Industrial Hemp in the United States:

Status and Market Potential

Abstract 

Industrial hemp has been the focus of official interest in several States. However, hemp

and marijuana are different varieties of Cannabis sativa, which is classified as a controlled substance in the United States. With Canada now allowing hemp production,

questions have been raised about the demand for hemp products. U.S. markets for hemp

fiber (specialty textiles, paper, and composites) and seed (in food or crushed for oil) are,

and will likely remain, small, thin markets. Uncertainty about longrun demand for hemp

products and the potential for oversupply discounts the prospects for hemp as an economically viable alternative crop for American farmers.

Keywords: industrial hemp, markets, bast fiber, hurds, seed, oil. 

The use of commercial or trade names does not imply approval or constitute endorsement by USDA.

Washington, DC January 2000
Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iv

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Identification: Industrial Hemp or Marijuana? . . . . . . . . . . . . . . . . . . . . . . . . . . .2

History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Industrial Hemp in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Plant Characteristics and Growing Requirements . . . . . . . . . . . . . . . . . . . . . . . . .4

Harvesting, Retting, and Fiber Separation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Harvesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Retting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Fiber Separation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

U.S. Hemp Fiber and Fabric Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Fiber Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Specialty Textiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Paper and Composites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Other Potential Uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Hemp Hurds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Seed Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Potential U.S. Production and Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Possible Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Estimated Costs and Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

U.S. Experience With Kenaf and Flax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

State Study Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Appendix I: Health Canada—Commercial Production of Industrial Hemp . . . .29

Appendix II: Oversupply of Small, Thin Markets . . . . . . . . . . . . . . . . . . . . . . . .32

Appendix III: State Report Summaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

ii • USDA Industrial Hemp in the United States
Executive Summary

Industrial hemp and marijuana are different varieties of the same species, Cannabis sativa L. Marijuana typically contains 3 to 15 percent of the psychoactive ingredient delta9-tetrahydrocannabinol (THC) on a dry-weight basis, while industrial hemp contains

less than 1 percent. However, the two varieties are indistinguishable by appearance. In

the United States, Cannabis sativa is classified as a Schedule I controlled substance,

regardless of its narcotic content, under the Controlled Substances Act as amended.

Since 1990, varieties containing less than 0.3 percent THC have been legalized in Great

Britain, Germany, Austria, and Switzerland. Canada and Australia legalized hemp production in 1998. In other countries, such as China, Russia, and Hungary, hemp production was never outlawed.

With Canada now allowing production of industrial hemp, questions have been raised

about the potential commercial market demand for industrial hemp products in the

United States. Hemp cultivation has been the focus of official interest in several States.

The Governor of Kentucky established a Hemp and Related Fiber Crops Task Force in

1994. Legislation passed in Vermont, Hawaii, and North Dakota in 1996 and 1997

authorized agronomic and economic feasibility studies. In 1999, nine States (Arkansas,

California, Hawaii, Illinois, Minnesota, Montana, New Mexico, North Dakota, and

Virginia) passed legislation concerning the research, study, or production of industrial

hemp as a crop. The first test plots of industrial hemp in the United States were planted

in Hawaii in December 1999.

Previous experience in the United States and other countries indicates that industrial

hemp grows well in areas where corn produces high yields. Plants require plentiful

moisture throughout the growing season and need substantial amounts of available nutrients to produce high yields. Hemp can be grown as a fiber, seed, or dual-purpose crop.

It is a bast fiber plant similar to flax, kenaf, and jute. The interior of the stalk contains

short woody fibers called hurds, while the outer portion contains the long bast fibers.

Hemp seeds are smooth and about one-eighth to one-fourth of an inch long.

No data are available on imports of hemp seed and oil into the United States, but data

do exist on hemp fiber, yarn, and fabrics. Imports of raw hemp fiber have increased dramatically in the last few years, rising from less than 500 pounds in 1994 to over 1.5 million pounds for the first 9 months of 1999. Yarn imports also have risen substantially,

peaking at slightly less than 625,000 pounds in 1997. The switch from yarn to raw fiber

in the last 2 years probably reflects the development of U.S. spinning capacity. At least

two companies are now spinning hemp yarn from imported fibers. Imports of hemp fabric have more than doubled from over 222,000 pounds in 1995 to about 523,000 pounds

in 1998. 

Current markets for bast fibers like industrial hemp include specialty textiles, paper, and

composites. Hemp hurds are used in various applications such as animal bedding, composites, and low-quality papers. As joint products, finding viable markets for both hemp

bast fiber and hurds may increase the chances of a successful business venture. Hemp

industry sources and some academic studies cite many potential uses for hemp fiber and

hurds. However, for these applications to develop or expand, hemp will have to compete

with current raw materials and manufacturing practices. The U.S. market for hemp

fibers is, and will likely remain, a small, thin market. Changes in price or quantity could

be more disruptive and have a greater adverse impact on market participants than would

be the case in a larger market.

Industrial Hemp in the United States USDA • iii
Since there is no commercial production of industrial fiber hemp in the United States,

the “size” of the market can only be gauged from hemp fiber and product imports. The

near-term, low-end size of the U.S. market for hemp as a textile fiber might be defined

by considering the domestic production and acreage required to replace imports of hemp

fiber, yarn, and fabric in 1999. Assuming a potential U.S. yield of 1,550 pounds of fiber

per acre and using linen yarn and fabric conversion factors, the estimated import quantity of hemp fiber, yarn, and fabric in 1999 could have been produced on less than 2,000

acres of land. Given the average size of farms in the United States (near 500 acres), just

a few farms could have supplied the hemp fiber equivalent of 1999 import levels.

As a specialty bast fiber, hemp’s closest competing textile fiber is linen. A longer term,

high-end size of the potential U.S. market for hemp fiber could be defined as domestic

production and acreage required to replace hemp and linen imports. The hemp fiber

required to replace the equivalent level of hemp and linen fiber, yarn, and fabric imports

in 1999 could have been produced on 250,000 acres—roughly 40 percent of 1999 tobacco acreage, 5 percent of U.S. oat acreage, or 0.4 percent of wheat acreage.

Despite the similarities between hemp and linen, there is no industry consensus as to

how closely the markets for the two fibers are allied. But since hemp fiber imports were

just 0.5 percent of linen imports during the first 9 months of 1999, the near-term market

potential for hemp in the United States for domestic textile production is closer to the

low end of the 2,000- to 250,000-acre production-equivalent range. Moreover, the absence

of a thriving textile flax (linen) production sector in this country (despite no legal barriers) suggests that hemp, flax’s close cousin in fiber uses and in production techniques,

will be unable to sustain adequate profit margins for a large production sector to develop.

In 1998, imports of hemp seed into North America were estimated at 1,300 tons. Given

yields in Germany of about 1,000 pounds per acre, it would take 2,600 acres to satisfy

the demand for hemp seed. As with fiber imports, it would take only a few averagesized farms to meet this demand. Hemp seeds can be used directly as a food ingredient

or crushed for oil and meal. Hemp seeds and flour are being used in nutrition bars, tortilla chips, pretzels, beer, salad dressings, cheese, and ice cream. The market potential

for hemp seed as a food ingredient is unknown. However, it probably will remain a

small market, like the markets for sesame and poppy seeds. Some consumers may be

willing to pay a higher price for hemp-seed-containing products because of the novelty,

but otherwise hemp seed will have to compete on taste and functionality with more

common food ingredients. 

Hemp oil is being used as an ingredient in body-care products, such as lotions, moisturizers, and shampoos, and sold in health food stores as a nutritional supplement. The

market for hemp oil is limited by a number of factors. First, mechanical crushing produces a lower oil yield than crushing combined with solvent extraction. Nor does hemp

oil undergo degumming and bleaching as do many other vegetable oils. Some consumers prefer an oil that has been processed without chemicals, but others may dislike

hemp oil’s color or taste. Second, the oil is high in unsaturated fatty acids, which can

easily oxidize, so it is not used for frying and must be kept in dark-colored bottles and

has a limited shelf life. Third, to be used as a salad oil, it will have to be tested by the

U.S. Food and Drug Administration and found “generally recognized as safe.” Last, as a

drying oil, hemp would have to compete on functionality and price with current raw

materials, such as linseed and tung oils, in established industrial markets.

iv • USDA Industrial Hemp in the United States
Several States have published reports or authorized agronomic and economic feasibility

studies of hemp production. The four reports summarized here have focused on different

aspects of supply and/or demand. Their estimates of hemp costs and returns reflect these

various focuses, as well as different assumed production practices and costs. However,

the widest range of estimates exhibited among the reports is for stalk and seed yields

and prices—not surprising given the uncertainty about hemp production and current and

potential hemp markets. Overall, hemp production was profitable only at the higher end

of estimated yields and prices. It seems questionable that U.S. producers could remain

profitable at the low end of the estimated net returns, particularly given the thinness of

current U.S. hemp markets. 

The market for hemp products might easily be oversupplied, as in Canada where the

35,000 acres of hemp produced in 1999 was seemingly more than the market could handle. The Minneapolis Star Tribune quotes the general manager of Kenex Ltd., Canada’s

biggest hemp processor, as saying “It’s given us one hell of a glut of grain and fiber.

There’s been a major overestimation of the market that’s out there” (von Sternberg,

1999).

Industrial Hemp in the United States USDA • v
Introduction

Industrial hemp and marijuana are different varieties of

the same species, Cannabis sativa L. In the United

States, Cannabis sativa is classified as a Schedule I controlled substance, regardless of its narcotic content, under

the Controlled Substances Act as amended. Regulatory

authority is vested in the Office of the Attorney General

and is carried out by the Drug Enforcement

Administration (DEA). Since 1990, varieties containing

very low levels of the psychoactive ingredient delta-9-

tetrahydrocannabinol (THC) have been legalized in Great

Britain, Germany, Austria, and Switzerland. Canada and

Australia legalized hemp production in 1998. In other

countries, such as China, Russia, and Hungary, hemp

production was never outlawed.

With Canada now allowing production of industrial

hemp, questions have been raised about the potential

commercial market demand for industrial hemp products in the United States. Several companies import

hemp fabrics and garments into the United States.

Other firms import hemp fiber or sterile hemp seed for

further processing and manufacturing into products,

such as paper, nutrition bars, and beer.

Hemp cultivation has been the focus of official interest

in several States. The Governor of Kentucky established a Hemp and Related Fiber Crops Task Force in

1994. Legislation passed in Vermont, Hawaii, and

North Dakota in 1996 and 1997 authorized agronomic

and economic feasibility studies. Published study

results are available from Kentucky, Oregon, and

North Dakota (McNulty, 1995; Thompson et al., 1998;

Ehrensing, 1998; Kraenzel et al., 1998). 

Since 1995, a total of 19 States (Arkansas, California,

Colorado, Hawaii, Illinois, Iowa, Kansas, Maryland,

Minnesota, Missouri, Montana, New Hampshire, New

Mexico, North Dakota, Oregon, Tennessee, Vermont,

Virginia, and Wisconsin) have introduced hemp legislation. In 1999, nine States (Arkansas, California,

Hawaii, Illinois, Minnesota, Montana, New Mexico,

North Dakota, and Virginia) passed legislation concerning the research, study, or production of industrial

hemp as a crop (Nelson, 1999). The legislation in

Minnesota and North Dakota permits the production of

industrial hemp, provided farmers obtain licenses from

DEA. Farmers are looking for alternative crops, particularly for tobacco, but also for rotation crops to break

pest and disease cycles.

The first test plots of industrial hemp in the United

States were planted in Hawaii in December 1999. To

gain DEA approval of the project, scientists were

required to enclose the plot inside a 12-foot-high fence

with infrared surveillance (Welna, 1999; Associated

Press, 2000). The project received $200,000 in funding

from a hair-care company that uses hemp oil in its

products (Hanks, July 1999).

This report examines the similarities and differences

between industrial hemp and marijuana. It then

reviews hemp’s history as a crop; its plant characteristics and growing requirements; and harvesting, retting,

and fiber separation. This is followed by a brief review

of Canadian hemp production and a discussion of U.S.

hemp fiber and fabric imports. The next two sections

assess hemp fiber and seed markets. The following

two sections discuss some of the issues involved in

potential U.S. hemp production and processing and

review estimated costs and returns for hemp production from four State-sponsored studies.

Industrial Hemp in the United States USDA • 1

Industrial Hemp 

in the United States

Status and Market Potential
Identification: Industrial Hemp 

or Marijuana?

Marijuana and industrial hemp are different varieties

of the same plant species, Cannabis sativa L.

Marijuana typically contains 3 to 15 percent THC on a

dry-weight basis, while industrial hemp contains less

than 1 percent (Blade, 1998; Vantreese, 1998). Most

developed countries that permit hemp cultivation

require use of varieties with less than 0.3 percent

THC. However, the two varieties are indistinguishable

by appearance. DeMeijer et al. (1992), in a study of 97

Cannabis strains, concluded that short of chemical

analysis of the THC content, there was no way to distinguish between marijuana and hemp varieties.

Industrial hemp can be grown as a fiber and/or seed

crop. Grown for fiber, it is planted in dense stands to

maximize stalk production. Grown for seed or for seed

and fiber, plants are spaced farther apart to encourage

branching and seed production. Marijuana varieties are

grown for their leaves and flower buds, and therefore

are grown under low-density conditions to maximize

branching. Thus, planting density and other production

characteristics do not offer a reliable way to distinguish

varieties for law enforcement purposes.

Health Canada announced regulations on March 12,

1998, that control activities relating to the production,

import, export, transport, and sale of industrial hemp

(see Appendix I for the fact sheet from Health

Canada). Production is highly regulated, with farmers

required to obtain annual government permits. Farmers

cannot have had a drug offense in the past 10 years

and need to have a criminal background check done at

their own expense. Federal agronomists and police

will check fields and test plants to make sure that no

narcotic plants are grown along with the industrial

hemp.

The European Union (EU) issued rules governing

hemp production in 1989, which include registration

of the area to be planted in advance, the use of seed

from certified low-THC varieties, and testing of fields

to determine THC content.

2 • USDA Industrial Hemp in the United States
History

The first records of hemp cultivation and use are from

China, where the species most likely originated

(Ehrensing). Migrating peoples likely brought hemp

to Europe where, by the 16th century, it was widely

distributed, cultivated for fiber, and the seed cooked

with barley or other grains and eaten (Dempsey, 1975).

