Welcome to the USA Hemp Museum’s economics room. Hemp is the perfect tool for us to use to bootstrap ourselves out of this economic mess and into the era of peaceful abundance.
$77 Billion A Year Can Be Saved/Earned By Ending The War On Drugs According To Harvard Economist Jeffrey Miron
Save $44 billion from Prison, Inc. Earn $33 Billion on hemp sales tax
CA Governor would like to support hemp.
Hemportunities – Opportunities In Hemp
Song: A Peaceful Solution – Willie Nelson Peace Research Institute
Towards A Green Economy by Lynn Osburn
” If America had not been infected with marijuana hysteria, hemp could be solving our energy problems today. When marijuana was outlawed most people did not know “marijuana” was Mexican slang for cannabis hemp. The American people, including doctors who routinely prescribed cannabis extract medicines, thought hemp and marijuana were two different plants. Otherwise hemp prohibition would never have happened.
Eastern Europeans were not subjected to the hysterical anti-marijuana syndrome plaguing the West. Poland, Hungary and Czechoslovakia among others, continued to make clothing from hemp fibers and medicines from hemp flowers. They pressed the versatile and edible oil from the seeds and used the left over high protein seed mash to make breakfast cereal and livestock feed. And they used surplus hemp for building insulation.
GREEN ECONOMY based on a hemp multi-industry complex will provide income for farmers in every state. . . . thousands of new products generating tens of thousands of sustainable new jobs. “
Economics: Energy, Environment and Commerce by Jack Herer
Free Enterprise & High Profit
There are many other areas of the economy that would benefit from ending hemp prohibition and the resulting stimulation of commerce in rediscovered hemp products, according to the Hempstead Company, Ecolution, The Body Shop, Hanf Haus, etc.
Legal hemp will return billions of dollars worth of natural resource potential back to the farmers and bring millions of good jobs in energy production to America’s heartland. Hemp energy farmers will become our nation’s largest producers of raw materials.
Family farms will be saved. Crops can be tailored to the needs of the nation. Hemp can be grown for BDF (biomass derived fuels) resources at about $30 per ton. Hempseed crops will again supply the paint and varnish industries with a superior organic and life sustaining alternative to petrochemicals. Hempseed oil has chemical properties similar to linseed oil. And the market is wide open for highly nutritious and delicious foods made from hempseed with its health-giving essential fatty acids and proteins.
Hemp grown for fiber will take the paper and textile industry out of the hands of the multinational corporations, and back to the local communities.
Hemp for Victory (text of WWII film)
[Text of 14 minute U.S. Dept. Of Agriculture Film, 1942]
“Long ago when these ancient Grecian temples were new, hemp was already old in the service of mankind. For thousands of years, even then, this plant had been grown for cordage and cloth in China and elsewhere in the Far East. For centuries prior to about 1850 all the ships that sailed the western seas were rigged with hempen rope and sails. For the sailor, no less than the hangman, hemp was indispensable. A 44-gun frigate like our cherished Old Ironsides took over 60 tons of hemp for rigging, including an anchor cable 25 inches in circumference. The Conestoga wagons and prairie schooners of pioneer days were covered with hemp canvas. Indeed the very word canvas comes from the Arabic word for hemp. In those days hemp was an important crop in Kentucky and Missouri. Then came cheaper imported fibers for cordage, like jute, sisal, and Manila hemp, and the culture of hemp in America declined.
