So far, hemp crop hasn’t grown to vision in Halifax County

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When former Gov. Ralph Northam visited South Boston to christen the Golden Piedmont Labs hemp processing and CBD-extraction facility in October 2020, state and community leaders touted the project as having the potential to restore the region to pre-NAFTA, tobacco-era economic glory.

“It’s wonderful to finally have something to really rejoice about, because we’ve had a lot of downturns,” Mattie Cowan — formerly of Halifax County Industrial Development Authority — said in 2020. “This helps farmers throughout our region; I think it’s going to be exceptional for the region.”

So far, the hemp craze has not lived up to its original hype.

“It was like the gold rush there at one time,” said local hemp farmer Garland Comer. “People just thought you were making stupid money, and a lot of times you weren’t even getting paid.”

Comer is one of several local farmers who had high hopes for hemp, but are now feeling let down.

“It’s just kind of a crappy deal all the way around,” he explained.

Rebekah Slabach, an extension agent through the Halifax Virginia Cooperative Extension office, offered some insight into the factors that contributed to the collective let-down.

“It’s a matter of supply and demand,” she summarized. “The new hemp market became saturated very quickly with all this new product and the supply chain wasn’t developed well enough to handle all of the processing and marketing needs.

“Many hemp producers couldn’t move product or were sitting on it or waiting to receive a check for product they had dropped off or sold,” she continued.

“It wasn’t the revenue we were hoping it was going to be,” said Steven Bowen, who has been growing hemp since 2019, when he was able to sell to other processors.

For Golden Piedmont in 2020, Bowen grew certified organic hemp — a costlier process that requires United States Department of Agriculture inspection.

“We were supposed to get paid a 10% premium for organic hemp,” he shared. “As of yet, we still haven’t gotten paid but a portion of what we hope to get.”

Both Bowen and Comer had arrangements with Golden Piedmont whereby they would receive a significant portion of the proceeds upon sale of the CBD oil extracted at the facility. As the market has been saturated, Golden Piedmont has not been able to move the product.

Sterling Edmunds — Halifax native and Golden Piedmont partner — regrets the situation, noting the entire inspiration for the project was to give local farmers a lucrative revenue stream.

“It’s not going to be anywhere near what a farmer takes to break even and that’s disappointing to us and disappointing to them, but the market is what it is,” he lamented.

“It was a sexy business,” Steve Mize, another Golden Piedmont partner, explained. “Everybody thought this is going to be the next new thing, and so it was over-grown.”

Mize noted that the saturation of the hemp CBD market was a nationwide trend that has unfortunately negatively impacted local farmers — and Golden Piedmont itself.

“The six partners that went into this spent a tremendous amount of money,” he expressed, further explaining the partners themselves do not draw salaries and are nowhere close to breaking even — let alone making profits.

“Fifty percent of nothing is nothing,” he said describing the partners’ cut so far.

These falling film evaporators and decarboxylation tanks are used at Golden Piedmont Labs in the CBD extraction process.

Sean Barker/Gazette-Virginian

Edmunds further indicated that the lion’s share of the losses will fall to the partners if the project ultimately fails.

“There was some Tobacco Commission money, but the vast, vast, vast majority was from the partners,” he stated.

For the farmers, the pandemic has coalesced with geopolitical and economic factors in a manner that has made financial risk-taking untenable — and the losses and delays in receiving revenues more painful.

Slabach explained, “Especially in this last year with recovering from the pandemic market effects and rising input costs, producers want to be confident and feel stable in their decision making and return on investment.”

Given these factors, hemp farmers in Halifax who cast their lot with CBD extraction have faced debilitating losses and tough decisions.

“Some people lost some crazy amounts of money,” Comer said.

“Once again the farmers were left holding the bag,” Bowen related with a touch of disdain.

Bowen noted, however, that Golden Piedmont did give the farmers a buy-out option. This involved a smaller but immediate amount of compensation — an amount that Bowen felt would not be worth his trouble.