Hemp reportedly was first grown in the New World in

Chile in 1545 (Blade). The Puritans brought hemp to

New England in 1645 as a fiber source for household

spinning and weaving, but it never rivaled flax in

importance. Cultivation spread to Virginia and, in

1775, to Kentucky, where the crop grew so well a

commercial cordage industry developed. The hemp

industry flourished in Kentucky, Missouri, and Illinois

between 1840 and 1860 because of strong demand for

sailcloth and cordage by the U.S. Navy. However,

increased production of cotton in the South, due to the

development of the cotton gin, and imports of cheaper

jute and abaca eventually displaced most domestic

hemp production (Dempsey, Ehrensing).

In 1937, Congress passed the Marijuana Tax Act,

which placed all Cannabis culture under the regulatory

control of the U.S. Treasury Department. The Act

required the registration and licensing of all hemp

growers with the Federal Government in an effort to

restrict production of marijuana in the United States

(Dempsey; Rawson, 1992; Ehrensing).

During World War II, when imports of abaca and jute

were unavailable, the Government instituted an emergency program to produce hemp as a domestic substitute. USDA’s Commodity Credit Corporation contracted with War Hemp Industries, Inc., a quasi-official

organization, to produce planting seed and fiber.

Production peaked in 1943 and 1944. After the war,

production rapidly declined as imports resumed and

legal restrictions were reimposed. A small hemp fiber

industry continued in Wisconsin until 1958 (Dempsey,

Ehrensing).

Industrial Hemp in Canada

In 1998, Health Canada permitted 259 farmers to grow

hemp on 6,180 acres, mostly in Ontario and Manitoba

(Health Canada, June 1998; Health Canada, June

1999). As of June 1999, Health Canada had issued 674

hemp production licenses, allowing cultivation on

35,000 acres. Manitoba accounted for over half of the

acreage, followed by Saskatchewan and Ontario

(Hansen-Trip, 1999). Actual acreage under cultivation

was lower because of a wet spring in western Canada,

lack of certified seed, and license delays (Hanks, Fall

1999). Most of the production was for seed, especially

in western Canada.

Gardner and White (1998) and Hanks (Fall 1999) profile the leading Canadian companies involved in hemp

production and processing. Most process seed or oil

using existing facilities. Two Manitoba companies,

Hemp Oil Canada and Fresh Hemp Foods, have their

own presses. Only two companies, Ontario-based

Hempline, Inc. and Kenex Ltd., operate fiber processing facilities.

Industrial Hemp in the United States USDA • 3
Plant Characteristics 

and Growing Requirements

Cannabis sativa L. is often referred to as true hemp to

distinguish it from other fiber crops. These include

Musa textilis (abaca or manila hemp), Agave sisalina

(sisal hemp), and Crotalaria juncea (sunn hemp).

Cannabis sativa is normally dioecious, meaning the

species has separate male and female plants.

Monoecious varieties, with the male and female flower

parts on the same plant, have been developed in a

number of countries through breeding and selection

(Dempsey, Ehrensing). Several countries, such as

France, the Netherlands, Hungary, Romania, and

China, have ongoing breeding programs. The industry

is seeking high-yielding strains that are low in THC

and meet various end-use needs. For example, breeders are looking for fiber lines that are high in primary

fiber yields (for pulping), extra-fine fibers (for textiles), and cellulose content (for biomass fuel) and for

seed lines with various seed sizes (for easier hulling

and assorted food uses), special amino acid profiles

(for human and animal feeds), and specific components in the oil for industrial uses (such as industrial

lubricants) (Vantreese, 1998).

Hemp is sensitive to day length; the plant matures

(sets seed) as days get shorter in the fall. Since production has historically been concentrated in northern

temperate regions, industrial hemp varieties have been

selected to mature in early fall (Blade; Reichert, 1994).

Industrial hemp can be grown as a fiber, seed, or dualpurpose crop. Hemp is a bast fiber plant similar to

flax, kenaf, and jute. The interior of the stalk is hollow, surrounded by a pith layer of woody fibers called

hurds (fig. 1). Outside the cambium layer, where cells

grow and differentiate, is the phloem or parenchyma

layer, which contains the long cells known as bast

fiber. Hemp seeds are smooth and about one-eighth to

one-fourth of an inch long. The seeds usually contain

from 29 to 34 percent oil. The oil is similar in composition to drying oils such as linseed and tung and consists primarily of three fatty acids: linoleic (54-60 percent), linolenic (15-20 percent), and oleic (11-13 percent) (Ehrensing). Both the fiber and seed can be used

in a wide range of applications (fig. 2).

Industrial hemp grows well in areas where corn produces high yields (Ehrensing). It can be grown on a

variety of soils, but it does best on loose, well-drained

loam soils with high fertility and abundant organic

matter. Plants require plentiful moisture throughout

the growing season, especially during the first 6 weeks

(Dempsey; Blade; Baxter and Scheifele, 1999). Hemp

also needs substantial amounts of available nutrients to

produce high yields. Both Dempsey (1975) and

Ehrensing (1998) review numerous fertilization studies

and conclude that hemp requires liberal fertilization

for high fiber yields.

Hemp diseases are not widespread and occur sporadically. They are usually caused by seed- and soil-borne

fungi, which can be controlled by seed treatment

before planting or by rotation (Dempsey). Under

favorable conditions, hemp is very competitive with

weeds so herbicides are generally unnecessary in hemp

fiber production (Ehrensing). Due to lower planting

densities, weed suppression may be less complete

when hemp is grown for seed (Baxter and Scheifele).

4 • USDA Industrial Hemp in the United States
Harvesting, Retting, 

and Fiber Separation

Harvesting and fiber processing differ depending on

whether the crop is grown for high-quality textile

fiber, for seed, or for fiber and seed. The Oregon

study, Feasibility of Industrial Hemp Production in the

United States Pacific Northwest, summarizes current

information and research on hemp harvesting, retting,

and fiber separation when the crop is grown for fiber

(Ehrensing).

Harvesting

When grown for textile fiber, the crop is harvested

when the fiber is at its highest quality. During World

War II, tractor-drawn harvester-spreaders were used to

cut hemp stems and lay them in windrows for field retting. After retting, a second machine was used to gather and tie the stems into bundles for pickup and delivery to the mill. A similar harvest system is still used in

Europe, but with more modern, specialized equipment.

Because these systems are designed to maintain the

parallel alignment of hemp stems throughout harvest

and processing in order to maximize the recovery of

long textile fibers, the equipment has limited throughput capacity. 

For seed, hemp is harvested when the seed is mature

and ready for combining. When produced as a dualpurpose crop in countries such as France and Hungary,

the seed is harvested near maturity with combines

modified to cut high off the ground, and then the

stems are harvested. The fiber from a dual-purpose

crop is usually of lower quality and is often used in

low-value applications such as pulp and paper. The

1998 crop in Canada was for dual production, and

farmers found that the length and strength of hemp

fibers were very rough on equipment during harvest

(Gardner and White; Vantreese, 1998; Scheifele,

1999). In 1999, some Canadian farmers planted early

flowering cultivars, which are shorter than traditional

varieties and easier to combine (Baxter and Scheifele).

The first Canadian-bred seed strain, which will be

available next year in limited quantities, is also short

(Hanks, Fall 1999). 

Retting

If hemp or flax (linen) fibers are to be used in textiles

and other high-quality applications, the bast fibers

must be separated from the rest of the stalk. Retting is

a microbial process that breaks the chemical bonds

that hold the stem together and allows separation of

the bast fibers from the woody core. The two traditional types of retting are field and water retting. 

With field or dew retting, plant stems are cut or pulled

up and left in the field to rot. Farmers monitor the

process closely to ensure that the bast fibers separate

from the inner core without much deterioration in

quality. Moisture is needed for the microbial breakdown to occur, but then the weather must be dry

enough for the stalks to dry for bailing. Although

varying weather conditions affect the quality of fiber,

field retting has been used extensively for hemp

because it is inexpensive, mechanized, and does not

use water.

Water retting produces more uniform and high-quality

fiber, but the process is very labor- and capital-intensive. Stems are immersed in water (rivers, ponds, or

tanks) and monitored frequently. Not only is this laborintensive, farmers and/or workers must be knowledgeable about fiber quality. Also, the process uses large

volumes of clean water that must be treated before

being discharged. Water retting has been largely abandoned in countries where labor is expensive or environmental regulations exist. Most hemp fiber currently

used in textiles is water retted in China or Hungary.

Scientists speculate that improved microorganisms or

direct use of enzymes may allow countries in Europe

and North America to produce textile-quality bast

fibers.

Fiber Separation

Once the stalks are retted, dried, and baled, they are

brought to a central location for processing. With

mechanical separation, in a process called breaking,

stalks are passed between fluted rollers to crush and

break the woody core into short pieces (called hurds),

separating some of it from the bast fiber. The remaining hurds and fiber are separated in a process called

scutching. Fiber bundles are gripped between rubber

belts or chains and carried past revolving drums with

projecting bars that beat the fiber bundles, separating

the hurds and broken or short fibers (called tow) from

the remaining long fiber (called line fiber). Fiber and

hurds also can be separated with one machine called a

decorticator (Kerr, 1998). Figure 3 presents a generalized schematic of plant and fiber yields, when grown

Industrial Hemp in the United States USDA • 5
for high-quality textile fiber, from harvest through to

fiber separation.

Although partially mechanized, these procedures are

functionally identical to traditional hand methods of

preparing hemp line fiber and tow for twisting into twine

or rope or for spinning into yarn. Not only are these

methods time consuming, they require skilled workers

and considerable investment in capital equipment.

It is also possible to mechanically convert virtually all

of the bast fiber directly into tow using flax breaking

and tow processing machinery. This eliminates traditional scutching and allows processing of randomly

oriented baled straw. Compared with scutching

machinery, tow-processing equipment usually has

higher throughput, requires fewer and less skilled

workers, and costs less. However, a tow processing

system cuts all of the bast fiber into short lengths,

making it appropriate only for lower value uses, such

as pulp and paper, instead of textiles.

Research in Europe has sought methods for separating

the bast fiber that bypass traditional retting and scutching. Steam explosion and ultrasound are under investigation in Germany, but the processes produce only short

fiber. Neither technology has moved beyond laboratory

or pilot scale trials. For hemp to be a viable fiber crop

in the United States, modern hemp harvesting and processing methods would need to be developed.

6 • USDA Industrial Hemp in the United States

Not to scale

Hollow core

iExcept at joints

Pith

iA layer composed of thick

 woody tissue used to support the

 plant

iThe product from this area is called

 hurds and is 60-75 percent of total

 mass

Cambium (growth area)

iProduces hurds on inside and bast

 and bark on outside—the

 differentiation layer

iAlso an abscission layer where

 fiber and hurds separate during the

 retting/breaking process

Phloem or parenchyma

iShort cells containing

 chlorophyll and long cells that are

 the bast fibers1

Cortex

iA layer of thin walled

 cells having no fiber but

 containing chlorophyll

Epidermis

iThe thin outside

 protective layer

 of plant cells

Figure 1. Cross section of a hemp stem

Source: Oliver and Joynt, p. 3.

1 Bast fibers are composed of primary bast fibers, which are long and low in lignin, and secondary bast fibers, which are

intermediate in length and higher in lignin.
Industrial Hemp in the United States USDA • 7
8 • USDA Industrial Hemp in the United States

Figure 3. A typical breakdown of the green- and dry-plant components of hemp grown for fiber

Green hemp plant 100%

40,000 kilograms per hectare

 (35,687 pounds per acre)

 Green leaves 30%

12,000 kilograms per hectare

 (10,706 pounds per acre)

 Dry leaves 12.5%

5,000 kilograms per hectare

 (4,461 pounds per acre)

 Green stems 70%

28,000 kilograms per hectare

 (24,981 pounds per acre)

 Dry unretted stems 26.3%

10,500 kilograms per hectare

 (9,368 pounds per acre)

 Dry retted stems 22.0%

8,800 kilograms per hectare

 (7,851 pounds per acre)

 Dry retted fiber 4.5%

1,800 kilograms per hectare

 (1,606 pounds per acre)

 Dry line fiber 3.5%

1,400 kilograms per hectare

 (1,249 pounds per acre)

 Dry tow 1.0%

400 kilograms per hectare

 (357 pounds per acre)

Note: Although these stem and fiber yields are from 1970, they illustrate how bast fibers are only a small portion of

total crop yields.

Source: Dempsey, p. 82.
U.S. Hemp Fiber 

and Fabric Imports

No data are available on imports or exports of hemp

seed and oil into the United States, but data do exist

on hemp fiber, yarn, and fabrics.

Imports of raw hemp fiber have increased dramatically

in the last few years, rising from less than 500 pounds

in 1994 to over 1.5 million pounds for the first 9

months of 1999 (table 1). Yarn imports also have risen

substantially, peaking at slightly less than 625,000

pounds in 1997. The switch from yarn to raw fiber in

the last 2 years probably reflects the development of

U.S. spinning capacity. At least two companies are

now spinning hemp yarn from imported fibers (Gross,

1997). According to industry sources, domestic spinning capacity for hemp was not available earlier in the

decade. No direct information is available on the uses

of the yarn, but it is likely used to manufacture apparel, household furnishings, and/or floor coverings.

A separate import code for hemp fabrics was added to

the Harmonized Tariff Schedule in 1995, so only a few

years of data are available. Imports more than doubled from over 222,000 pounds in 1995 to about

523,000 pounds in 1998. The volume dropped for the

first 9 months of 1999, again probably reflecting

domestic production of hemp-containing fabrics.

China is the largest supplier of hemp fabric to the

United States, followed by Hungary, Poland, and

Romania. Data are not available on how much hemp

clothing and household furnishings are imported into

the United States.

Imports of tow and yarn waste have declined since the

late 1980’s and early 1990’s and have varied from year

to year (table 1). No direct information is available on

the uses of hemp tow and yarn waste. However, both

hemp and flax are bast fibers and flax tow and yarn

wastes are byproducts of linen processing and spinning. Since the main use of flax tow and waste is in

specialty papers, hemp tow and waste may be used for

the same purpose. 

The United States also exports hemp raw fiber, tow

and yarn waste, and yarn. During 1997-99, hemp

exports were around 10 percent of imports. The data

for earlier years, however, are suspect as exports of

raw fiber are unexplainably larger than imports.

