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Opening Up the Industrial Hemp Supply Chain

How it all Began – the 2018 Farm Bill

The 2018 Farm Bill had a significant impact on the industrial hemp supply chain in the United States. Prior to this legislation, hemp was classified as a Schedule I controlled substance under the Controlled Substances Act (CSA) of 1970. This meant that hemp was treated the same as marijuana, which contains much higher levels of THC (the chemical in cannabis that has psychoactive properties).

Under the CSA, the cultivation, production, and commercialization of hemp was illegal, regardless of its THC content. This prohibition included both the plant itself and its derivatives, including products such as hemp-derived CBD oil. The legislation also called for the establishment of federal regulations and standards for the production and testing of hemp. The Farm Bill also allowed for the transportation of hemp and hemp-derived products across state lines, removing barriers and enabling a more efficient and interconnected supply chain.

Taking effect in early 2019 the new Farm Bill allowed for the cultivation of industrial hemp in the United States, with the stipulation that it contains no more than 0.3% THC. As this change opened up new opportunities for farmers to grow hemp as a cash crop, there were still some negative connotations to overcome as some farmers had “less than ideal” experiences with things associated with cannabis and CBD.

The Difference Between Industrial Hemp and CBD

There are many differences between CBD and industrial hemp beyond the THC levels. Much like bamboo and flax, industrial hemp is grown for its stalk on outdoor farms with 300,000-400,000 plants per acre. Unlike bamboo and flax, industrial hemp can grow in most regions of the United States. CBD, on the other hand, is grown for the flower either indoors or outdoors (the trend is more controlled indoor grow operations) with only about 1600 plants per acre.

Most “hemp processing facilities” throughout America and the rest of the world focus on CBD extraction instead of industrial hemp. The price volatility in the CBD market has proven to be unreliable for all stakeholders that seek to build a company that creates a long-term impact. Part of the reason that the hemp market skewed toward CBD is that the market was quickly established with dozens of players raising multiple large amounts of capital.

CBD companies promised farmers upwards of $50,000+ per acre to farm their crops, which was unsustainable. There were multiple things that the industry didn’t take into account.

  • Extracting CBD is a very labor-intensive process.
  • CBD crops can be ruined because a single male plant can pollinate many females.
  • CBD crops (especially outdoor grows) can be destroyed due to mold. 
  • CBD has migrated over the past few years towards controlled, indoor grow operations.

Industrial hemp may not be as sexy as CBD, but there are many real-world examples of the need for industrial hemp fibers beyond the typical textiles we’ve seen for years. We understand that most of today’s hemp market is focused on the plant’s flower (where CBD is found). But, we are seeing a shift towards the fiber content, and the big opportunity that we have uncovered lives within the material science of the plant’s stalk.

The stalk of the industrial hemp plant has been known to be used for 50,000+ things. Hemp has proven itself to be the world’s most versatile plant over the past few hundred years. The rope on the Mayflower was built from hemp fibers. The first American flag was made out of hemp fibers. The strength properties of hemp fibers have stood the test of time, and we’re finding new uses for that durable and sustainable fiber all the time. In fact, we think the market will be revolutionary.

Could Industrial Hemp be as Big as the Oil Boom?

It is difficult to tell with accuracy if the industrial hemp market could create the next Standard Oil Company. However, it certainly has the potential to be an industry hotbed as our future is tied more and more to sustainability issues. Let’s face it, Standard Oil was a dominant and highly influential company in the late 19th and early 20th centuries because it controlled a significant portion of the oil industry. Comparing the industrial hemp market to the oil market might seem like a stretch, but there are some similarities.

It comes down to market dynamics. Even though the industrial hemp market is still relatively new and evolving. It encompasses various sectors such as plastics, paper, textiles, construction materials, food products, supplements, and a lot more. While there is potential for growth, the market is also quite diverse, meaning multiple players and products will emerge over the coming years.

The main reason this market doesn’t exist is that creating an industrial hemp supply chain was all but illegal up until a few years ago. The industrial hemp market is still subject to regulations and restrictions, but we are witnessing a lot of movement to open the floodgates here. The bipartisan Industrial Hemp Act, introduced in March 2023 seeks to ease the burden on farmers who grow grain and fiber hemp, or “industrial hemp.” The new bill would exempt farmers exclusively growing industrial hemp from the burdensome background checks and costly sampling and testing protocols required for farmers growing cannabinoid hemp. 

It’s worth noting that the hemp industry is influenced by sustainability concerns, environmental factors, and changing consumer preferences. There is also an increasing focus on local and small-scale production, organic practices, and community-based initiatives. On a larger scale, hemp fibers are finding their way into many commodity applications that mined materials have traditionally dominated. These factors will lead to a more diverse market as well as new raw materials supply chains. These continued developments, changes in regulations, and market dynamics will shape its trajectory in the coming years.

The ability to build an industrial hemp supply chain that supports manufacturers is a multi-billion-dollar opportunity. The ability to replicate that supply chain dozens of times domestically and internationally is a multi-trillion-dollar opportunity! So, could hemp compete with the trajectory of the 20th-century oil boom? We think, yes!  

So, you’re left probably wondering: 

Who Will Benefit from this New Industrial Hemp Supply Chain?

