Economics of Producing Hemp in NY: Fiber, Grain and Dual Purpose, Projected Costs and Returns, Preliminary 2020 Budgets

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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.  Value of production, variable, fixed and total costs, and returns, dollars per acre, by industrial hemp production scenario, conventional tillage system, New York, Preliminary 2020 budgets, 18 December 2019.

Budget Items Hemp Fiber Production & Harvest Hemp Seed (Grain) Production & Harvest
$ per Acre
Hemp Fiber & Seed (Grain) Production & Harvest
Value of Production      
Fiber 635.20   198.40
Seed (Grain)   700.00 700.00
Total Value 635.20 700.00 898.40
       
Costs of Production      
Variable Inputs      
Fertilizers & Lime 76.66 76.66 76.66
Seeds & Plants 204.83 102.41 47.41
Sprays & Other Crop Inputs 18.51 65.30 41.49
Labor 38.05 15.49 46.84
Repair & Maintenance      
–Tractors 3.65 18.95 20.90
–Equipment 13.78 13.40 23.62
Fuel & Lube 16.94 17.18 28.37
Interest on Operating Capital 9.52 7.91 7.29
Variable Costs Total 381.94 317.30 292.58
       
Fixed Inputs      
Tractors 24.10 41.81 54.98
Equipment 31.91 23.31 42.53
Land Charge 101.88 101.88 101.88
Value of Operator & Family Management      
Fixed Costs Total 157.89 166.39 199.38
       
Total Costs 539.83 484.30 491.96
       
Returns      
Returns above Variable Costs 253.26 382.70 605.82
Returns above Total Costs 95.37 215.70 406.44

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.
  • Expected value of hemp fiber production:  $0.08 per pound; expected value of hemp seed (grain) production:  $0.70 per pound
  • Expected yield, hemp fiber production, fiber production and harvest only scenario:  3.97 tons per acre; expected yield, hemp fiber production, dual purpose fiber and seed (grain) production and harvest scenario:  1.24 tons per acre; expected yield, hemp seed (grain) production:  1,000 pounds per acre
  • Revenues, costs and returns reflect expected 2020 price levels as of fall 2019.
  • Fertilizers & Lime costs reflect Cornell University agronomists’ recommendations regarding N and Purdue University regarding phosphorus and potash.
  • Seeds & Plants costs vary by scenario with respect to seeding rates, but are constant with respect to seed price per pound.
  • Sprays & Other Crop Inputs include crop professional fees, machinery hire rent & lease, 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.
  • Questions? Comments?  Contact John Hanchar jjh6@cornell.edu
  • Check the Cornell University Hemp website for updates and, or new analysis https://hemp.cals.cornell.edu/

Acknowledgments

Work to date has benefitted from

  • the contributions of:  Jodi Putman, Field Crops Specialist, Cornell University/CALS/CCE/NWNY Dairy, Livestock, & Field Crops Program; others from the Cornell University Industrial Hemp Research and Extension Group; and unnamed farm business owners
  • funding from NYS Department of Agriculture and Markets, NYS Empire State Development Corporation, and others
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