A full discussion of world production and trade of

hemp fiber and seed can be found in Charest (1998)

and Vantreese (1998). Wang and Shi (1999) also

review the decade-long decrease in world hemp fiber

production and highlight China’s critical role in

declining world production and exports. Dempsey

(1975) and Ehrensing (1998) provide historic information on world fiber production.

Industrial Hemp in the United States USDA • 9

Table 1—U.S. hemp imports, by category, 1989-99

Total fiber,

Tow and tow/waste,

Year Raw fiber yarn waste Yarn and yarn Fabric Total1

Pounds

1989 0 166,200 0 166,200 na 166,200

1990 0 74,697 542 75,239 na 75,239

1991 1,900 127,429 132 129,462 na 129,462

1992 904 15,410 88 16,402 na 16,402

1993 0 121 16,848 16,969 na 16,969

1994 463 6,089 11,570 18,122 na 18,122

1995 14,844 7,754 8,181 30,779 222,495 253,274

1996 72,991 43,568 12,899 129,458 291,517 420,975

1997 193,535 13,340 624,682 831,557 451,174 1,282,731

1998 708,918 73,471 149,447 931,836 522,789 1,454,625

19992 1,587,674 35,170 65,927 1,688,771 201,650 1,890,421

na = Not available. A separate import code for hemp fabrics was added in 1995. 

1 Includes fabric for 1995-99. 

2 January to September.

Source: U.S. Department of Commerce, Bureau of Census.
Fiber Markets

Currently, the markets for bast fibers like industrial

hemp include specialty textiles, paper, and composites.

Cordage markets have long disappeared, as natural

fibers have largely been replaced by plastic and steel

(Miller, 1991; Orgel and Ravnitzky, 1994). In recent

years, Canada, Australia, and a few European countries, including the Netherlands and Germany, have

researched industrial hemp as a possible fiber for textile and paper production. Hungary and China currently are the major producers of high-quality, water-retted

hemp textile fibers (Ehrensing). Small specialty pulp

and paper mills in Britain, Spain, and Eastern Europe

process flax, hemp, and other specialty fibers. Other

potential uses of hemp bast fiber include molded automobile parts and as a replacement for fiberglass. In

addition, hurds are utilized in various applications

such as animal bedding.

Industry sources and some academic studies, such as

Thompson et al. (1998) and Gardner and White

(1998), cite numerous current and potential uses for

hemp bast fiber and hurds. For these applications to

develop or expand, hemp will have to compete with

current raw materials and manufacturing practices. In

the market for nonwood fibers, hemp would have to

compete with cotton, flax, abaca, sisal, and other nonwood fibers in terms of fiber characteristics, fiber

quality, and price. The U.S. market for hemp fibers is,

and will likely remain, a small, thin market. Changes

in price or quantity could be more disruptive and have

a greater adverse impact on market participants than

would be the case in a larger market. For example,

small increases in world hemp fiber and tow production caused export prices to fall by half to a world

average of 35 cents per pound in 1996 (Vantreese,

1998). See Appendix II for a discussion and some

examples of oversupply in small, thin markets.

Specialty Textiles

According to Ehrensing (1998), hemp textile production is based primarily in Asia and central Europe.

Most hemp fiber used in textiles is water-retted in

China or Hungary. However, water retting has been

largely abandoned in countries where labor is expensive or environmental regulations are enforced.

Several companies in Poland also make hemp yarn and

fabrics (Gardner and White). A small market based on

hemp textiles imported from China, Poland, and

Hungary has developed in North America and western

Europe during the 1990’s. In the last few years, a couple of U.S. companies have begun producing hemp

yarns and/or fabrics (Gross, Gardner and White).

The current, low-end size of the U.S. market for hemp

raw materials may be defined as the equivalent domestic production and acreage required to replace imports

of hemp fiber, yarn, and fabric in 1999.1 Reichert

(1994) reports hemp fiber yields of 800 to 2,320

pounds of fiber per acre. Assuming a potential U.S.

yield of 1,550 pounds of fiber per acre (midpoint of

the range) and using linen yarn and fabric conversion

factors (1.0989 and 1.1447, respectively), the total

import quantity of hemp fiber, yarn, and fabric in 1999

could have been produced on less than 2,000 acres of

land. Given the average size of farms in the United

States (near 500 acres), just a few farms could have

supplied the hemp fiber equivalent of 1999 import levels. Detailed data are not available on the amount of

hemp seed or oil or the levels of hemp-containing

clothing and household furnishings imported into the

United States. Thus, this calculation understates the

production capacity needed to replace all hemp product imports. Nevertheless, the calculation does demonstrate the small, thin nature of the market for industrial

hemp and its products in the United States. 

Hemp’s closest competing fiber for textile uses—in

terms of fiber production, processing, and characteristics—is linen, which is derived from textile flax.

Textile flax is not grown in the United States, with

demand met wholly by imports. While U.S. imports of

hemp fiber, yarn, and fabric have increased dramatically in recent years, 1999 hemp imports (JanuarySeptember) represented just 0.5 percent of U.S. linen

yarn, thread, and fabric imports. However, the U.S.

market for linen may indicate the longer term potential

demand for hemp fiber and products. During 1989-99,

imports of linen yarn, thread, and fabrics accounted for

62 percent of total linen imports (table 2). Linen

apparel accounted for another 33 percent, with household furnishing and floor coverings taking up the

remainder. The United States also exports a small

amount of linen products (table 3).

A long-term, high-end size of the potential U.S. market for hemp fiber could be defined by considering the

equivalent domestic production and acreage required

10 • USDA Industrial Hemp in the United States

1 Nine months of import data were extrapolated to estimate a full

year of imports.
to replace both hemp and linen imports. The hemp

fiber required to replace the equivalent level of hemp

and linen fiber, yarn, and fabric imports in 1999 could

have been produced on 250,000 acres—roughly 40

percent of 1997 tobacco acreage, 5 percent of U.S. oat

acreage, or 0.4 percent of wheat acreage.

Hemp and linen are specialty textile fibers. Since

1980, linen and hemp together have accounted for less

than 3 percent of world textile fiber production (table

4). Cotton and noncellulosic fibers are the dominant

components. Worldwide production of hemp fibers

decreased from a high of 569 million pounds in 1980

to 222 million pounds in 1995, a decline of 61 percent.

A new data series was started in 1996, which does not

Industrial Hemp in the United States USDA • 11

Table 2—U.S. linen imports, by category, 1989-991

Yarn,

thread, Household Floor

Year and fabric Apparel furnishings covering Total2

1,000 pounds

1989 388,036 178,957 1,799 9,555 578,347

1990 408,078 170,367 1,512 9,611 589,568

1991 368,383 177,722 3,137 10,812 560,054

1992 320,325 192,787 1,611 22,877 537,600

1993 321,186 193,040 914 22,286 537,426

1994 339,604 196,292 1,797 34,089 571,782

1995 368,778 163,492 3,171 35,736 571,177

1996 246,191 144,194 1,990 32,559 424,934

1997 329,590 154,634 1,835 36,846 522,905

1998 253,270 183,602 1,954 44,995 483,821

19993 186,301 148,106 3,142 41,707 379,256

1 Estimated raw-fiber equivalent quantity contained in the products. 

2 Does not include imports of raw fiber and tow/yarn waste. 

3 January to September.

Source: Meyer.

Table 3—U.S. linen exports, by category, 1989-991

Yarn,

thread, Household Floor

Year and fabric Apparel furnishings covering Total2

1,000 pounds

1989 24,256 12,160 2,471 8,154 47,041

1990 32,727 15,794 4,267 12,011 64,799

1991 28,005 16,072 4,300 15,440 63,817

1992 30,755 14,878 3,274 15,431 64,338

1993 30,178 19,629 2,610 17,455 69,872

1994 35,511 23,038 2,457 14,569 75,575

1995 35,106 24,397 3,011 13,733 76,247

1996 39,681 27,745 2,729 14,844 84,999

1997 54,604 19,803 3,980 26,784 105,171

1998 56,282 19,976 3,738 22,906 102,902

19993 48,045 16,598 1,733 14,093 80,469

1 Estimated raw-fiber equivalent quantity contained in the products. 

2 Does not include exports of raw fiber and tow/yarn waste. 

3 January to September.

Source: Meyer.
include production estimates from the former Soviet

Union and Eastern Europe. During 1996-98, production averaged 146 million pounds, with China as the

dominant producer.

According to industry sources, the fineness and quality

of flax and hemp overlap depending upon growing

conditions, variety, and how the crop is handled after

harvesting. There is no industry consensus as to how

closely the markets for the two fibers are allied

(Gross). Nonetheless, with hemp fiber imports just 0.5

percent of linen imports, the near-term market potential for hemp in the United States (for domestic textile

production) is closer to the low end of the 2,000- to

250,000-acre production-equivalent range. The general

manager of Kenex Ltd. indicated that the 1999 supply

of hemp fiber and seed from 35,000 Canadian acres

has oversupplied the North American hemp market

(von Sternberg, 1999).

Some people will buy hemp apparel and related items

simply because they are made from hemp. This is

probably a small but stable component of demand. A

more volatile component is based on fashion trends

and whether designers use hemp- or linen-containing

fabrics in their designs. In the last few years, some

famous designers, including Calvin Klein, Giorgio

Armani, and Ralph Lauren, have included hemp fabrics in their clothing lines (Gross; The Economist,

1998; Copeland, 1999). Because of changing fashion

trends, markets for specialty textile fibers tend to be

cyclical. Cyclical markets would be more disruptive

to fibers with small markets than to fibers with large

market shares, such as cotton.

Hemp also is being used in the manufacture of household furnishings and floor coverings, particularly carpets (Gross; von Hahn, 1999). Competition with linen

for traditional upholstery, drapery, and floor covering

markets would depend on the fiber’s quality and price.

A comparison of the import values for hemp and linen

yarns reveals that hemp may be able to compete on

price (table 5). From 1994 to 1998, the import value

12 • Industrial Hemp in the United States USDA

Table 4—World textile fiber production, 1980-98

Rayon Nonand cellulosic Wool Hemp Total

Year acetate fibers Cotton (clean) Silk Flax (soft)1 fibers

Million pounds

1980 7,147 23,095 31,427 3,675 123 1,389 569 67,425

1981 7,064 23,869 30,474 3,719 126 1,347 492 66,969

1982 6,493 22,368 31,993 3,656 121 1,437 459 66,603

1983 6,457 24,418 31,560 3,759 121 1,733 406 69,779

1984 6,605 26,023 42,552 3,831 123 1,512 443 71,669

1985 6,462 27,533 38,541 3,816 150 1,642 481 77,011

1986 6,304 28,499 33,880 3,924 139 1,605 485 80,688

1987 6,229 30,293 38,891 4,079 139 2,108 474 82,213

1988 6,385 31,784 40,514 4,202 141 2,039 465 85,530

1989 6,488 32,512 38,280 4,431 146 1,799 397 84,053

1990 6,079 32,838 41,808 4,359 146 1,570 364 87,164

1991 5,365 33,678 45,636 3,929 148 1,541 439 90,736

1992 5,130 35,629 39,650 3,794 148 1,484 432 86,267

1993 5,171 36,566 37,234 3,695 150 1,369 260 84,445

1994 5,087 39,549 41,229 3,437 152 1,261 209 90,924

1995 5,342 40,514 44,868 3,283 203 1,537 223 95,970

1996 5,004 43,887 43,219 3,289 194 1,448 139 97,180

1997 5,102 48,837 44,132 3,181 192 1,400 148 102,992

1998 4,817 50,135 40,629 3,120 192 1,424 152 100,469

1 Cannabis sativa. Figures prior to 1996 include rough estimates for the former Soviet Union and Eastern Europe. A new data series was started in 1996 that does not include estimates from these regions.

Source: Meyer.
of hemp yarn averaged $1.93 per pound, while the

value for single- and multiple-strand linen yarn averaged $2.97 per pound. Information on yarn quality is

not available, which may account for linen’s higher

value. Nevertheless, the value of hemp imports per

pound, calculated by dividing the value of hemp yarn

imports by the volume, has fluctuated widely since the

early 1990’s. During 1990-92, the value of hemp yarn

ranged from $12.92 to $21.19 per pound. Between

1993 and 1999, the value ranged from $1.01 in 1997

to $3.31 for the first 9 months of 1999. The lower values in recent years may be to due to the increased volume of imports, enabling companies to spread their

costs over more tonnage. Similar variations occurred

in the import values of raw hemp fiber, which settled

at around 40 cents per pound in 1997 and 1998.

Paper and Composites

The specialty and recycled paper markets are also possibilities for industrial hemp bast fibers. Specialty

paper markets include currency, cigarette papers, filter

papers, and tea bags. A number of companies in U.S.

and European markets are selling paper that contains

small amounts of hemp fiber, usually blended with less

expensive nonwood fibers. These papers have gained

some market acceptance as ecologically friendly or

tree-free, but at present are considerably more expensive than wood-based paper (Ehrensing, Gardner and

White). Within the mainstream pulp and paper market,

fibers compete on quality characteristics, with cotton

predominant among nonwood fibers, then flax, and

then kenaf and other specialty fibers. Manufacturers

are willing to pay more for specialty fibers if quality

dictates. For example, abaca fibers retain their strength

and form when wet, commanding a high price. 

Rising wood prices and regulatory practices have promoted the growth of recycled pulp and paper.

Therefore, a potential market may exist for agricultural

fibers as an additive to strengthen paper made from

recycled materials. Recent Dutch and German research

suggests that industrial hemp may not be competitive

in the specialty paper market, but may be used as a

fiber supplement to recycled paper pulp.

In North America, use of nonwood fibers, such as

hemp, in composites is still largely in research and

development or the early stages of commercialization.

Flax, kenaf, jute, hemp, and wheat straw—in combination with various resins—can be used to make composite board. Wheat straw is the dominant nonwood

fiber in these applications (Glaser and Van Dyne,

1997). Hemp fibers could be desirable in this market

because of their length and strength. Composites made

using agricultural fibers are being developed in companies and research institutes in Europe, Canada, and

the United States. The USDA Forest Service’s Forest

Products Laboratory is a leader in the research of nonwood fibers in composites. The percentage of the composites market captured by nonwood fibers in coming

years will depend on economics and availability of

raw materials.

Other Potential Uses

The Economic Impact of Industrial Hemp in Kentucky

cites molded automobile parts and fiberglass replacement as potential uses for hemp bast fiber. Hemp

fibers have been used in the manufacture of trunk liners and press-molded airbag parts for several BMW

models. Kenex Ltd. has developed prototype molded

car parts. Transit buses are being retrofitted in Florida

with molded hemp parts for use in Orlando

(Thompson et al.). In recent years, several automobile

companies have investigated using nonwood fibers,

such as hemp and kenaf, in the manufacture of molded

car parts because they are lighter and more recyclable

than current raw materials (Domier, 1998; Copeland).