But now with Philippine and East Indian sources of Hemp in the hands of the Japanese, and shipment of jute from India curtailed, American hemp must meet the needs of our Army and Navy as well as of our industry. In 1942, patriotic farmers at the government’s request planted 36,000 acres of seed hemp, an increase of several thousand percent. The goal for 1943 is 50,000 acres of seed hemp. In Kentucky much of the seed hemp acreage is on river bottom land such as this. Some of these fields are inaccessible except by boat. Thus plans are afoot for a great expansion of a hemp industry as a part of the war program. ”
Hemp Ethanol Saves The World
“According to the 3rd edition of “Environmental Chemistry” by Professor Stanley E. Manahan, “Meeting US demands for oil and gas would require that about 6% of the land area of the coterminous 48 states be cultivated intensively for energy production.” (40) According to one source, the US has 60 million idle acres of farmland (41) – about 3% of US land area – and another 130 million or so acres devoted to raising meat (42). According to another source, more than 302 million hectares of land are devoted to producing feed for the U.S. livestock population — about 272 million hectares in pasture and about 30 million hectares for cultivated feed grains. (43) Either way, it seems there’s more than enough land to grow fuel with, if we each eat five or ten fewer steaks every year. As well, urban agriculture is another option to free land up for fuel crops – for example, 6% of Cuba’s food supply is grown in the city of Havana. (44) Not only would urban agriculture increase the area available for food, it would conserve energy previously used to transport food.”
Hemphasis Economic Papers
An Atlantic Canada Industrial Hemp Product Marketing Study, September 1998
- The U.S. Hemp Market: An economic examination of the hemp industry
- Hemp: A New Crop with New Uses for North America
Journal of the International Hemp Association. Vol. 1 (1994)–Vol. 6 (1999). Superseded by Journal of Industrial Hemp.
Journal of Cannabis Therapeutics. Hawarth Press. Vol. 1 published 2001.
Journal of Industrial Hemp. Haworth Press. Vol. 1 to be published 2002.
Blade (1998), Bócsa and Karus (1998), Ceapoiu (1958), Clarke (1977, 1998a), Joyce and Curry (1970), McPartland et al. (2000), de Meijer (1994), Nova Institute (1995, 1997a, 1997b, 2000), Ranalli (1998), Riddlestone et al. 1994, Small (1979), Van der Werf (1994a).
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US Hemp Market
Modern farmers plan their production to include the most profitable mix of products in a Acropping sequence@ or crop rotation. (Wilcox et al, 1974) The result is a mix of crop and livestock enterprises which is determined by the principle of equal marginal returns. Hemp, due to its exceptionally low fertilizer and irrigation needs, high nutrient return (with up to 70% of all nutrients absorbed by the plant returned to the soil), and its short-day growing cycle, is an ideal rotational alternative for use with short season high-demand crops. (Hemp, 1994) Thus, it offers modern farmers the opportunity to make optimum use of available resources with the lowest possible average cost figures, given the nature of the secondary crop (which often can utilize, at least in part, the nutrient and soil enrichment properties of the hemp crop in lieu of expensive and ecologically damaging fertilizers) and, therefore, provides a far more attractive cost curve than is the case for other agricultural products. In addition, because many of the byproducts of hemp production are appropriate for use as livestock feed, the range of efficient product mixes is even greater than is the case with many other product choices.
The Farm Market System
As a close approximation of a perfectly competitive market organization, agricultural firms have above average needs for efficient and cost effective means of production. In addition, due to the nature of a competitive market, the opportunity to compete on the basis of product differentiation is essentially non-existent, and the sole criteria for successful production becomes the ability to produce goods profitably given the fact that the product demand curve for agricultural products is perfectly price elastic (from the standpoint of the individual firm, of course, from the industry perspective, the curve is highly inelastic). Thus the selection of a product mix which maximizes the potential for profit under as wide a range of conditions as possible is a necessity for any firm which wishes to remain competitive. Moreover, due to the nature of the farm market itself, which is based in large part on speculative investment in future production (the commodities market) as well as the wide range of uses for its outputs, which in the case of hemp include such diverse applications as the production of paper, use as a fuel, food production, clothing production, and industrial applications, crop selections which maximize not only production possibilities but market possibilities as well increase the likelihood of profit while minimizing the impact of any potential substitution effect as a result of the lowering of the price of other agricultural products. Indeed, given the exceptionally wide range of products which incorporate hemp into their production, the likelihood that a substitute product will adversely affect product pricing is exceptionally low, a positive inducement to farmers to produce the crop.
