Reestablishing United States Hemp as a Fiber Crop for Textiles: Addressing Barriers and Leveraging Financial Opportunities.

Abstract

A financial model was developed to determine the profitability of hemp fiber farming in the northeastern US. The textile and fashion industry have experienced a sharp increase in demand for more sustainable and traceable product as consumers become more aware of the environmental impacts of fashion. For fashion brands with US headquarters, domestic American hemp fiber allows for greater transparency into a supply chain when brands engage directly with growers and processors. My research asked: Can growing hemp for fiber be a profitable business at a small scale? What scenarios and variables will affect profitability the most? What innovation gaps exist in the United States textile industry that represent the greatest barriers to success? My hypotheses are: 1) Growing hemp for fiber will be profitable for farmers in the northeastern US; 2) product made with domestic hemp textiles will cost more to produce; and 3) product made with domestic hemp fiber will command a higher retail price due to an increase in consumers’ willingness to pay for sustainable products. I interviewed many industry experts in hemp agronomy, fiber farming, decortication, processing, and product design to help test my hypotheses. In tandem with published global research, I determined the average fiber yields, farm costs, and processing costs by averaging the collected data. With the averages for each input, I created a baseline financial model for a hypothetical hobby-sized 12-acre farm. In addition to the baseline, scenarios were modeled to test the effects of adding processing costs and revenue, increased production, and a model for the addition of a producer-owned small-scale decortication facility. Hemp fiber farming is not a profitable business in the New England area due to a lack of processing infrastructure; a decortication facility to break down the bulky stalks into manageable bast fiber is necessary for profitability. Without accessible decortication, the baseline NPV over a 12-year period was $-73,786. The results showed the most successful scenario was a co-op owned operation of a decortication facility with a medium capacity able to accept more than 15 acres of hemp harvest. The scenario showed an NPV of $41,488, with increased profitability up to $212,627 when the maximum capacity of 25 acres of harvested input was reached. The actual cost to purchase and establish a decortication facility was not insurmountable but cost of rent for industrial space presented limited profitability. With city or government grants or subsidies, or financial investment from fashion brands, this could be overcome. The American hemp industry has decades of catching up to do to standardize plant genetics, fiber quality, and update antiquated infrastructure. The profitability of hemp at the farm level is dependent on overcoming these innovation gaps and having public and private enterprises investing in traceable, local supply chains. As both brands and cities reckon with climate goals, hemp for fiber can be an equitable opportunity for people, planet, and profit.