For nonwood fibers to gain a part of this market, they

will have to be supplied in adequate quantities

Industrial Hemp in the United States USDA • 13

Table 5—U.S. import value of linen and hemp

yarns, 1989-99

Linen yarn, Linen yarn, Hemp

Year single multiple yarn

Dollars/pound

1989 2.47 6.76 na

1990 2.50 6.34 12.92

1991 2.38 5.33 21.19

1992 2.14 5.67 18.26

1993 2.38 4.61 1.34

1994 3.49 2.26 1.34

1995 3.73 2.24 2.89

1996 2.39 1.86 1.93

1997 3.14 2.62 1.01

1998 2.86 3.34 2.47

19991 2.79 3.09 3.31

na = Not available. 

1 January-September.

Source: U.S.Department of Commerce, Bureau of Census.
throughout the year at prices competitive with current

raw materials.

The Kentucky report also suggests that hemp and other

nonwood fibers could replace fiberglass in certain

applications. The short fiber length and absorbent

properties of these fibers would limit their use to

replacing chopped fiberglass and in applications where

moisture is not a problem. Given current market conditions, it can be assumed that synthetic fibers are the

raw material of choice because of their properties

(e.g., moisture resistance), their price, or both.

Hemp Hurds

In countries currently producing industrial hemp,

hurds are sold for a variety of uses, including animal

bedding, composites, and low-quality papers.

According to Thompson et al. (1998), industrial hemp

hurds appear to be price-competitive with wood chips,

fine wheat straw, and other types of bedding used for

high-value racehorses. Hemp hurds are favored over

cheaper alternatives since they are more absorbent,

and thus, reduce illness. Companies in England,

France, and the Netherlands are making horse bedding

from hurds. Some members of the racehorse industry

in Kentucky have expressed interest in using hemp

hurds (Patton, 1999). In addition, hurd-based cat litter

is being sold in England, France, and Germany

(Gardner and White). Since hurds are a joint product

with the bast fiber, finding markets for hemp hurds

may make the difference between a profitable and

unprofitable industrial hemp enterprise.

14 • USDA Industrial Hemp in the United States
Seed Markets

Thompson et al. (1998) estimated the demand for

hemp seed by asking seed processing firms in the

United States and Canada how many tons they purchased per month. They estimated North American

demand at 1,300 tons at an average price of 39 cents

per pound. Given yields in Germany of 1,000 pounds

per acre, it would take 2,600 acres to satisfy the estimated demand for hemp seed. Ehrensing (1998) found

bulk hemp seed prices at about 45 cents per pound,

with strong demand. Hanks (Fall 1999) reports an

average Canadian seed price of 41 cents per pound (60

cents Canadian) in 1999, but states that many

observers fear overproduction of hemp in western

Canada may bring crop prices down. In comparison,

during the 1994/95-1998/99 marketing years, soybean,

canola, and flaxseed prices averaged 10, 11, and 10

cents per pound, respectively (Ash, 1999).

According to Vantreese (1998), export prices of hemp

seed have been extremely volatile in the last 20 years,

mainly due to the variability of Chinese exports. China

began producing and exporting hemp seed in large

quantities in 1986, causing world prices to fall from 25

cents in 1985 to 15 cents per pound in 1986. In 1991,

China stopped exporting hemp seed and prices nearly

doubled in 1992. Prices peaked in 1995 at 41 cents a

pound. During the 1990’s, increased EU production of

hemp also increased the demand for seed stock for

planting, thereby raising export values.

Hemp seeds can be used as a food ingredient or

crushed for oil and meal. The seed contains 20 percent

high-quality, digestible protein, which can be consumed by humans, animals, and birds (Vantreese,

1998). The seed is approximately 29 to 34 percent oil

by weight. The oil can be used both for human consumption and industrial applications (fig. 2). Due to

the high content of polyunsaturated oils, it is fairly

unstable and becomes rancid quickly unless preserved.

The meal (seed cake) contains 25 to 30 percent protein

and can be used in food and animal feed (Vantreese,

1998; Hinz, 1999).

Companies are using hemp seed in their products.

Natural-product magazines, such as the Natural Food

Merchandiser and Organic & Natural News, have

advertised products containing hemp ingredients such

as roasted hulled seed, nutrition bars, tortilla chips,

pretzels, and beer. At least two breweries in the United

States, as well as breweries in Canada, Germany, and

Switzerland, make hemp beer (The Economist;

Gardner and White; Louie, 1998). One article touts

hulled hemp seeds as more shelf-stable than flax and

more digestible than soybeans and finds the seed in

snacks, spreads, salad dressings, cheese, and ice cream

(Rorie, 1999). The market potential for hemp seed as a

food ingredient is unknown. However, it probably will

remain a small market, like those for sesame and

poppy seeds. Some consumers may be willing to pay a

higher price for hemp-seed-containing products

because of the novelty, but otherwise hemp seed will

have to compete on taste and functionality with more

common food ingredients. 

Currently, a trendy use of hemp oil is for body-care

products, such as lotions, moisturizers, shampoos, and

lip balms (Marshall, 1998; Rorie). For example, The

Body Shop, a British-based international skin products

company, began selling hemp-oil-containing products

about 2 years ago in the United States. In June 1999,

the company reported that those seven or eight products now account for 10 percent of total sales.

However, to meet this demand, The Body Shops

imports only 12 tons of organic hemp seed oil a year

into the United States (Patton).

Hemp oil is also sold in health food stores as a nutritional supplement. The oil is mechanically (cold)

pressed from the seed to maintain its quality and

integrity. According to one industry participant, coldpressed hemp oil has a dark green color and nutty flavor (Hemp-Agro). It contains roughly the same ratio

of linoleic and linolenic acids that would be found in a

nutritionally balanced diet (Marshall, Hinz). In addition to these two essential fatty acids, hemp oil contains 1 to 4 percent gamma-linolenic acid (GLA).

GLA is also available from evening primrose and borage oils that, because of their unpleasant taste, are sold

only in capsule form (Marshall, Hemp-Agro).

The market for hemp oil is limited by a number of factors. First, mechanical crushing produces a lower oil

yield than crushing combined with solvent extraction.

Nor does hemp oil undergo degumming and bleaching

as do many other vegetable oils. Some consumers prefer an oil that has been processed without chemicals,

but others may dislike hemp oil’s color or taste.

Second, the oil is high in unsaturated fatty acids,

which can easily oxidize, so it must be kept in darkcolored bottles and has a limited shelf life. Like flax

and safflower oils, which also are highly unsaturated,

Industrial Hemp in the United States USDA • 15
hemp oil should not be used for frying. Third, to be

used as a salad oil, it will have to be tested by the U.S.

Food and Drug Administration and found “generally

recognized as safe.” In Canada, hemp foods are now

regulated as novel foods, a legislative category developed primarily for products containing genetically

modified organisms (Hanks, Fall 1999).

As a drying oil, hemp oil would have to compete with

manmade chemicals and plant-based oils, such as linseed and tung oils, in industrial applications. As with

industrial uses of all plant and animal oils and fats, use

of linseed and tung oils has fluctuated in the last two

decades, with no apparent upward or downward trend

(table 6). Hemp oil would have to compete on functionality and price with current raw materials in these

established industrial markets.

16 • USDA Industrial Hemp in the United States

Table 6—U.S. use of selected vegetable oils in

industrial applications, 1978/79-19981

All fats Linseed Tung Linseed

Year2 and oils3 oil oil and 

tung oils

Million pounds

1978/79 4,443.9 207.5 13.5 221.0

1979/80 4,216.1 160.0 15.7 175.7

1980/81 4,163.2 127.6 16.6 144.2

1981/82 3,721.0 92.7 14.6 107.3

1982/83 3,649.6 97.6 12.2 109.8

1983/84 3,982.1 121.2 19.7 140.9

1984/85 3,665.0 166.0 12.4 178.4

1985/86 3,571.3 176.9 11.6 188.5

1986/87 5,990.6 280.8 12.2 293.0

1987/88 4,098.1 159.3 14.8 174.1

1988/89 3,805.4 154.9 7.7 162.6

1989/90 3,509.8 110.5 8.9 119.4

1991 3,745.1 95.8 6.4 102.2

1992 3,727.9 154.4 7.3 161.7

1993 3,646.2 125.8 11.2 137.0

1994 4,307.5 124.3 9.3 133.6

1995 3,760.2 112.8 20.2 133.0

1996 3,588.7 98.6 21.3 119.9

1997 3,889.8 83.0 19.4 102.4

1998 3,695.4 79.4 14.3 93.7

1 Includes soaps, paints, varnishes, resins, plastics, lubricants, fatty

acids, and other products. 

2 Crop year runs from October 1 to September 30. Annual totals

reported on a calendar year basis beginning in 1991. 

3 Includes castor oil, coconut oil, tallow (beef fat), lard (pork fat), linseed oil, rapeseed oil, soybean oil, tall oil, and tung oil. 

Source: U.S. Department of Commerce, Bureau of Census.
Potential U.S. Production and

Processing

Potential yields and processing methods, along with

farmer costs and returns, are important considerations

when evaluating industrial hemp as a potential U.S.

crop. Revenue is dependent on yields and market

prices. Generally, the lower the market price, the

greater the yield must be for producers to break even

or make a profit. In addition, U.S. experience with

kenaf and flax may lend insights into the processing

hurdles hemp may face in the United States.

Possible Yields

The Oregon study summarizes hemp yields reported

by researchers from various countries since the 1900’s

(Ehrensing). Early in this century, U.S. dry-stem yields

ranged from 2 to 12.5 tons per acre, but averaged 5

tons per acre under good conditions. Research trials in

Europe during the last four decades had dry-matter

yields that ranged from 3.6 to 8.7 tons per acre. In the

Netherlands, research trials during the late 1980’s

reported dry-stem yields of 4.2 to 6.1 tons per acre.

Recent commercial production in England produced

average dry-matter yields of 2.2 to 3 tons per acre on

several thousand acres over several years.

Experimental production in Canada during 1995 and

1996 yielded 2.5 to 3 tons of dry stems per acre.

According to the study, some of the variation in yield

can be attributed to different measurement practices.

For example, European authors generally report total

above-ground dry matter, including stems, leaves, and

seed, versus the dry-stem yields reported by other

researchers.

Vantreese (1998) reports that hemp seed yields have

increased dramatically in recent years. In 1997, world

average yields reached 876 pounds per acre. Yields

ranged significantly, from a high of 1,606 pounds per

acre in China, where the seed is consumed, to 595

pounds per acre in France, where much of the production is certified planting seed. In Germany, current

seed yields are about 1,000 pounds per acre

(Thompson et al.), while those in Eastern Europe

range from 350 to 450 pounds per acre (Mackie,

1998). In Canada, seed yields in 1999 averaged 800

pounds per acre (Hanks, Fall 1999). 

Processing

In addition to the uncertainty about yields, there is

some question as to whether hemp fibers can be profitably processed in the United States. As was outlined

earlier, the technologies used to process hemp fiber

have not changed much and they require capital

investment and knowledgeable workers. Research is

under way to streamline harvesting, retting, and fiber

separation, but those technological breakthroughs have

yet to occur. Traditional retting and fiber-separation

Industrial Hemp in the United States USDA • 17

Table 7—Estimated enterprise costs for hemp production in Kentucky, 1994

Costs Fiber1 Seed Certified seed

Dollars/acre

Variable costs:

Seed (pounds) (40) 80.00 (10) 20.00 (10) 20.00

Fertilizer 33.58 33.58 33.58

Lime (tons) (1) 10.82 (1) 10.82 (1) 10.82

Fuel, oil (hours) (4.5) 16.02 (2.2) 12.22 (2.2) 12.22

Repairs 9.35 17.60 17.60

Interest 7.93 4.24 4.24

Total 184.12 98.46 98.46

Fixed costs2 46.08 41.25 64.84

Operator labor3 (hours) (8) 56.00 (8) 56.00 (10) 70.00

Total enterprise costs 286.20 195.71 233.30

1 Harvested and sold as raw stalks. 

2 Depreciation, taxes, insurance. 

3 At $7 per hour.

Source: McNulty.
processes—both labor and resource intensive—could

limit the ability of U.S. hemp producers to compete

against major suppliers such as China, Hungary,

Poland, and Romania. 

Specialty oilseed crushing mills that could accommodate hemp seed do exist in the United States.

According to the Soya & Oilseed Bluebook, companies

in North Dakota, Minnesota, Georgia, and North

Carolina mechanically crush flaxseed, borage, safflower, canola, sunflowerseed, crambe, peanuts, and

cottonseed (Soyatech, 1999). 

Estimated Costs and Returns

Both the 1995 Kentucky Task Force report (McNulty)

and the 1998 Kentucky impact analysis (Thompson et

al.), as well as the Oregon and North Dakota studies

(Ehrensing, Kraenzel et al.), present estimated costs

and returns for hemp production. All include estimates for fiber (stalk) production. The 1995

Kentucky, 1998 Kentucky, and North Dakota reports

also present estimates on seed production. In addition,

most of the studies compare the estimated hemp costs

and returns to those for other crops. 

The Kentucky Task Force estimated total costs—

which include variable costs, fixed costs, and operator

labor—to be $286 per acre for hemp fiber, $196 for

seed, and $233 for certified seed (table 7). These costs

were comparable to 1993 estimated expenses for producing corn and double-crop wheat/soybeans in

Kentucky (table 8). The analysis assumed that hemp

grown for fiber would be harvested and sold as raw

stalks on a dry-weight basis. Various sources priced

raw, dry defoliated stalks at $60 to $125 per metric

ton. Yields were assumed to range from 7 to 15 metric

tons per hectare (2.8-6.1 metric tons per acre), based

largely on European studies. Thus, potential returns

for hemp fiber ranged from a low price/low yield estimate of $170 per acre to a high price/high yield return

of $759 per acre (table 8). With estimated production

expenses of $286, net returns for hemp for fiber

ranged from -$116 to $473 per acre. Returns for hemp

seed were estimated to range from $60 to $800 per

acre. Given costs of production at $196 per acre, net

returns ranged from -$136 to $604 per acre (McNulty). 

