Producers cautioned to assess industrial hemp production for associated risks

    Farming and ranching is a very risky business. Many times the success or failure of an agricultural business is determined by the ability of the operator to manage risk. One of the most risky decisions that farmers and ranchers make regularly is considering producing a new crop.
    The last several years have been very challenging for Colorado farmers and ranchers as commodity prices continue to be weak. Cash market prices that just a few years ago might have offered a small profit will not cover the cost of production today. Many agricultural producers are looking for more profitable alternatives to traditional crop and livestock enterprises.
    One such alternative that many farmers are considering is industrial hemp. Industrial hemp shares the same botanical name as marijuana (Cannabis sativa).
    The major difference between industrial hemp and marijuana is the Tetrahydrocannabinol (THC) content. THC is the psychoactive ingredient in marijuana that produces the “high.” According to 2018 Farm Bill, industrial hemp must contain less than 0.3% THC on a dry weight basis.
    In order to make a sound decision regarding the production of hemp, growers must evaluate the risks associated with the crop. That risk assessment should include a thorough review of the five areas of risk in agriculture. Those five areas include price, production, legal, financial and human risk.
    Price risk is defined as the fluctuations in prices paid for inputs or received for outputs (commodities sold).  The major issue for industrial hemp in this risk category is the lack of a price discovery function. It is very difficult to determine the price of hemp fiber, seed or flower (used in cannabinol/CBD production) at any given time.
    Unlike corn, wheat, cattle and other traditional agricultural commodities, hemp is not currently traded in any public markets, so information on prices paid for hemp products is scarce.

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