Economics Roundtable: Legalizing Drugs
Cannabis Politics – Jeffrey Miron legalize everything – Prohibition
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USDA Industrial Hemp in the United States: Status and Market Potential
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.
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 (January-September) 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 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 Could Save America – Rense
“Then came World War II. The Japanese attack on Pearl Harbor shut off foreign supplies of “manilla hemp” fiber from the Phillipines. The USDA produced a film called Hemp For Victory to encourage US farmers to grow hemp for the war effort. The US government formed War Hemp Industries and subsidized hemp cultivation. During the War and US farmers grew about a million acres of hemp across the midwest as part of that program.
After the war ended, the government quietly shut down all the hemp processing plants and the industry faded away again.
During the period from 1937 to the late 60’s the US government understood and acknowledged that Industrial Hemp and marijuana were distinct varieties of the cannabis plant. Hemp is no longer recognized as distinct from marijuana since the passage of the Controlled Substances Act (CSA) of 1970. This is despite the fact that a specific exemption for hemp was included in the CSA under the definition of marijuana.
The United States government has published numerous reports and other documents on hemp dating back to the beginnings of our country. Below is a list of some of the documents that have been discovered:
- 1797: SECRETARY OF WAR: U.S.S. CONSTITUTION’S HEMP
- 1810: JOHN QUINCY ADAMS – RUSSIAN HEMP CULTIVATION
- 1827: U.S. NAVY COMMISSIONER – WATER-ROTTED HEMP
- 1873: HEMP CULTURE IN JAPAN
- 1895: USDA – HEMP SEED
- 1899: USDA SECRETARY – HEMP
- 1901: USDA LYSTER DEWEY RE; HEMP & FLAX SEED
- 1901: USDA LYSTER DEWEY 13 PAGE ARTICLE ON HEMP
- 1903: USDA LYSTER DEWEY RE; PRINCIPAL COMMERCIAL PLANT FIBERS
- 1909: USDA SECRETARY – FIBER INVESTIGATIONS: HEMP/FLAX
- 1913: USDA LYSTER DEWEY – HEMP SOILS, YIELD, ECONOMICS
- 1913: USDA LYSTER DEWEY – TESTS FOR HEMP, LIST OF PRODUCTS
- 1916: USDA BULLETIN 404 – HEMP HURDS AS A PAPER MAKING MATERIAL
- 1917: USDA – HEMP SEED SUPPLY OF THE NATION
- 1917: USDA – CANNABIS
- 1927: USDA LYSTER DEWEY RE; HEMP VARIETIES
- 1931: USDA LYSTER DEWEY RE; HEMP FIBER LOSING GROUND
- 1943: USDA – HEMP FOR VICTORY – DOCUMENTARY FILM
- 1947: USDA – HEMP DAY LENGTH & FLOWERING
- 1956: USDA – MONOECIOUS HEMP BREEDING IN THE U.S.
These documents and many more are published online by USA hemp historian extraordinaire, John E. Dvorak. His Digital Hemp History Library is the most complete source for historical hemp documents and data anywhere.
Hemp: Economic Prosperity for a new Millennium – BACH
A New, Multi-Billion Dollar Discovery –With over 50,000 commercial uses, today’s hemp is the most versatile, sustainable and valuable natural resource on Earth. Conservative estimates of its profit potential surpass $500 billion per year and tens of thousands of new jobs, once the trade barriers are removed and this valuable cash crop is again allowed to compete. Restoring hemp to its traditional role as the primary source of food, clothing, shelter, fuel, paper, fiber, medicine and other consumer goods will put money into local communities for an ecological and financially stable economy.
Hemp to Butanol – Everything Else is Second Best
In order to allow a return to sensible behavior, the economics of hemp prohibition needs to be addressed. There are a number of factors and forces that went into making hemp illegal in the first place. Economics always plays an important part in any human activity. “Follow the Money” is now a phrase from popular culture, which does nothing to take away from its ability to arrive at the truth.
There are four major areas where hemp was undesirable competition for the economic powers existing at the time it was made illegal. Let’s call these the four F’s: fiber, food, pharmaceuticals, and fuels.