The Oregon report also estimated costs and returns for

hemp grown for fiber, using typical costs associated

with irrigated field corn in the Pacific Northwest (table

9). Variable and fixed costs for hemp were estimated

at $371 and $245 per acre, respectively. The dry-matter yield was assumed to be 5 tons per acre, which is

consistent with the higher average yields reported in

Western Europe using well-adapted cultivars. A price

of $75 per dry ton was based on the price of wood

chips in the Pacific Northwest, as it was anticipated

that the fiber could be used by local composite and

paper companies. Given this yield and price, gross

18 • USDA Industrial Hemp in the United States

Table 8—Estimated costs of production and returns for various crops in Kentucky, 1993 or 1994

Estimated cost per acre

Return Net return

Crop1 Yield per acre per acre Variable Fixed Labor Total per acre

Dollars

Fiber hemp2 2.8-6.1 metric 170-759 184 46 56 286 -116 to 473

tons

Hemp seed3 na 60-800 98 41 56 196 -136 to 604

Corn grain 110 bushels 231 155 46 32 233 -2

Wheat/soybeans

(double crop) 45/28 bushels 300 149 44 37 230 70

Tomatoes

(for processing) 27 tons 2,430 1,278 154 231 1,663 767

Burley tobacco 2,500 pounds 4,375 1,905 626 700 3,231 1,144

na = Not available. 

1 For all crops except hemp, source is University of Kentucky, Department of Agricultural Economics crop budgets for 1993. 

2 Various sources priced dry, defoliated stalks at $60 to $125 per metric ton. 

3 One source estimated returns at $60 to $171 per acre for seed (for oil and feed), while another estimated seed returns at $800 per acre

(2,000 pounds per acre at 40 cents per pound).

Source: McNulty.
revenue would be $375 per acre and net returns would

be -$241 per acre (Ehrensing). 

The Oregon report presents a sensitivity analysis of net

returns based on various yields and potential market

prices (table 10). Most of the net returns remain negative except under the highest yield/price combinations.

The analysis was further refined to see if dual production was any more profitable. The cost of combine

seed harvest, $20 per acre, was added to variable

costs, and stalk yields were lowered to 2.5 tons per

acre with a price of $75 per ton. Again, most of the

net returns are negative except for the highest

yield/price combinations (table 11) (Ehrensing). 

The 1998 Kentucky report estimates costs and returns

for hemp grown for fiber (straw), seed (grain), certified

seed, and both fiber and seed (table 12). The cost estiIndustrial Hemp in the United States USDA • 19

Table 9—Estimated production budget for hemp in

the Pacific Northwest1

Dollars/ton

Item Dollars/acre (dry weight)

Variable costs:

Cultural

Tillage and planting 40.00 8.00

Hemp seed 34.00 6.80

Fertilizer and application3 85.00 17.00

Irrigation 62.00 12.40

Total 221.00 44.20

Harvest4

Forage chopper ($3/ton) 15.00 3.00

Raking ($1.50/ton) 7.50 1.50

Baling, large square 

bales ($9.80/ton) 49.00 9.80

Loading and trucking 

($3.00/ton) 15.00 3.00

Total 86.50 12.80

Miscellaneous

Operating capital interest 29.78 5.96

Pickup 7.68 1.54

Farm truck 6.34 1.27

General overhead 20.00 4.00

Total 63.80 12.76

Total variable costs 371.30 69.76

Fixed costs:

Land rent 150.00 30.00

Insurance, machinery 

and equipment 3.00 0.60

Irrigation system, depreciation and interest 44.00 8.80

Machinery and equipment, 

depreciation and interest 48.00 9.60

Total 245.00 49.00

Total production costs 616.30 118.76

Gross income

(yield = 5 tons/acre)5 375.00 75.00

Net projected returns -241.30 -43.76

1 Budget was developed using typical costs associated with irrigated field corn in the Pacific Northwest. Production practices were

chosen to maximize stem dry-weight yield for possible production of

composite wood products or paper. 2 25 pounds/acre at

$1.36/pound. The assumed cost of hemp seed is the average of

prices reported for commercially available European hemp varieties.

Cost of shipping from Europe was not included. 3 600 pounds/acre

16-16-16 at $250/ton. 4 Based on cost of operating silage corn harvesters and local cost of raking and baling hay and grass seed

straw. No costs associated with retting, such as additional irrigation,

are included. 5 The dry matter yield is assumed to be 5 tons/acre,

which is consistent with the higher average yields reported in

Western Europe using well-adapted hemp cultivars. An assumed

price of $75 per dry ton was used in the analysis since prices for

wood chips in the Pacific Northwest have risen over the past decade

and this trend is expected to continue.

Source: Ehrensing.

Table 10—Estimated net return per acre from

hemp production in the Pacific Northwest at 

various price and yield levels

Yield (tons Price (dollars/ton)

per acre) 50 75 100 125

Dollars/acre

3 -431.70 -356.70 -281.70 -206.70

4 -399.00 -299.00 -199.00 -99.00

5 -366.30 -241.30 -116.30 8.70

6 -333.60 -183.60 -33.60 116.40

7 -300.90 -125.90 49.10 224.10

Source: Ehrensing.

Table 11—Estimated net return per acre from dualpurpose hemp production in the Pacific Northwest

at various seed prices and yield levels1

Seed price Seed yield (pounds/acre)

(dollars/pound) 500 750 1000

Dollars/acre

0.30 -255 -181 -106

0.35 -231 -143 -56

0.40 -206 -106 -6

0.45 -181 -68 45

0.50 -156 -31 94

0.55 -131 7 144

1The cost of combine seed harvest, $20 per acre, was added to

variable costs. Hemp stem yield was assumed to be 2.5 tons per

acre with a price of $75 per ton. Other assumptions are the same

as those used for table 9. 

Source: Ehrensing.
mates are based on the 1995 Kentucky report and

updated to 1997 with some modifications. The yields

used in the analysis are from Germany. The prices,

based on import prices and/or prices paid in Canada,

were estimated to be 39 cents per pound for seed, $1.20

per pound for certified seed for planting, and $200 per

ton for hemp stalks. The residual stalks from seed production were estimated to fetch $120 per ton. Total

costs ranged from $257 to $403 per acre. According to

the report, these cost estimates are consistent with

those made by Reichert (1994), by Kenex Ltd., and

from German cultivation data (Thompson et al.). 

Estimated revenue ranges from $477 per acre for seed

to $900 per acre for certified seed. Thompson et al.

admit that the very high returns calculated in these

estimates cannot be sustained. While most of their

discussion focuses on why the price of certified seed

will decrease, little attention is given to stalk prices.

The price they used for stalks is the first-year (1998)

price offered by Kenex Ltd., the Ontario firm contracting for hemp acreage, which is not representative of

long-term stalk prices. With new crops, firms often

have to offer farmers an initial premium to induce

them to experiment with a new crop and to compensate them for lower initial yields and the forgone

returns of a conventional crop. Thus, many of the revenue estimates likely overstate average annual returns.

Given the high estimates, it is not surprising that when

compared with conventional field crops, hemp net

20 • USDA Industrial Hemp in the United States

Table 12—Estimated growing costs and returns for industrial hemp in Kentucky 

using 1997 technology, yields, and, prices1

Item Fiber2 Seed2 Certified seed Fiber and seed2

Dollars/acre

Variable costs:

Seed (pounds) (50) 125.00 (10) 25.00 (10) 25.00 (50) 125.00

Fertilizer 45.01 45.01 45.01 45.01

Herbicides 0.00 10.95 10.95 0.00

Lime (tons) (1) 12.12 (1) 12.12 (1) 12.12 (1) 12.12

Fuel, oil (hours) (4.5) 18.43 (2.2) 14.06 (2.2) 14.06 (2.2) 22.25

Repair 16.14 30.38 30.38 23.12

Interest 8.38 5.24 5.24 8.94

Storage 5.00 5.00 5.00 5.00

Transport to processor 27.20 8.00 5.60 24.00

Total 257.28 155.76 153.36 265.44

Fixed costs3 50.27 45.00 70.73 75.05

Operator labor4

(hours) (8) 56.00 (8) 56.00 (10) 70.00 (9) 63.00

Total enterprise costs 363.55 256.76 294.09 403.49

Stalk revenue 680.00 60.00 60.00 450.00

Stalk yield 3.4 tons/acre 0.5 tons/acre 0.5 tons/acre 2.25 tons/acre

Price per ton 200/ton 120/ton 120/ton 200/ton

Seed revenue na 416.91 840.00 273.00

Seed yield na 1,069 lbs/acre 700 lbs/acre 700 lbs/acre

Price per pound na 0.39/pound 1.20/pound 0.39/pound

Total revenue 680.00 476.91 900.00 723.00

Profit 316.45 220.15 605.91 319.51

na = Not applicable. 

1 Figures are based on estimates in McNulty (1995) and updated to 1997 based on the increased costs of growing corn. Also, herbicide, storage, and transport-to-processor costs were added; estimates for repair were increased by 50 percent; 50 pounds of hemp seed per acre were

assumed for cultivating hemp for fiber rather than 40 pounds. 

2 Referred to in the report as straw and grain. 

3 Fixed costs include depreciation, taxes, and insurance. 

4 At $7 per hour.

Source: Thompson et al.
returns were higher than those for all the selected

crops except tobacco (table 13).

The costs and returns in the North Dakota report are

based on a dual-purpose crop in Ontario, Canada.

Information from Vantreese (1997) was used as the

basis for the three price/yield scenarios. Prices ranged

from $5.51 to $6.80 per bushel for seed and from

$40.44 to $51.45 per ton for fiber (table 14). Yield

estimates ranged from 14.3 to 23.8 bushels of seed per

acre and 2.5 to 3 tons of fiber per acre. Total costs

were estimated at $175 per acre, while potential revenue ranged from $180 to $316 per acre, resulting in

net returns of $5 to $142 per acre. The return for the

low-price/low-yield hemp scenario was comparable to

those for most of the comparison crops in the study.

Only irrigated potatoes had higher net returns than any

of the three hemp scenarios (Kraenzel et al.).

Among the studies, total costs ranged from $175 for

North Dakota to $616 in Oregon (table 15). A lot of

the variation can be attributed to differences in fixed

costs. For example, fixed costs in the Kentucky studies, which do not include land rent, are estimated at

$75 per acre or below. In the Oregon report, fixed

costs are $245 per acre, including land rent and irrigation-system depreciation. When land and irrigation

costs are removed, fixed costs drop to $51. Also, when

land rents, estimated at $65 to $75 (Vantreese, personal communication), are added to the Kentucky estimates, fixed costs range from $106 to $150. The estimates also may differ due to varying assumptions

about production practices and may reflect different

cost structures among the States. The Oregon study

did cite high land costs as one reason hemp production

may not be viable in the Pacific Northwest

(Ehrensing).

Industrial Hemp in the United States USDA • 21

Table 13—Estimated returns to land, capital, and

management per acre for industrial hemp and

common Kentucky crops, 1997

Crop Estimated return to land,

capital, and management

Dollars/acre

Hemp, seed only 220.15

Hemp, fiber only 316.45

Hemp, seed and fiber 319.51

Hemp, certified seed only 605.91

Grain sorghum, conventional tillage 10.51

Wheat, reduced tillage 14.24

Continuous corn 75.71

Popcorn, reduced tillage 78.25

Soybeans, no-till, rotation following crop 102.20

No-till corn, rotation following soybeans 106.48

White corn, rotation following soybeans,

reduced tillage 135.84

Alfalfa hay 141.34

Barley/no-till soybeans, double-crop 

following corn 158.09

Wheat/no-till soybeans, double-crop 

following corn 158.43

Grass legume hay, round bales 161.56

Dark air-cured tobacco 182.48

Dark fire-cured tobacco 1,104.87

Burley tobacco, baled, nonirrigated 1,563.48

Source: Thompson et al.

Table 14—Estimated costs and returns for hemp and other crops in North Dakota, 1998

Crop Average yield Average price Total revenue Total costs Net returns

Per acre Dollars/unit ------------------Dollars/acre-------------------

Low-price/low-yield hemp1 14.3 bushels; $5.51/bushel; 179.96 174.63 5.33

2.5 tons $40.44/ton

Average hemp1 19 bushels; $6.16/bushel; 248.13 174.63 73.49

2.75 tons $45.96/ton

High-price/high-yield hemp1 23.8 bushels; $6.80/bushel; 316.29 174.63 141.65

3 tons $51.47/ton

Corn grain2 54 bushels 2.25 121.50 159.70 -38.20

Spring wheat2 31 bushels 3.71 115.01 117.32 -2.31

Confectionery sunflowers2 1,080 pounds 0.131 141.48 140.62 0.86

Malting barley2 50 bushels 2.41 120.50 115.02 5.48

Irrigated potatoes2 32,500 pounds 0.045 1,462.50 1,017.59 444.91

1 Estimates are for a dual-purpose crop in Ontario, Canada. 

2 From projected 1998 crop budgets for Northeast North Dakota.

Source: Kraenzel et al.
None of the cost estimates include costs for monitoring, licensing, or regulating hemp production. These

external expenses would be part of the cost of producing industrial hemp and could be borne by taxpayers

or passed on to growers and/or processors. According

to Thompson et al. (1998), Kenex Ltd. estimates that

Canadian farmers will pay US$50 annually for a background check and to obtain the satellite coordinates for

their hemp fields (fields are monitored via satellite as

part of the Canadian program).

The studies also present a range of revenue estimates,

which is not surprising given the uncertainty about

demand and expected market prices. Overall, it seems

questionable that U.S. producers could remain profitable at the low end of the estimated net returns. In

addition, given the thinness of the current U.S. hemp

fiber market, any overproduction could lead to lower

prices and lost profitability. 

U.S. Experience With Kenaf and Flax

Both kenaf and flax can be legally grown in the United

States. Their recent production history may lend additional insights into the potential for hemp in the United

States.

Kenaf is a relatively new crop. It can be grown in

many parts of the United States, but it generally needs

a long growing season to produce the necessary yield

to make it a profitable crop. With a long growing season, like that found in the southern United States,

kenaf can reach a height of 12 to 18 feet and produce

5 to 10 tons of dry fiber per acre annually. An estimated 8,000 acres of kenaf was grown in the United

States in 1997, up from 4,000 acres in 1992 and 1993.

