results. Too much hemp on the immature market would lead to prices bottoming out, essentially short-circuiting the economic solutions which politicians and advocates have touted the hemp industry to provide.

Nevertheless, Hickey remains hopeful and confident that the U.S. Department of Agriculture and the respective states themselves shall prove capable of nurturing the opportunities represented by the reformed hemp industry.