Industrial Hemp and Other Alternative Crops for Small-Scale Tobacco Producers
Although few alternative crops can be expected to yield high returns comparable to tobacco, industrial hemp fiber for paper and textile production has been suggested as a possibility. Industrial hemp is a bast fiber similar to flax, jute and kenaf. Bast fibers tend to have high production costs because they are only a small portion of the plant stem and must be separated from the rest of the stem before they can be used in textile or paper production. A report examining the possibilities for industrial hemp and other bast fiber crops such as kenaf in Kentucky was released in June 1995 (“Report to the Governor’s Hemp and Related Fiber Crops Task Force”). The executive summary of the Kentucky report is attached as an appendix. That report highlights the uncertainty about the economics of industrial hemp.
The Economics of Industrial Hemp Production: The latest US experience with hemp dates from World War II when hemp was grown for fiber in Kentucky and other states. Today there is only a very small market for hemp fiber in the United States; about $30,000 of hemp fiber and yarn was imported from Europe and Asia in 1994. In recent years, European countries including the Netherlands, have conducted research on industrial hemp as a possible fiber for textile and paper production. There are small specialty pulp mills in Britain, Spain and Eastern Europe which process flax, hemp and other specialty fibers. Researchers in the Netherlands suggest that industrial hemp probably is not competitive in European specialty paper markets but is being considered as a fiber supplement to recycled paper pulp. Field trials have shown industrial hemp can be grown in Britain but the economic use of the fiber has yet to be established. Few estimates are available for modern production and processing costs and the market potential is uncertain.
Why Industrial Hemp
Industrial hemp varieties of Cannabis, also referred to as “fiber” or “non-drug” hemp, should not be confused with marijuana. Industrial hemp and marijuana are genetically distinct varieties of Cannabis, much like a St. Bernard and a Chihuahua are very different breeds of Canine. It is not possible to extract a drug from the industrial hemp plant, and industrial hemp can’t “get you high.” Industrial hemp contains virtually no THC (delta-9-tetrahydrocannabinol), the active ingredient in marijuana. Industrial hemp has less than 0.3% THC, while marijuana typically has 5-25% THC.
Additionally, industrial hemp contains a relatively high percentage of CBD (cannabidiol), which negates THC’s psychoactive effects.
Every other industrialized nation in the world permits the farming of industrial hemp for fiber and seed, and industrial hemp is recognized in international law. Article 28(2) of the 1961 United Nations’ Single Convention on Narcotic Drugs, to which the U.S. is a signatory, states “This Convention shall not apply to the cultivation of the Cannabis plant exclusively for industrial purposes (fiber and seed) or horticultural purposes.”
In spite of this, the U.S. Drug Enforcement Administration (DEA) continues to intentionally confound industrial hemp and marijuana. This has resulted in an absurd policy: hemp seed, oil and fiber are all currently legal for trade in the U.S., and domestic industry imports industrial hemp for diverse uses. Yet, at the same time, U.S. farmers are prevented from producing industrial hemp for the domestic market. It is time to remove unnecessary barriers to the domestic production of legal industrial hemp.
INDUSTRIAL HEMP: GLOBAL MARKETS AND PRICES
Industrial hemp can be grown with little or none of the psychoactive properties of marijuana by utilizing low-THC varieties. However, most seedstock in the world has been bred for European and Asian production. The development of a US-based industrial hemp seedstock industry may improve yields (if varieties were engineered for North American production) and lower seed costs. However, this is not guaranteed.
Many have argued the merits of hemp fiber and oil — superior fiber length and strength, excellent oil quality for both industrial and feed uses, and a myriad of other applications. Despite these claims, world production has steadily fallen; dramatically since the early 1980s. Declines in production may be signaling that hemp profits are also on the decline — either absolutely and/or relative to other production alternatives. Industrial hemp faces significant competition from other natural fibers (cotton comprises 98% of the natural cellulose textile fiber market), oils (particularly soy) and a multitude of synthetics. Specialty pulp fibers are limited to less than 5% of normal demand of other major grades of paper.