Primary production areas are Texas, Mississippi,

Georgia, Delaware, and Louisiana (Glaser and Van

Dyne). Processing and product technology for kenafbased pulp and for about six other markets have been

developed, but markets must be established in each

geographic area since the core fraction is very low

density and expensive to ship.

Flax is grown in the United States in small quantities.

Production is almost totally oilseed varieties (for linseed oil). Textile or linen flax has not been grown

commercially in North America for 40 years (Domier).

The United States does not produce textile flax for

several reasons. First, the market for linen is very

small compared with other natural fibers like cotton,

which accounts for nearly one-third of U.S. fiber mill

use. Linen textile imports have accounted for an annual average of 2 to 3 percent of the quantity of all fibers

consumed in the United States (mill use plus net textile trade). Additionally, since 1989, linen textile

imports as a percentage of total textile imports have

consistently fallen from 12 percent to 4 percent in

1998 and 1999. The market remains small because the

economics of producing textile flax is not very

price/cost competitive. As noted earlier, many inefficiencies continue to exist in this industry, particularly

22 • USDA Industrial Hemp in the United States

Table 15—Comparison of estimated costs and returns for hemp from the various State studies

Report Variable Fixed costs1 Operator Total costs Revenue Net returns

costs labor

Dollars/acre

1995 Kentucky:

Fiber 184 46 56 286 170 to 759 -116 to 473

Seed 98 41 56 196 60 to 800 -136 to 604

Certified seed 98 65 70 233 na na

Oregon:

Fiber 371 245 na 616 375 -241

1998 Kentucky:

Fiber 257 50 56 364 680 316

Seed 156 45 56 257 477 220

Certified seed 153 71 70 294 900 606

Fiber and seed 265 75 63 403 723 320

North Dakota:

Fiber and seed na na na 175 180 to 316 5 to 142

na = not available. 

1 In the two Kentucky studies, fixed costs include depreciation, taxes, and insurance. In the Oregon study, fixed costs include land rent ($150),

irrigation-system depreciation and interest ($44), machinery depreciation and interest, and insurance.
the methods of harvesting and processing. Because of

the length of the fiber and the variation in quality, U.S.

mills are reluctant to use textile flax. Some recent

developments, however, have allowed the use of textile flax waste on cotton-spinning systems. Also, a flax

fiber mill reopened in Quebec in December 1997, and

research and development activities are occurring in

Alberta, Connecticut, Maine, Oregon, and

Saskatchewan (Domier; Hanks, Fall 1999).

Industrial Hemp in the United States USDA • 23
State Study Findings

Each of the three 1998 studies focused on different

aspects of supply and/or demand. Since Kentucky was

a major producer of certified hemp seed in the past, it

is one of the main markets mentioned in the 1998

study. Also, the horse racing industry in the State

could be a significant buyer of hemp hurds for animal

bedding. North Dakota has an oilseed crushing industry. Thus, the North Dakota study concluded that the

largest market opportunity for the State may be hemp

seed oil. The Oregon report concentrated on fiber production because of the pulp and paper industry in the

Pacific Northwest. (Summaries from each of the

reports are in Appendix III.)

All three of the studies do mention hemp’s benefits as

a rotation crop. As stated in the Oregon report, industrial hemp may provide an excellent rotation crop for

traditional crops to avoid outbreaks of insect and disease problems or to suppress weeds (Ehrensing). The

North Dakota report further states that hemp rebuilds

and conditions soils by replacing organic matter and

providing aeration through its extensive root system

(Kraenzel et al.).

The Kentucky Task Force had a broad mandate to

examine legal, agronomic, and economic aspects of

hemp production. In 1995, the majority of the

Kentucky Task Force concluded that legal prohibition

of Cannabis cultivation was the overriding obstacle to

reintroduction of fiber hemp production in Kentucky.

Significant progress on agronomics, marketing, or

infrastructure development is unlikely, and of relatively little importance, unless legal issues are resolved

(McNulty).

The North Dakota report takes a different position.

Since industrial hemp may have potential as an alternative rotation crop, the report recommends that the North

Dakota Legislature consider action that would allow

controlled experimental production and processing.

This would allow collection and analysis of necessary

baseline production, processing, and marketing data. At

the same time, the concerns and costs of law enforcement agencies could be addressed (Kraenzel et al.).

24 • USDA Industrial Hemp in the United States
Conclusions

Current markets for bast fibers like industrial hemp

include specialty textiles, paper, and composites.

Hemp hurds, the inner woody portion of the plant

stem, are used in various applications such as animal

bedding, composites, and low-quality papers. As joint

products, finding viable markets for both hemp bast

fiber and hurds may increase the chances of a successful business venture. Hemp industry sources and some

academic studies cite many potential uses for hemp

fiber and hurds. However, for these applications to

develop or expand, hemp will have to compete with

current raw materials and manufacturing practices.

The U.S. market for hemp fibers is, and will likely

remain, a small, thin market. Changes in price or

quantity could be more disruptive and have a greater

adverse impact on market participants than would be

the case in a larger market.

Since there is no commercial production of industrial

fiber hemp in the United States, the “size” of the market can only be gauged from hemp fiber and product

imports. The near-term, low-end size of the U.S. market for hemp as a textile fiber might be defined by

considering the domestic production and acreage

required to replace imports of hemp fiber, yarn, and

fabric in 1999. Assuming a potential U.S. yield of

1,550 pounds of fiber per acre and using linen yarn

and fabric conversion factors, the estimated import

quantity of hemp fiber, yarn, and fabric in 1999 could

have been produced on less than 2,000 acres of land.

Given the average size of farms in the United States

(near 500 acres), just a few farms could have supplied

the hemp fiber equivalent of 1999 import levels.

As a specialty bast fiber, hemp’s closest competing

textile fiber is linen. A longer term, high-end size of

the potential U.S. market for hemp fiber could be

defined as domestic production and acreage required

to replace hemp and linen imports. The hemp fiber

required to replace the equivalent level of hemp and

linen fiber, yarn, and fabric imports in 1999 could

have been produced on 250,000 acres—roughly 40

percent of 1999 tobacco acreage, 5 percent of U.S. oat

acreage, or 0.4 percent of wheat acreage.

Despite the similarities between hemp and linen, there

is no industry consensus as to how closely the markets

for the two fibers are allied. But since hemp fiber

imports were just 0.5 percent of linen imports during

the first 9 months of 1999, the near-term market

potential for hemp in the United States for domestic

textile production is closer to the low end of the 2,000-

to 250,000-acre production-equivalent range.

Moreover, the absence of a thriving textile flax (linen)

production sector in this country (despite no legal barriers) suggests that hemp, flax’s close cousin in fiber

uses and in production techniques, will be unable to

sustain adequate profit margins for a large production

sector to develop.

Thompson et al. (1998) estimate imports of hemp seed

into North America at 1,300 tons. Given yields in

Germany of about 1,000 pounds per acre, it would

take 2,600 acres to satisfy the demand for hemp seed.

As with fiber imports, it would take only a few average-sized farms to meet this demand. Hemp seeds can

be used directly as a food ingredient or crushed for oil

and meal. Hemp seeds and flour are being used in

nutrition bars, tortilla chips, pretzels, beer, salad dressings, cheese, and ice cream. The market potential for

hemp seed as a food ingredient is unknown. However,

it probably will remain a small market, like the markets for sesame and poppy seeds. Some consumers

may be willing to pay a higher price for hemp-seedcontaining products because of the novelty, but otherwise hemp seed will have to compete on taste and

functionality with more common food ingredients. 

Hemp oil is being used as an ingredient in body-care

products, such as lotions, moisturizers, and shampoos,

and sold in health food stores as a nutritional supplement. The market for hemp oil is limited by a number

of factors. First, mechanical crushing produces a lower

oil yield than crushing combined with solvent extraction. Nor does hemp oil undergo degumming and

bleaching as do many other vegetable oils. Some consumers prefer an oil that has been processed without

chemicals, but others may dislike hemp oil’s color or

taste. Second, the oil is high in unsaturated fatty acids,

which can easily oxidize, so it is not used for frying,

must be kept in dark-colored bottles, and has a limited

shelf life. Third, to be used as a salad oil, it will have

to be tested by the U.S. Food and Drug Administration

and found “generally recognized as safe.” Last, as a

drying oil, hemp would have to compete on functionality and price with current raw materials, such as linseed and tung oils, in established industrial markets.

Several States have published reports or authorized

agronomic and economic feasibility studies of hemp

production. The four reports summarized here have

Industrial Hemp in the United States USDA • 25
26 • USDA Industrial Hemp in the United States

focused on different aspects of supply and/or demand.

Their estimates of hemp costs and returns reflect these

various focuses, as well as different assumed production practices and costs. However, the widest range of

estimates exhibited among the reports is for stalk and

seed yields and prices—not surprising given the uncertainty about hemp production and current and potential

hemp markets. Overall, hemp production was profitable only at the higher end of estimated yields and

prices. It seems questionable that U.S. producers could

remain profitable at the low end of the estimated net

returns, particularly given the thinness of current U.S.

hemp markets. 

The market for hemp products might easily be oversupplied, as in Canada where the 35,000 acres of hemp

produced in 1999 was seemingly more than the market

could handle. The Minneapolis Star Tribune quotes the

general manager of Kenex Ltd., Canada’s biggest

hemp processor, as saying “It’s given us one hell of a

glut of grain and fiber. There’s been a major overestimation of the market that’s out there” (von Sternberg). 
References

Ash, Mark (coordinator), Oil Crops Situation and Outlook

Yearbook, OCS-1999, USDA, ERS, Oct. 1999, 102 pp.

Associated Press, “Georgia Farmers Call for Hemp

Research,” January 2, 2000.

Baxter, W.J. (Bill), and Gordon Scheifele, Growing

Industrial Hemp, Ontario Ministry of Agriculture, Food,

and Rural Affairs, Guelph, Ontario, Canada, April 1999,

http://www.gov.on.ca:80/OMAFRA/english/crops/hort/

hemp/hempinfosheet-apr-99.htm.

Blade, Stanford F., “Industrial Hemp in Alberta,” Alberta

Hemp Symposium Proceedings, Alberta Agriculture, Food,

and Rural Development, Edmonton, Alberta, Canada,

March and April 1998, http://www.agric.gov.ab.ca/crops/

special/hemp/symposia2.html.

Charest, Nicole, “Industrial Hemp: Markets, The Next

Challenge,” Alberta Hemp Symposium Proceedings,

Alberta Agriculture, Food, and Rural Development,

Edmonton, Alberta, Canada, March and April 1998,

http://www.agric.gov.ab.ca/crops/special/hemp/symposia15.html.

Copeland, Julie, “North Dakota Professor Promotes Potential

Uses for Hemp,” Grand Forks Herald, April 10, 1999.

DeMeijer, E.P.M., H.J. van der Kamp, and F.A. van Eeuwijk,

“Characterization of Cannabis Accessions with Regard to

Cannabinoid Content and Relation to Other Plant

Characters,” Euphytica, Vol. 62, No. 3, 1992, pp. 187-200.

Dempsey, James M., “Hemp,” in Fibers Crops, University

of Florida, Gainesville, 1975, pp. 46-89.

Domier, Kenneth W. “The Potential for Agricultural Fibres,”

Alberta Hemp Symposium Proceedings, Alberta

Agriculture, Food, and Rural Development, Edmonton,

Alberta, Canada, March and April 1998,

http://www.agric.gov.ab.ca/crops/special/hemp/symposia6.html.

The Economist, “Hemp’s Good Habits,” Aug. 1, 1998, p. 55.

Ehrensing, Daryl T., Feasibility of Industrial Hemp

Production in the United States Pacific Northwest, Station

Bulletin 681, Oregon State University, Corvallis, May

1998, 35 pp.

Gardner Pinfold Consulting Economists Ltd. and Jim White

of InfoResults Ltd., A Maritime Industrial Hemp Product

Marketing Study, prepared for the Nova Scotia

Department of Agriculture and Marketing and the New

Brunswick Department of Agriculture and Rural

Development, Canada, September 1998,

http://agri.gov.ns.ca/pt/agron/hemp/hempms.htm.

Glaser, Lewrene, and Donald Van Dyne, “Straw and Kenaf

Make Inroads in Building Materials and Paper,” Industrial

Uses of Agricultural Materials Situation and Outlook

Report, IUS-7, USDA, ERS, July 1997, pp. 17-25.

Gross, Elaine, “Hemp: Historic Fiber Remains

Controversial,” Textile World, Vol. 147, No. 11, 1997, pp.

42, 44-46.

Hanks, Arthur, “Top of the Crop,” The Hemp Commerce &

Farming Report, Vol. 1, No. 3, AHEM, Vancouver,

Canada, July 25, 1999, http://www.hemphasis.comIhcfr/

hcfr0799.htm.

Hanks, Arthur, “The Great Canadian Hemp Experiment:

Year II,” The Carbohydrate Economy, Vol. 2, No. 3,

Institute for Local Self-Reliance, Minneapolis, MN, Fall

1999, pp. 1, 4-6.

Hansen-Trip, Niels, Industrial Hemp Licensing and

Authorization, Statistical Summary, June 1999, Health

Canada, http://www.hc-sc.gc.ca/hpb-dgps/therapeut/zfiles/

english/hemp/revrep99_e.html.

Health Canada, Therapeutic Products Programme Report on

Industrial Hemp Licences, June 1998, http://www.hcsc.gc.ca/hpb-dgps/therapeut/zfiles/english/hemp/statsqa_e.html.

Health Canada, Therapeutic Products Report on Industrial

Hemp Licences, June 1999, Questions and Answers,

http://www.hc-sc.gc.ca/hpb-dgps/therapeut/zfiles/

english/hemp/revrep_e.html.

Hemp-Agro, “Guide to Hemp Oil,” http://www.hempagro

.com, undated.

Hinz, Herb A., “Brief Analysis of the Characteristics of

Industrial Hemp (Cannabis sativa L.) Seed Grown in

Northern Ontario in 1998,” undergraduate thesis,

Lakehead University, Thunder Bay, Ontario, May 19,

1999, http://www.gov.on.ca:80/OMAFRA/english/

crops/hort/hemp/hempthesis.htm

Industrial Hemp in the United States USDA • 27
Kerr, Nancy, “Evaluating Textile Properties of Alberta

Hemp,” Alberta Hemp Symposium Proceedings, Alberta

Agriculture, Food, and Rural Development, Edmonton,

Alberta, Canada, March and April 1998, http://www.agric.

gov.ab.ca/crops/special/hemp/symposia5.html.