“We did elect to ride the boat a little longer,” he shared. “We didn’t expect we’d have to ride the ship that long before we got paid.”

Comer appears slightly more optimistic: “I still think that they’re on the right track, I just don’t know when the timing will be right,” referring to Golden Piedmont.

Hope for hemp farmers

By the numbers, USDA reports that local farmers grew 86.63 acres of hemp in 2020 — mostly for CBD extraction, stimulated by the excitement generated by the opening of Golden Piedmont Labs. By 2021, the realities of delayed and absent returns led to an overall reduction of hemp acreage to 25.27.

This year, USDA reports that Halifax grew 79.40 acres of hemp — but for grain and fiber, which is turning out to be a more stable and less saturated segment of the hemp sector.

These figures are consistent with national trends, as reported by a January Successful Farming article: “Licenses were issued for nearly 285,000 acres in 2021, down from as many as 466,000 acres in 2020 and more than 511,000 acres in 2019, when production was the highest ever….”

Hemp seeds for cannabidiol — CBD — are more expensive than are the hemp and grain varieties, and standard practices for growth typically require an incubation period within a greenhouse or other indoor facility, a step that is not necessary for grain and fiber, which can be grown outdoors from the beginning.

Additionally, the quality standards for CBD tend to be more stringent, as it is frequently used for direct human consumption via medicinal products—though these standards are enforced by the market rather than by government agencies.

“The fiber stuff is not as much money, but I think in the long term, the lower input will be more sustainable,” Comer indicated.

Both Comer and Bowen participated in an exploratory pilot project for fiber — and indeed, their two farms combined account for the vast majority of the 2022 hemp acreage numbers reported by USDA for Halifax.

Both men report that they were paid expeditiously and in full for the fiber project.

The Mortons — with their MOR-hemp business — have found success growing hemp for grain, which they then sell to Whiskey Write distillery in Waynesboro, to produce Tusk, a line of hemp-infused alcohol products.

Stephon Morton, President and COO of the company, analyzed the hemp industry prior to their launch and observed the market saturation of the hemp-derived CBD sector. He guided the family business toward the grain and fiber segment, seeing greater profit in that direction—though MOR-hemp did do a small-scale CBD grow in 2019.

Morton indicates that the business will continue to develop in the grain-and-fiber direction.

“We want to get into textiles. We’re currently looking into doing hemp yarn,” he shared.

The creative marketing strategies employed by MOR-hemp and the overall stability of the grain-and-fiber segment offer hope to current and prospective local hemp farmers that there will continue to be lucrative options going forward.

Hope for Golden Piedmont

Though clear-eyed about their prospects, the partners and senior staff of Golden Piedmont Labs are hopeful that they will pull through the current dip in the hemp CBD market and ultimately achieve sustainability and profitability.

Edmunds notes that CBD sales nationwide are already starting to rebound.

“Sales in the industry are going up — it was just massive over-growing that caused this problem, and the market’s got to adjust,” he said.

As hemp farmers are exiting the industry or pivoting to fiber-and-grain, the demand for CBD is likely to increase in the long term, he explained.

Mize indicates that Golden Piedmont is well poised to succeed due to their high-caliber team of partners and staff.

“The six partners that came into this have a huge business acumen from other businesses, so we’re really thinking outside the box,” he said. “We have a great staff, and a great crew in the back.”

Mize shared as well that the market saturation issue has had a “herd-thinning” effect within the industry.

“The market is consolidating right now if you look at most of the players — probably 70% have gone out of business already,” he revealed.

Additionally, the state-of-the-art machinery at Golden Piedmont Labs and their high-quality standards give the company a competitive edge that is uncommon in the now-shrinking market.

“We have one of the only facilities that can take the THC out of the plant,” Mize remarked.

This rare feature opens more markets in Europe, where product regulation standards are different than here in the United States. It also makes Golden Piedmont an attractive option for many domestic buyers.

Mize indicates that though their meticulous quality standards and equipment have required a significant investment of capital on the front end relative to competitors, he believes that this will pay off in the long term.