Hemp processing technology remains antiquated. However, new innovative fiber separation techniques are being tested, particularly in western Europe. Given that US hemp production is essentially non-existent, if production was legalized, farmers would be limited to selling bulk production until (and if) a US hemp processing industry was established. The domestic market for hemp is relatively small ($100,000 of raw or processed hemp, 1996) and is comprised primarily of value-added products ($1.3 mil of hemp fabrics and products, 1996). The lack of processing facilities and other infrastructure necessary for a viable commercial hemp market in the US makes demand and profit projections extremely speculative. The US retail hemp market was projected to be $23.3 mil last year. (It would be interesting to find out the farm-value of hemp fiber in a pair of jeans.) If legal constraints were lifted today, growers would primarily be bulk suppliers to a limited domestic market, at least in the short-run.
Potential US industrial hemp growers would compete with many low-cost producers (China, the FSU and Eastern Europe) where labor costs remain low. The European Union continues to subsidize industrial hemp at the rate of $100/ton (approximately half the market price). Despite these subsidies, hemp production in France (which has always been legal) has not grown in recent years, and newly legalized production in the Netherlands, England and Germany remains negligible. Canada and Australia have both recently authorized limited hemp production. It is not reasonable to believe that the US would subsidize hemp production.
Further, many of the multinationals purportedly interested in hemp production (Weyerhauser, Masonite, International Paper and Inland Container Corporation) are not confined to the US for investment opportunities. Multinationals have the capacity to invest in production and processing facilities all around the world. Non-existent US industrial hemp production does not impede their investment elsewhere. It is notable that foreign investment in hemp processing facilities in China and Europe are small. It is logical to assume that these decisions were based on prudent business sense.
US hemp farmers would face considerable world price variability. When world hempseed production surged in the 1980s, prices fell below the break-even price required for production (as estimated from Canadian research). US hemp fiber import prices averaged $3.85/kg in 1996, also below the break-even price projected by Canadian research. If the profit margin collapses, or remains risky, alternative crops are increasingly attractive.
If industrial hemp production was permitted in the US, it is reasonable to assume that production would be relatively low in early years (the EU experience bears this out). Commodity prices can be more volatile in thin (low volume) markets, creating more market risk than US farmers might be willing to bear. Contract production would alleviate some of that risk. Any price, thus profit projections, for industrial hemp production must take into account the effect of changes in both production and demand on world price.
A Maritime Industrial Hemp Product Marketing Study
J.6 Markets and Marketing
Many independent growers are still in the process of developing markets for this year’s crop. This suggests primary processors will likely play a key role in developing markets and that at present, the market is not structured for large scale and long-term growth.
Contrary to many reports, hemp is at present a niche market. Increasing demand for hemp products over the last decade has not yet fueled an increase in world production of fibre and grain. Furthermore, there are limited markets for this year’s production, although some key players are said to have markets secured. Expanding the range of value-added industrial products available and fostering the necessary consumer demand will take time.
Careful product positioning and advertising for consumer awareness will be important to success in the higher-value oil and food markets. To quote one respondent, “the sizzle sells the steaks”. Growers must understand that while infrastructure investment tends to be less than that required for fibre markets, considerable working capital is needed to launch a new product into the health market.
One respondent suggested there is a danger in trying to pursue hemp in too large a scale for the Maritimes. Local uses and niche markets should be the focus initially suggesting a “get there first” situation versus unlimited demand.
J.7 Vertical Integration
This is considered by many to be blueprint for success in hemp. The fibre market, the primary focus of Maritime growers, is not one where one individual farmer is likely to develop given the volume that is needed to economically sustain processing facilities. For example, HempFlax in the Netherlands complements its large growing base (over 5,500 acres) with two decorticating plants and a recently purchased a paper mill with an annual capacity of 30 thousand tons of paper (25% hemp composition). The company has spent millions developing harvesting and processing machinery.
Primary processors should consider contracting hemp production to guarantee price and consistency of supply.