Although industrial hemp can be used for 50,000+ things, no smart company (or team) would go to market trying to solve 50,000 problems. We must find niches to penetrate new markets, products, and the consumer’s mind.

In the early days, Facebook focused on ivy league colleges. Apple focused on serving the education market. The industrial hemp supply chains that will succeed long-term will start by solving specific problems for specific customers. 

Our team tested out numerous markets before landing on the current target verticals. Unfortunately, we saw roadblocks in many of the places that other industrial hemp companies are focused on. Animal bedding, building materials, textiles, and bioplastics: are all markets that companies see as viable opportunities. Although some of these sectors have seen success in international markets, there are multiple reasons why these opportunities are not the optimal market penetration strategy. 

One of the bottlenecks industrial hemp supply chains will face over the next few years is their focus on the wrong markets. Many players will build supply chains that focus on domestic markets that will struggle over the next few years.

  • Textiles – most clothing is manufactured in Europe and Asia.
  • Animal bedding – this market will compete with wood chips and other waste materials that are sold for pennies per pound. 
  • Bioplastics – these materials require a large expense to build a chemical conversion plant, and typically come at a 150-200% price premium due to low supply and high costs.

It’s not that these markets can not benefit from hemp, it’s that these markets have other factors that make alternative materials a better solution today.

After testing all of the viable markets, our team decided to pursue the “additives” market. Instead of making bioplastic, we decided to focus on aligning with the pre-existing relationships and supply chains in the plastics market by providing a reliable supply chain of bio-based additives. Instead of focusing on hemp fiber paper, we looked at adding the fibers to standard pulps to increase strength and decrease the need for bleaching. Instead of pure hemp-based construction products, we looked at augmenting existing materials to make them stronger and lighter. Our hemp-based additives will replace or augment materials like talc, calcium carbonate, fiberglass, and carbon fiber. 

Heartland’s Approach to the Industrial Hemp Supply Chain

Heartland’s hemp-based materials can make hundreds of different types of manufactured products stronger, lighter, cheaper, and more sustainable. Even though we have many R&D projects rolling in various industries, the perfect prototype project was plastics, and we’re gaining serious ground.

In fact, our value proposition was originally built around hemp materials engineered for polymers (plastics, rubbers, and foams). We have developed a specific input format that allows our hemp materials to be compounded at the highest percentage of plastic possible.

Today, we have plastic compounders that are using our materials at 20%-40% hemp. But, we have compounders who are testing the ability to masterbatch our materials at 85%+. We decided to solve the problems that the manufacturers and the plastic compounders face. 

  • There was no reliable supply chain for bio-based materials. This leaves hemp materials stuck in R&D labs with no path to commercial use cases.
  • There was little product consistency in most agriculture supply chains. But, every pound of material needs to have the same specs (size, moisture content, aspect ratio, etc).
  • Current materials used in plastics manufacturing are mined and synthetic.
  • Many of the current materials can be considered toxic and carcinogenic.
  • Consumers are demanding more sustainable products, even though many manufacturers don’t have a way to satisfy those demands (besides recycling programs).

A More Focused Approach to Agriculture Too

By focusing on understanding our customers better, we will build a more reliable industrial hemp supply chain that focuses on solving problems for those businesses who are actively looking for alternatives – and that number increases daily!

A properly executed industrial hemp processing facility requires Big-Ag infrastructure. This includes:

  • Large farming partnerships (10,000+ acres).
  • Large processing capacities (1,000,000+ pounds of hemp per day).
  • A customer base that has demand for hundreds of millions of pounds.

This is the only way to create a stable supply chain that farmers, investors, and manufacturers can trust. At the end of the day, the only way that hemp is valuable to a manufacturer is if it can be applied in mass manufacturing with a reliable, efficient, and consistent product. Our Imperium products hit those targets.

Just a few years ago, most farmers who had committed to industrial hemp were growing small batches (dozens or hundreds of acres tops). The lack of supply did not allow companies to use hemp-based materials regularly. Today, Heartland is leading the charge with thousands of acres (in Michigan alone) and we will represent a full 15% of industrial hemp in the United States!

Where Will This Lead Us?

The first U.S. company that can source and process 1,000,000+ pounds of hemp per day will create a supply chain that American manufacturers can rely upon. However, to properly scale an industrial hemp industry, a few key things must be secured:

  1. Farming
  2. Storage
  3. Logistics
  4. Processing Capacity
  5. A Pipeline of Customers

If all five of these key pieces within a hemp supply chain are not properly secured, any industrial hemp material supplier will be setting themselves up for huge challenges.  At Heartland, we’ve been laser-focused on all five for over three years now.

The 2018 Farm Bill opened the doors for hemp farming across the heartland of America. Since then, the world has seen dozens of different approaches from entrepreneurs who are looking to capitalize on the new legislation. We see the opportunities created by the 2018 Farm Bill previously focused on CBD, are shifting toward the hemp fiber and hemp grain markets.

Soon, we will look back on the 2018 Farm Bill, and how it played a pivotal role in transforming the industrial hemp industry in the United States. It will have created new economic opportunities, stimulated countless innovations, and brought the industrial hemp supply chain into the mainstream; providing a new raw material that will radically change our world for the better. 

Join us in creating a carbon negative future!

Heartland Team