Kraenzel, David G., Tim Petry, Bill Nelson, Marshall J.

Anderson, Dustin Mathern, and Robert Todd, Industrial

Hemp as an Alternative Crop in North Dakota,

Agricultural Economics Report 402, North Dakota State

University, Fargo, July 23, 1998, 22 pp.

Louie, Elaine, “Cannabis Beer? Not What You Think,” New

York Times, Sept. 15, 1998.

Mackie, Gordon, “Hemp: The Acceptable Face Of

Cannabis,” Textile Month, Oct. 1998, pp. 49-50.

Marshall, Tony, “Is There a Market for Hemp Oil?,” Alberta

Hemp Symposium Proceedings, Alberta Agriculture, Food,

and Rural Development, Edmonton, Alberta, Canada,

March and April 1998, http://www.agric.gov.ab.ca/crops/

special/hemp/symposia14.html.

McNulty, Sara (editor), Report to the Governor’s Hemp and

Related Fiber Crops Task Force, Commonwealth of

Kentucky, Frankfort, June 1995.

Meyer, Leslie A. (coordinator), Cotton and Wool Situation

and Outlook Yearbook, USDA, ERS, various issues.

Miller, Richard Lawrence, Hemp as a Crop for Missouri

Farmers, Report to Agriculture Task Force, Missouri

House of Representatives, Jefferson City, Summer 1991.

Nelson, Peter A., State Hemp Legislation Updates:

Individual State Action in Relation to the Development of

a United States Industrial Hemp Industry, Agro-Tech

Communications, Memphis, TN, Fall 1999,

http://www.naihc.org/hemp_policy/state_updates_fall_99.

html.

Oliver, Al, and Howard Joynt, Industrial Hemp Fact Sheet,

British Columbia Ministry of Agriculture and Food,

Kamloops, British Columbia, Canada, April 1999, 20 pp.

Orgel, Stephen, and Michael Ravnitzky, “Hemp: The First

Industrial Textile,” Industrial Fabrics Review, Vol. 71, No.

6, Oct. 1994, pp. 24, 26-27.

Patton, Janet, “Founder of The Body Shop Sees Hemp as

Viable Kentucky Crop,” Lexington Herald-Leader,

Lexington, KY, June 25, 1999.

Rawson, Jean M., Growing Marijuana (Hemp) for Fiber:

Pros and Cons, Report 92-510, Congressional Research

Service, Washington, DC, June 1992, 5 pp.

Reichert, Gordon, “Government of Canada: Report on

Hemp,” Bi-Weekly Bulletin, Vol. 7, No. 23, Dec. 16, 1994.

Rorie, Somlynn, “The Rediscovery of Hemp,” Organic &

Natural News, Aug. 1999, pp. 17-19.

Scheifele, Gordon, Determining the Feasibility and

Potential of Field Production of Low THC Industrial

Hemp (Cannabis sativa) for Fibre and Seed Grain in

Northern Ontario, Ontario Ministry of Agriculture, Food,

and Rural Affairs, Thunder Bay, Ontario, Canada, March

1999, http://www.gov.on.ca:80/OMAFRA/english/crops/

hort/hemp/info_final_report.htm.

Soyatech, Inc., Soya & Oilseed Bluebook, Bar Harbor, ME,

1999, 242 pp.

Thompson, Eric C., Mark C. Berger, and Steven Allen,

Economic Impact of Industrial Hemp in Kentucky,

University of Kentucky, Center for Business and

Economic Research, Lexington, July 1998, 66 pp.

Vantreese, Valerie L., Industrial Hemp: Global Markets and

Prices, University of Kentucky, Department of Agricultural

Economics, Lexington, revised June 1997, 33 pp.

Vantreese, Valerie L.,Industrial Hemp: Global Operations,

Local Implications, University of Kentucky, Department

of Agricultural Economics, Lexington, July 1998, 29 pp.

von Hahn, Karen, “Trendwatch: Hemp,” Canadian House &

Home, Feb./March 1999.

von Sternberg, Bob, “In Canada, Hemp Hasn’t Lived Up To

the Hype,” Minneapolis Star Tribune, Minneapolis, MN,

Oct. 16, 1999.

Wang, Qingbin, and Guanming Shi, “Industrial Hemp:

China’s Experience and Global Implications,” Review of

Agricultural Economics, Vol. 21, No. 2, 1999, pp. 344-57.

Welna, David, “Reintroducing Hemp,” Morning Edition,

National Public Radio, December 14, 1999.

28 • USDA Industrial Hemp in the United States
Appendix I

INFORMATION March 1998

COMMERCIAL PRODUCTION OF INDUSTRIAL HEMP

Effective March 12 , 1998, the commercial production (including cultivation) of industrial hemp is

now permitted in Canada, under licences and authorizations, issued by Health Canada.

Industrial Hemp usually refers to varieties of the Cannabis plant that have a low content of THC

(delta-9 tetrahydrocannabinol) and that are generally cultivated for fibre. Industrial hemp should

not be confused with varieties of Cannabis with a high content of THC which are referred to as

marijuana. The psychoactive ingredient in marijuana is THC. 

Internationally, Cannabis is regulated by the United Nation’s Single Convention on Narcotic

Drugs. Canada has signed and ratified this Convention. The Controlled Drug and Substance

Act (CDSA) came into force effective May 14, 1997. The Industrial Hemp Regulations to the

CDSA will permit the commercial cultivation of industrial hemp in Canada.

The Regulations control the activities relating to importation, exportation, possession, production,

sale, provision, transport, sending, delivering and offering for sale of industrial hemp.

The Regulations define industrial hemp as the plants and plant parts of the Cannabis plant, whose

leaves and flowering heads do not contain more than 0.3 percent THC. It includes derivatives of

the seeds such as oil and seedcake. It does not include non-viable Cannabis seed, but it includes

its derivatives.

It also does not include the mature stalks or the fibres derived from those stalks. This means that

such fibres or the products made from the mature cannabis stalk may be imported, treated and sold

in Canada.

The Regulations consist of the following components:

• Importers and exporters of industrial hemp, in the form of seed or viable grain, will be

licensed. In addition to holding a licence they will also be required to obtain a permit for

each shipment.

.../2
- 2 -

• The importer must ensure that shipments of viable grain are accompanied by foreign

certification. A list will be published by Health Canada indicating which countries are

designated as having equivalent controls on the production of viable grain. Viable grain may

only be imported from listed countries. This will ensure that viable grain imported will not

produce a plant containing more than 0.3% THC.

• Seed growers will be restricted to a 0.4 hectare minimum plot size and will be required to

demonstrate current membership in the Canadian Seed Growers Association as part of their

licence application. Seed growers will be required to provide the number of hectares grown

in the previous two years as part of their licence application.

• Plant breeders will not be restricted to minimum plot sizes. Persons applying for a licence as

a plant breeder must be registered with the Canadian Seed Growers Association and may only

cultivate industrial hemp under this regulatory framework. The pedigreed seed restriction

which applies to growers in the year 2000 does not apply to plant breeders nor does the

limitation to the List of Approved Cultivars.

• Growers for fibre or viable grain will require a licence before they can purchase seeds from a

distributor or cultivate industrial hemp. Growers will be required to provide the number of

hectares grown in the previous two years as part of their licence application.

• Only approved varieties of industrial hemp seeds, as listed on Health Canada’s List of

Approved Cultivars may be planted. Commencing January 1, 2000, only pedigreed seeds of

approved varieties may be planted. Growers will be required to identify their fields, and

maintain records of production and distribution.

• Licences and audit trails will also be required for processing activities such as pressing seeds

into oil. All parties licensed or authorized will be required to identify a person resident in

Canada who will be responsible for the licensed activities.

• To obtain a licence for the importation, exportation, production or sale of industrial hemp,

applicants will be required to produce a police security check.

• Derivatives of seed or viable grain, such as oil and seed cake, will be exempted from the

Regulations if there is evidence that the derivatives contain no more than 10 micrograms of

delta-9-tetrahydrocannabinol per gram and carry appropriate labelling statements. Products

made from derivatives of seed or viable grain will be exempted if there is evidence that each

lot or batch contains no more than 10 micrograms of delta-9-tetrahydrocannabinol per gram.

• Importers and exporters of derivatives will be required to provide proof with each shipment

that the shipment contains no more than 10 micrograms of delta-9-tetrahydrocannabinol per

gram for each lot to ensure that the product is within the limit. Similarly products made from

the derivatives of seed or viable grain must be accompanied with evidence that each shipment

contains no more than 10 micrograms of delta-9-tetrahydrocannabinol per gram. .../3
- 3 -

• No person will be permitted to import or export a derivative or a product produced from a

derivative that contains more than 10 micrograms of delta-9-tetrahydrocannabinol per gram.

• No person will be permitted to import or sell whole plants, including sprouts or the leaves,

flowers or bracts of industrial hemp; or import, sell, or produce any derivative or any product

made from a derivative of the above.

• Authorizations will be required for transportation, when products are transported outside the

direction or control of a licence holder, or for possession for the purpose of testing for

viability.

• No person shall advertise to imply that a derivative or product is psychoactive.

• Testing for the level of THC in leaves or in derivatives must be done by a competent

laboratory according to standards defined by Health Canada. 

Health Canada will continue to issue licenses for approved research studies related to the cultivation

of hemp for industrial purposes.

Application Forms and relevant Guidance Documents, aimed at expediting the review of licences

and authorizations for the commercial cultivation of industrial hemp and also for research licences,

are available.

The documents are available from: 

Internet: www.hc-sc.gc.ca/hpb-dgps/therapeut

Section: Hemp

 or Jean Peart, Manager, Hemp Project

Bureau of Drug Surveillance

Therapeutic Products Directorate

Address Locator 4103A, 122 Bank Street, 3rd Floor

Ottawa, Ontario, Canada, K1A 1B9

 Phone: (613) 954-6524 FAX: (613) 952-7738

Internet: jean_peart@hc-sc.gc.ca

Copies of the Controlled Drugs and Substances Act are available from:

Internet: canada.justice.gc.ca/FTP/EN/Laws/

 or Canada Communications Group

Ottawa, Ontario

KlA 0S9

Telephone - (613) 956-4802
Appendix II

Oversupply of Small, Thin Markets

This appendix presents the general economic theory

behind the operations of small, thin commodity markets and provides three case studies to illustrate the

consequences of oversupply.

General Economic Theory

Agricultural commodities are generally homogeneous

and undifferentiated. Small, thin (niche-like) markets

may develop due to changes in demand, such as a shift

in consumer tastes, or changes in supply, such as a

new production technology, a new product, or a new

use for a traditional product. Oversupply in small, thin

markets can result from supply-side phenomena,

demand-side phenomena, or both. 

When the stimulus comes from the supply side, innovators may actually have to cultivate a market for their

product. Provided that expectations about production

efficiencies hold true, early firms that discover and

serve the market are able to realize a significant return.

However, the early firms may not be able to deter new

entries. When new firms enter, they are not aware of

the number of other new entrances or the extent to

which original firms are expanding production. Total

supply may increase by more than what firms expect,

driving prices down. For less efficient firms, price may

be below average cost and they will exit the market.

As the market matures, information is exchanged

among buyers and sellers and parties develop more

accurate expectations of market behavior.

On the demand side, changes in consumer preferences

may stimulate a new or added demand for a product.

With expectations for continued growth in demand,

producers respond to initial price incentives by entering the market. If demand does not expand as expected, the market finds itself oversupplied and prices

decline.

In some cases, expectations about production efficiencies and future growth in demand combine to define a

potential niche market. When one or both of the

expectations fall short, the market becomes oversupplied and prices fall.

The extent of any price decline in small, thin markets

that are oversupplied depends on secondary markets.

The availability of a secondary market limits the price

decline in the primary market; its absence sharpens the

price decline and may force out all but the most efficient producers.

Losses incurred by producers/growers in an oversupplied niche market are a function not only of net

returns to the production process, but of the size and

specialized nature of the initial investment.

Investment losses of the firms who exited the market

will depend on the firms' sunk costs and the degree of

specialization. If the initial investment was high, the

losses may be greater. The degree of specialization is

also important. If the plant and equipment can be used

for another economic activity, some of the losses may

be recouped or offset. However, if the equipment is

specialized, the salvage value may be low. 

Case Studies

A review of particular niche markets—poinsettias,

emus, and mesclun—may serve to illustrate the issues

involved in oversupply.

Poinsettias. Large numbers of entrants led to oversupply. No secondary markets were available, so prices

declined. Investment in specialized resources was minimal, so that many producers were able to shift

resources to other horticultural products.

U.S. growers produce more than $900 million of potted flowering plants annually, with poinsettias the

most important. Only small quantities are imported

from and exported to Canada. Poinsettias are a perishable product, demand is highly seasonal (NovemberDecember), and no secondary markets exist.

Therefore, with imperfect knowledge about market

supply and prices, growers can easily overproduce and

prices can fall quickly, particularly since no secondary

markets exist. Grower numbers probably peaked in

1992 and have since trended downward due to declining profit margins. Similar cases are found with other

potted flowering plants, such as Easter lilies. Because

production processes are similar, growers will typically switch to producing other flowering plants, foliage

plants, or bedding and garden plants if profit margins

decline. 

Emus. Significant investment in specialized resources

(breeding stock), unexpectedly high production costs, and

limited demand created substantial losses to growers.

32 * USDA Industrial Hemp in the United States
Production of ratites—ostriches, emus, and rhea—has

occurred on a small scale in the United States for

about 100 years. Starting about 1985, a few studies

indicated that ratites might be efficient converters of

feed. At the time, there was a known, albeit small,

market for meat, hides, emu oil, eggs, and feathers, but

it was expected to expand as production increased.

This raised the price of breeding stock. U.S. ratite

production entered into what is called the breeder

phase. As more producers became convinced that

ratites would be profitable, the demand for birds grew

and the price of breeding stock skyrocketed. As long

as producers were convinced that more breeding stock

(and eventually products) could be marketed, the price

remained very high. When the demand for products

did not develop as growers had hoped, the demand for

breeding stock declined and the price of breeding

stock plummeted. Investment in the production of

ratites, particularly in breeding stock, expanded much

more rapidly than demand for products. Emus have

received the most attention, as producers have let them

run wild or killed the birds to avoid having to feed and

care for them. In many cases, growers incurred significant losses when prices fell. There will probably continue to be a small market for some products and market size may even expand over time, but investment

and production increased too fast, too soon.