“Most of the companies now, they want you to produce a very clean product,” he stated. “A lot of the people went out of business because they didn’t have enough forethought to do it the way that the big people are wanting right now.”

Brandee Lloyd, the director of sales for Golden Piedmont, explains that Golden Piedmont’s high-end and relatively new equipment is an advantage in and of itself.

“A lot of these processors are buying equipment from China and it’s taking six to eight months,” she said, describing the ways in which delivery delays impact competitors.

“So, if something breaks, they’re out of commission for months at a time and they don’t have the runway,” she continued. This dynamic has resulted in a lot of businesses failing, selling to larger companies or simply pausing production.

Lloyd noted as well that a return to relatively normal business operations as COVID has transitioned from pandemic to endemic status has allowed for more marketing opportunities via sales events and the ability to develop relationships with large-scale clients.

“We do have larger clients, and the clients that we are working with, we work to create partnerships with, not just one-off sales,” she explained. “Working with those relationships is how we’re going to stay relevant.”

Lloyd has learned that the CBD industry is tough because buyers have trust issues with processors based on negative experiences with other companies.

“Making sales in this industry is not easy, because they’ve been burned a lot,” she indicated. Many buyers have asked for “proof of life” via photos of product and lot numbers because of these trust issues and past experiences with processors that failed to deliver.

As Lloyd and Golden Piedmont partners have more opportunities to establish themselves, network with clients and develop trust within the industry, they are elevating their profile as well as their reputation.

These efforts are paying off, as industry leaders are beginning to recognize the company’s focus on quality.

“We won the CBD wholesaler of the year award last year — for the country,” Mize reported.

Two efforts that are already underway could essentially solidify Golden Piedmont’s success if and when they come to fruition: the legalization of recreational cannabis in Virginia, and FDA regulation of the CBD industry.

“If Virginia goes recreational, we are the largest hemp processor in the state of Virginia. We think we would be perfectly positioned to go move in that direction,” Edmunds explained with optimism.

As hemp and cannabis are part of the same taxonomical family — essentially biological “cousins” — Golden Piedmont already has the equipment necessary to extract the active components from cannabis to make concentrate products, which are wildly popular in the cannabis industry.

In addition to this prospect, the legalization of cannabis will increase the demand for CBD, as medicinal cannabis products typically feature a 1-to-1 ration of THC to CBD.

THC is the psychoactive ingredient in cannabis. Most medicinal customers prefer a mitigated psychoactive effect for disease and pain management — one of the benefits of the 1-to-1 ratio with CBD.

Regarding the Federal Drug Association’s regulation of CBD, Golden Piedmont leaders believe that this will open a whole new dimension to the industry.

“What that does is open up the blue-chip companies,” Lloyd stated.

“You’ll have it at Walmart, you’ll have it at Wegman’s, you’ll have it at CVS, and that will be enormously positive for farmers, for processors, for us, community, everything,” Edmunds shared with enthusiasm.

The issue for Golden Piedmont now is to make it to that point. Edmunds outlined three strategies for getting there.

“There’s a lot of ways for us to do that: (A) raise more capital; (B) just slow down processing; and (C) is just, buy more hemp elsewhere,” he said.

Although this strategy represents a departure from the original vision to provide income to local hemp farmers, it would ensure that those currently employed at Golden Piedmont Labs would be able to keep their jobs until the shifts that the leaders hope for fall into place.

Regarding their chances, Mize stated, “I think you’re always at risk — any new business is — of not making it.”

“We’re in a better place than 90% of the extractors out there. Having said that, we’re still not in a great position,” he elaborated.

“The industry is struggling,” Lloyd chimed in. “Everyday it’s, how can we get a higher price point for this?”

Still, with their competitive advantages, survival thus far in a rapidly shrinking industry and the prospects of sales boons should recreational cannabis become legal and the FDA decide to regulate CBD, the leaders at Golden Piedmont Labs have real reasons to hope for a brighter future.

“We do see some light at the end of the tunnel,” Lloyd concluded.

Region: North Carolina