By LAURIE KIEFABER

Indiana Correspondent

COTATI, Calif. — Growing hemp for cannabidiol (CBD) oil and fiber might now be legal in the United States, but many banks are still hesitant to make loans for harvesting equipment and possibly processing equipment.

"Banks are so scared that the FDIC will penalize them for supporting anyone that has the word 'cannabis' in their supply chain and, since hemp is a form of cannabis, banks won't make loans for processing equipment," according to a recent press release from Delta Separations.

Delta is a hardware manufacturer that develops equipment for the safe extraction of high-quality oil from plant-based biomass, primarily for the cannabis and hemp industries.

Andrew Bish, COO of Bish Enterprises and CEO of Hemp Harvest Works, also sees this as a problem. Hemp Harvest Works and Formation-Ag are the only two U.S. companies with experience manufacturing equipment dedicated to harvesting hemp.

"Banks are having a difficult time with this, and crop insurance is a major part of it," he said. "Processors can't get crop insurance anyway, so that doesn't impact them, but the fact that the Fed hasn't given appropriate directives to banks regarding hemp ... Banks for the most part have taken the 'safe route' and just say no whenever possible.

"Most of the money coming into this industry is private capital. This is also why we haven't seen the major players publicly come into this space, as they often have lines of credit with major banks that have explicit policies against financing cannabis. Once banking is resolved, Bayer, Corteva, Monsanto, Syngenta, et cetera, those players will step in."

However, once the hemp is harvested Bish does not see processing as a problem. "There is enough processing equipment to handle the volume of hemp," he said. “There have been quite a few large-scale processors (extractors) open this past year, so there should be no worries there."

Corbett Hefner, vice president of research and development/business development at Formation Ag, said there are banks that will make loans for equipment: Finance Scope (based in Minnesota), Green Leaf Capital, and Bank of the West based in California.

It's difficult to say if more banks across the country are loaning money in this industry. It might just depend on the bank.

"PNC (Bank) does not restrict lending to hemp farmers who operate in compliance with applicable law, including the recently passed Agriculture Improvement Act of 2018 and applicable state laws," said Marcey Zwiebel, PNC senior vice president and director of corporate public relations.

Tade J. Powell, senior vice president and director of communications and public relations at First Farmers Bank & Trust in Converse, issued a statement: "First Farmers Bank & Trust is working with representatives of both the Indiana Bankers Assoc. and the American Bankers Assoc. to stay current on all laws and regulations regarding industrial hemp production that could impact underwriting decisions.

“Ag-related industry makes up over 60 percent of overall bank portfolio and all emerging sectors within the industry are being carefully researched and investigated by bank personnel."

A representative of State Farm Bank in Wabash, Ind., said they "don't do those types of loans."

Hemp crop losses

U.S. hemp farmers might not be as successful this year due to harvesting equipment shortages, a lack of knowledge, and other factors. Since the new farm bill passed in December 2018, 46 states have licensed farms to plant hemp, according to Delta Separations.

Bish said there is a serious harvesting equipment shortage. "Neither of us (Hemp Harvest Works nor Formation Ag) have the capacity to handle the influx of growers for this year," he said. "Both of us cut off orders months ago, leaving many people scrambling.

“On top of this, some of our delivery schedules aren't lining up with customers' expectations of crop development, leading to earlier-than-expected harvest in some areas when they anticipated a later harvest with mechanical equipment."

Bish explained many producers will be hand-harvesting or using traditional methods, which is not ideal. Hefner agreed. "There are many ways to cut or chop up a (hemp) crop, but that does not equate to being an effective method that will maximize the return per acre," he said.

"We are seeing people combine and silage chop hemp crops and the CBD yield is dropping between 70 to 90 percent after the harvest. Formation Ag is beginning a study with our local university to study this in detail, with the goal of producing a published report comparing the different methods (of harvesting)."

Bish estimated up to half of registrants will be hand-harvesting their hemp this year.

Delta officials worry there won't be enough processing equipment to handle 90 percent of this year's harvest, leaving $7.5 billion rotting in farmer's fields. Bish believes there should be enough processors as long as the hemp is stored properly.

"Processing isn't as time-sensitive, presuming you store product appropriately (which most people don't understand how to do)," he said, "so product can sit and wait in line to be processed without an issue."

The actual number of new hemp acres planted this year is up for debate. Delta and other industry experts estimate 128,000 acres of additional hemp have been planted this year. Erica McBride Stark, executive director of the National Hemp Assoc., said she's hearing the same number but it's tough to verify.

"The only way (to verify acres of hemp planted) is to contact each state department of agriculture and see if they release it," she noted. "Also, there's usually a pretty wide discrepancy between the number of acres permitted versus what actually gets put into the ground. So a lot of states may not even know that yet.

“These things will get better once the USDA starts overseeing the program and is the central data collection."

Bish agreed the USDA needs to start surveying this crop, and estimated at least 160,000 acres of new hemp has been planted in the U.S. Unfortunately, he expects there will be crop loss.

"Keep in mind, most of these acres were planted by people that have no idea what they are doing. Twenty percent of acres planted have already failed – possibly 30 percent ... Of the remainder, another 30 to 40 percent will treat the plant in a manner that reduces their yield down to nearly nothing."

Aside from crop loss, Hefner is concerned about food safety. "Hemp farmers are growing a ... plant that uptakes everything it can from the soil. (Growers) need to have a good safety plan in place to ensure customers are getting the correct safe product,” he explained.

He recommends soil testing for not only nutrients, but residual chemicals, as well as implementing Good Agricultural Practices (GAP) principles and third-party farm audits. Standards and regulations will be mandated soon, but it's best to be ahead of the curve.

If 128,000 acres of new hemp have been planted this year, Delta officials say this is a 300 percent increase over last year. Each acre of hemp can be used to produce 165 pounds of CBD oil, worth approximately $66,000. If that same acre would yield fiber products only, the value would be $850.