Economics of Producing Hemp for CBD in NY: Costs of Production, Land Based, Raised Bed, Plastic Mulch, Drip Tape Irrigation Production System, Initial Estimates, 2019

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Author:

John J. Hanchar, Cornell University/College of Agriculture & Life Sciences/NWNY Dairy, Livestock and Field Crops Program

Note: this version is dated 18 December 2019. It was prepared for the winter 2019/2020 meeting season.


Table 1.  Variable, fixed and total costs of production, hemp CBD, raised bed, plastic mulch, drip tape irrigation production system, NY, 2019 growing season, 18 December 2019 cost analysis

INPUTCOST (Dollars per Acre)
Variable Inputs  
Fertilizers & Lime 349.33
Seeds & Plants 4,530.80
Sprays & Other Crop Inputs 2,850.56
Labor 4,472.44
Repair & Maintenance  
— Tractors 23.56
— Equipment 6.24
Fuel & Lube 100.70
Interest on Operating Capital 308.34
Variable Costs Total 12,641.97
   
Fixed Inputs  
Tractors168.78
Equipment107.39
Land, Buildings and Improvements191.67
Value of Operator & Family Management  
Fixed Costs Total467.84
   
TOTAL COSTS13,109.81

Selected Notes:

  • Individuals are encouraged to study, consider the various sources of risk and uncertainty that characterize hemp enterprises — production, marketing (price and payment models, product sold, payment receipt), labor, legal, and financial – when making decisions regarding hemp’s place in cropping systems.  Variability in outcomes requires considerable management input to develop and implement strategies for addressing risks and uncertainties.
  • Reported totals may not equal the sum of individual items due to rounding.
  • Costs reflect 2019 prices for inputs.
  • Production, harvest practices, input use and other data, information per Larry Smart, Maire Ullrich, Janice Degni, Lindsey Pashow, Jud Reid, and others, Cornell University Hemp Research and Extension Group
  • Analysis reflects costs incurred from application submission, establishment of a winter cover crop through placement of dried material in totes for shipping or storage.
  • Tillage operations, bed shaping, plastic laying, drip tape installation, fertilizer applications, planting, cultivating between rows, transporting harvested plants to drying barn completed using a tractor and implement.
  • Other tasks including pruning/thinning, removing male plants, staking, harvesting, hanging, stripping, and filling totes completed using hand labor.
  • Transplants at 1,800 plants per acre, $2.50 per plant cost for purchased transplants or for value of on farm grown, 1,550 plants harvested per acre
  • Sprays & Other Crop Inputs include:  crop professional fees; machinery hire, rent & lease; license and testing fees; drying expenses; and others — estimates reflect no spray inputs.
  • Labor costs reflect labor from hired and, or family and, or owner/operator sources.
  • Machinery related variable and fixed costs per Lazarus: http://wlazarus.cfans.umn.edu/william-f-lazarus-farm-machinery-management
  • This analysis excludes a charge for management inputs.
  • Future work will incorporate total value of production, revenue estimates for the purpose of developing costs and returns analysis.  Variability in revenue related factors and the resulting risks and uncertainties point to the importance of understanding the relationship between expected revenue, price and payment model, percent CBD, pounds of dry matter sold, THC levels, other quality factors etc.
  • Check:
  • Questions? Comments? Contact John Hanchar at jjh6@cornell.edu
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