Organic Mesclun. Increased consumer demand for a

popular new product led to high prices. Production

costs and efficiencies for organic mesclun were not

distinctly different from alternative (nonorganic) production practices. Nonorganic mesclun producers

entered the market, supplies increased, and prices

declined. Requirements for highly specialized investments were minimal. Firms with land certified for

organic production could switch to other organic

products with more profitable returns, which limited

losses from oversupply of this market.

For several years, USDA's Agricultural Marketing

Service (AMS) has collected data on prices for organic

mesclun mix (salad mix of baby lettuces, herbs, and

greens) in the Boston wholesale market. Organic

mesclun prices are higher than regular (nonorganic)

mesclun, but the price premiums have declined in

recent years. In 1996, regular mesclun from California

or Arizona cost an average of $8.64 per 3-pound carton (ranging from $7.50 to $10.00) and organic

mesclun cost $9.72 per 3-pound carton (ranging from

$7.75 to $10.75). The monthly organic premium averaged 14 percent, ranging from 8 percent in November

to 22 percent in December.

Mesclun is a relatively new commercial crop in the

United States. Initially, mesclun was a very small

market; it was produced organically and garnered high

prices. Other producers—both organic and regular—

entered the mesclun market, attracted by high returns.

By 1996, only about 30 percent of the mesclun in the

Boston wholesale market was organic. As production

expanded, mesclun prices declined and the premium

between organic and regular mesclun narrowed.

Industry insiders say that as long as there is a large

supply of regular mesclun, organic prices will continue

to be low. The market will bear a very small premium

for organic mesclun. 

As the gap between organic and regular mesclun

prices decreased, organic mesclun producers could

remain in the market because variable production costs

are not much higher than for regular mesclun. Since

the lettuces and greens are harvested when quite small,

they are not in the ground very long and are less prone

to insect and disease problems than other organic

crops. 

The investment required to make land certified for

organic production can be significant. Some industry

experts think the organic share of the mesclun market

will continue to decrease. But, since the production of

organic mesclun requires little, or no, specialized

investment, producers exiting the market will shift to

other organic crops that yield a higher return on relatively expensive certified organic land. 

Industrial Hemp in the United States USDA * 33
Summary

Report to the Governor's Hemp and

Related Fiber Crops Task Force 

Commonwealth of Kentucky, 

June 1995

· Most analysts forecast long-term increases in

world demand for all types of fibrous materials,

and some predict limitations in production capacity.

New fiber crops, new industrial uses of nonwood

fibers, and agricultural diversification in general

are therefore subjects of widespread interest.

Kentucky agriculture is not alone in efforts to pursue these possibilities, and will be required to compete with producers in other states and nations.

· Kentucky history, as well as recent research in

other temperate zone countries, demonstrates that

hemp can be produced in the Commonwealth.

Selection of adapted varieties, crop management

practices, harvesting technology and several other

agronomic aspects may require a significant

research and development effort if hemp is to be a

large scale crop. Yet there is no reason to believe

that these production issues are insurmountable.

· The historical advantages (for example: favorable

climate, naturally fertile soils, labor supply) held by

Kentucky hemp producers, particularly hemp seed

producers, have been made somewhat less important by modern agronomic technology.

· Hemp and kenaf may have a slight advantage over

certain other annual row crops with regard to

potential environmental impacts. This might result

from projected requirements for less pesticide and

modest reductions in soil erosion.

· Currently, established markets for hemp in the U.S.

are generally limited to specialty/novelty textiles,

oils, foods, paper and other materials. The specialized nature of this market does not require competition with other fiber sources. The potential market

size is difficult to predict, but it is unlikely to support the large acreage of a major new field crop.

· Bast fibers contribute an exceedingly small fraction of world textile fiber supply, which is overwhelmingly dominated by cotton. Increasing world

demand and price for cotton in recent years has

generated some interest in alternative fibers.

However, extraction and processing of bast fibers

for high-quality textiles is more difficult than for

cotton. A large investment, and perhaps some technological innovation, will be required by the textile

industry if bast fibers are to become competitive as

mass market textiles.

· Use of annual fiber crops for most paper applications or for building materials, as a substitute for

wood or recycled fiber, could create a very large

but relatively low value market. Crop prices above

$60/ton would probably be required to interest

most producers; this price might preclude extensive

competition in this market. Vast quantities of

fibrous waste materials (sugar cane bagasse, straw)

are available world wide and would also compete

for such applications.

· A large and long-term USDA effort on kenaf has

addressed many production and processing challenges. Infrastructure for significant utilization of

kenaf fiber is beginning to develop in the southern

U.S. The University of Kentucky College of

Agriculture is actively investigating kenaf production. Development of this alternative fiber crop in

Kentucky will be dependent on nearby location of

processing facilities and a profitable market for

farmers.

· Legal prohibition of Cannabis cultivation is the

overriding obstacle to reintroduction of fiber hemp

production in Kentucky. Significant progress on

agronomics, marketing, or infrastructure development is unlikely, and of relatively little importance,

unless legal issues are resolved. Legislative action

would be required at both the state and federal

level. Such consideration would likely receive

strong diverse reactions from both private and public sectors.

Source: McNulty.

34 * USDA Industrial Hemp in the United States

Appendix III

State Report Summaries
Summary

Feasibility of Industrial Hemp

Production in the United States

Pacific Northwest

May 1998

For many centuries hemp (Cannabis sativa L.) has been

cultivated as a source of strong stem fibers, seed oil,

and psychoactive drugs in its leaves and flowers.

Environmental concerns and recent shortages of wood

fiber have renewed interest in hemp as a raw material

for a wide range of industrial products including textiles, paper, and composite wood products. This report

assesses the agricultural feasibility of industrial hemp

production in the Pacific Northwest (PNW).

Hemp is an herbaceous annual that develops a rigid

woody stem ranging in height from 1 to over 5 meters

(3 to 19 feet). Hemp stalks have a woody core surrounded by a bark layer containing long fibers that

extend nearly the entire length of the stem. Plant

breeders have developed hemp varieties with increased

stem fiber content and very low levels of delta-9-

tetrahydrocannabinol (THC), the psychoactive ingredient of marijuana. 

Historically, hemp fiber was used mainly for cordage,

but it can also be made into textiles, paper, and composite wood products. Demand for hemp cordage

peaked in the late 1800's, and world hemp production

has continuously declined since that time, except for

brief increases during both World Wars. Hemp fiber

has largely been replaced by relatively inexpensive

natural and synthetic fibers. 

Although hemp is well adapted to the temperate climatic zone and will grow under varied environmental

conditions, it grows best with warm growing conditions, an extended frost-free season, highly productive

agricultural soils, and abundant moisture throughout

the growing season. When grown under proper conditions, hemp is very competitive with weeds, and herbicides are generally not required in hemp production.

Although a number of insect pests and diseases have

been reported on hemp, significant crop losses from

pests are not common. High levels of soil fertility are

required to maximize hemp productivity. Cultural

requirements and production costs are quite similar to

those of corn. Reported hemp yields range from 2.5 to

8.7 tons of dry stems per acre.

The climatic and soil requirements of hemp can be met

in some agricultural areas of the PNW, however, hemp

will almost certainly require irrigation to reliably maximize productivity in the region. The requirement for

supplemental irrigation will place hemp in direct competition with the highest value crops in the PNW, limiting available acreage. Stem yields will have to be

substantially higher than those previously recorded for

hemp to be economically feasible in the PNW at current prices. It is unlikely that the investment needed to

improve hemp production technology will be made

until legislative restrictions are removed from the crop.

Source: Ehrensing.

Industrial Hemp in the United States USDA * 35
Executive Summary

Economic Impact of Industrial Hemp

in Kentucky

July 1998

In recent years, industrial hemp has been viewed

worldwide as a versatile and environmentally friendly

plant that has many industrial applications. Although

it is currently grown in many European and Asian

countries and even in Canada, industrial hemp is still

prohibited from being grown in the United States.

This situation exists even though the current consumer

and business environment in the United States may

make industrial hemp cultivation and processing commercially feasible. Many consumers are starting to

prefer products made from natural materials. The

industrial hemp plant is a good source of natural raw

materials for a number of products and is a superior

source in some cases. Moreover, many farmers in

Kentucky and throughout the nation are looking to

alternative crops to replace their current crops, and

some have touted hemp as an excellent rotation crop

with much potential for agriculture.

Kentucky should be in a position to benefit from the

establishment of an industrial hemp cultivation and

processing industry in the United States. Historically,

Kentucky has been a good location to grow hemp.

Before hemp cultivation was outlawed, it had been a

major crop in Kentucky and grew well in the climate.

In the 1800's, Kentucky regularly accounted for onehalf of the industrial hemp production in the United

States. The climate, soil, and growing season in

Kentucky also make the state a superior location for

growing certified hemp seed to be planted by farmers

raising an industrial hemp crop.

The Kentucky Hemp Museum and Library contracted

with the University of Kentucky Center for Business

and Economic Research to conduct an analysis of the

potential economic impact of industrial hemp in

Kentucky. This study looks at the different markets

for hemp products, examining both the current markets

in which foreign-grown hemp is being used, and

potential or burgeoning markets that may have uses for

industrial hemp.

In the report, we estimate costs for growing industrial

hemp in Kentucky and provide information on potential prices farmers could expect for their hemp crop.

We also compare the return from cultivating industrial

hemp with the returns for other crops in Kentucky. In

addition, we detail the costs of a hemp processing

facility to separate the hemp into fiber and other materials. Finally, we estimate the potential jobs and earnings impacts of growing industrial hemp in Kentucky

under several scenarios.

Among the key findings of this report are:

· A market for industrial hemp exists in a number of

specialty or niche markets in the United States,

including specialty papers, animal bedding, and

foods and oils made from hemp.

· Additional markets could emerge for industrial

hemp in the areas of automobile parts, replacements for fiberglass, upholstery, and carpets.

· Using current yields, prices, and production technology from other areas that have grown hemp,

Kentucky farmers could earn a profit of approximately $320 per acre of hemp planted for straw

production only or straw and grain production,

$220 for grain production only, and $600 for raising certified seed for planting by other industrial

hemp growers. In the long run, it is estimated that

Kentucky farmers could earn roughly $120 per acre

when growing industrial hemp for straw alone or

straw and grain, and $340 an acre from growing

certified hemp seed.

· Industrial hemp, when grown in rotation, may

reduce weeds and raise yields for crops grown in

following years. Several agronomic studies have

found that industrial hemp was more effective than

other crops at reducing selected weeds. One study

found that industrial hemp raised yields by improving soil ventilation and water balance.

· The economic impact if Kentucky again becomes

the main source for certified industrial hemp seed

in the United States is estimated at 69 full-time

equivalent jobs and $1,300,000 in worker earnings.

The total economic impact in Kentucky, assuming

one industrial hemp processing facility locating in

Kentucky and selling certified seed to other growers, would be 303 full-time equivalent jobs and

$6,700,000 in worker earnings. If two processing

facilities were established in Kentucky, industrial

hemp would have an economic impact of 537 fulltime equivalent jobs and $12,100,000 in worker

36 * USDA Industrial Hemp in the United States
earnings. If one processing facility and one industrial hemp paper-pulp plant were established in

Kentucky, industrial hemp would have an economic

impact of 771 full-time equivalent jobs and

$17,600,000 in worker earnings.

· These economic impact estimates reflect possible

outcomes for Kentucky given a national industrial

hemp industry that is focused in specialty niche

activities that have been demonstrated to work in

Europe. It is important to remember, however, that

technologies are under development that may allow

industrial hemp products to compete in bulk commodity markets. The economic impacts that would

occur if these technologies were found to be commercially feasible would be substantially greater

than those identified in this report.

Source: Thompson et al.

Industrial Hemp in the United States USDA * 37
Executive Summary

Industrial Hemp as an Alternative

Crop in North Dakota

July 1998

This preliminary study reports on current efforts to

define existing world markets and possible United

States markets for industrial hemp as well as resulting

economic feasibility should production be legalized.

A large percentage of the information available on

industrial hemp is by non-agriculturists. This indicates

a need for North Dakota to continue working with its

agricultural counterparts to bring this potential alternative crop into the agricultural research domain.

· The industrial hemp world market consists of over

25,000 products in nine submarkets: agriculture,

textiles, recycling, automotive, furniture,

food/nutrition/beverages, paper, construction materials, and personal care. These products are made

or manufactured from raw materials derived from

the industrial hemp plant: fiber, hurds, and hemp

seed/grain.

· World hemp fiber production has declined from

over 400,000 tons in 1961 to 113,000 tons in 1996.

India, China, Russia and Korea are the major low

cost producers. This constitutes about 250,000

acres under production worldwide. Preliminary

figures for 1997 indicate that this downward trend

continues.

· A revitalization of industrial hemp may be occurring as indicated by projected increased demand

(retail sales) from $75 million in 1997 to $250 million by 1999 worldwide (Wall Street Journal, April

24, 1998). Various reasons that would explain this

phenomenon include technological advances in

processing, an increase in pricing, or interpretation

of existing information.

· The largest market opportunity for North Dakota

identified in this report may be hemp seed oil. This

opportunity was also identified by the University of

Kentucky (July 1998).

· North Dakota may have a comparative advantage

because a state of the art multi-oil processing facility already exists that is capable of processing hemp

seed.

· Hemp hurds appear to be price competitive with

wood chips, fine wheat straw, other types of animal

bedding, and other high-end pet needs. Hurds may

also be a complement or substitute material in

strawboard production.

· Certified seed production is a market opportunity.

· Initially, hemp appears to be comparable to barley.

However, a 1998 Kentucky study projects higher

returns from $220.15 per acre for producing hemp

seed for crushing to $605.91 for certified seed.

· Historically, imported jute and abaca were intense

competitors with American industrial hemp.

· Law enforcement agencies have legitimate concerns about their ability to enforce laws regulating

industrial hemp production. Advances in biotechnology such as terminator genes may create solutions.

· Recommendations. Since industrial hemp may

have potential as an alternative rotation crop, it is

recommended that the North Dakota Legislature

consider action that would allow controlled experimental production and processing, then, necessary

baseline production, processing, and marketing data

could be collected and analyzed. For example, all

new enterprises would require a critical threshold

volume in order to succeed in terms of economic

profit. What is the volume and the acreage

required to produce it? At the same time the concerns and costs of law enforcement agencies could

be addressed.

Source: Kraenzel et al.

38 * USDA Industrial Hemp in the United States