by Duane Stjernholm
The purpose of this Executive Summary is to outline the possibilities and Vision for economic development that are available to the Weld County Communities that have been created by the current status and reintroduction of Hemp into the agricultural arena. This Summary’s intent is not to detail the minutia involved in this unprecedented development opportunity, but to paint the Big Picture of what can be possible to those who embrace and collaborate in this broad Vision.
Since Hemp was removed from the Schedule I list by the Federal Government in December of 2018 by the Farm Bill, the interest in growing and processing hemp in Colorado and around the United States has grown exponentially. The vast majority of this growth, however, has been in the CBD sector of the industry because of the lack of whole plant processing facilities. The CBD segment of the industry is currently very profitable, but this profitability will not be sustainable as the exponential growth in this segment has created a situation where the supply will soon outstrip the demand and the prices for processed CBD will take a dramatic downturn. The CBD segment of the Hemp industry requires a high amount of initial financial input. The NRCS in Montrose has estimated that upfront costs there are $15,000 per acre to participate in this segment. Most growers in the state of Colorado do not have the resources or expertise to participate in this segment of the Hemp market. One of the drawbacks in this segment is that the cultivation of CBD market plants requires only female plants grown from clones or feminized seed which usually requires some type of propagation facility like a greenhouse or an artificially lighted indoor nursery. In addition there is a lot of hand work involved in planting and growing of seedlings, the mitigation of weeds, and labor intense planting, male plant removal, and harvesting. In addition, the final processing of the biomass usually just involves the flower of the plant with the rest of the plant going to waste.
The Agriculturally Cultivated segment of Industrial Hemp involves a completely different methodology for growing and processing. This segment is grown as nature intended from seed to seed, is fully mechanized from seed to sale, and involves whole plant processing. CBD Hemp Cultivation is more akin to gardening than farming, but Agriculturally Cultivated Hemp is more in tune with traditional farming methodologies. Last year there were around 90 million acres of corn grown in the USA, more than 80 million acres of soy beans, more than 50 million acres of hay and more than 40 million acres of wheat. In practicality, the gardening methods of CBD Hemp production are too expensive and labor intensive for Hemp to reach these commodity levels of cultivation, whereas Agriculturally Cultivated Hemp can easily be introduced into normal crop rotations and can use existing equipment and/or slightly modified current equipment to ramp up the number of acres to the commodity acreage levels of other major crops.
The Colorado Hemp Processing Cooperative is focused on whole plant processing. The four major raw materials that the Cooperative will produce from the whole plant are the cleaned and sorted Seeds (grain), the residual Flower that can be obtained when harvesting the grain, and the two components of the Hemp stalk, namely the Bast (outer bark) and Hurd (inner pith). The Bast and Hurd are separated from the stalk in a process called decortication using a machine called a decorticator. These four raw materials are the key components for producing a wide variety of other consumer products. It is commonly said that Hemp can be the basis for over 25,000 products from these raw materials. The Seed can be used for various types of food, cosmetics, and also converted into biodiesel. The Flower can be processed with extraction to produce CBD and other Cannabinoids and terpines which are becoming valuable in creating a variety of health and wellness products. The Bast can be utilized for building materials, insulation, textiles, rope and twine, as well as utilized in still experimental supercapacitors as a substitute for graphene at a much lower cost. The Hurd can be utilized in hempcrete and Hemp geopolymers as building materials as well as paper production and also utilized in the production of ethanol with a higher octane rating than ethanol from corn. Because Hemp is a Key Component for such a wide variety of products, the future of successful Hemp production is almost assured as it will take a lot of Hemp and a lot of time to fully saturate this wide range of products and markets. After crop cultivation, this is the First Step of the Processing to Retail Supply Chain.
In addition, the CHPC is also working with collaborators to produce Hemp Biochar from the waste stalks of the CBD segment as well as the medical and recreation cannabis industry. These stalks are currently going to waste, but they cannot be decorticated because they are short and bushy unlike the Agriculturally Cultivated Hemp stalks which are long and straight and ideal for decortication. Hemp Biochar can be used for a wide range of practical purposes. A big plus is that it can be used to expedite the remediation of soils that have been depleted and damaged by the overuse of chemicals associated with the cultivation of GMO crops. These chemicals have basically killed the microbiome in the soil which is necessary for healthy plants to thrive. Hemp Biochar serves as a home for the aquatic microbiome in the soil and further supplements its growth by retaining moisture in the soil. Hemp Biochar also makes an excellent water filtration medium which is as good as if not better than activated charcoal. Additionally, if it is oxidatively modified, which adds ionization, it can filter out radioactive elements like Radium which is a problem in some Colorado Communities. Other uses for Hemp Biochar chardboard include packaging, air filters, ceiling tiles, furniture, paper towels, pet products like cage liners and poop bags as well as car insulation just to mention a few.
The key element in the production of these raw materials is, of course, the whole plant processing facility and enough contracted Hemp to keep the facility in constant production. Current estimates are that 30-50,000 acres of Agriculturally Cultivated Industrial Hemp will be needed dependent on the size of the processing facility. The CHPC will be contracting with the growers for their crops with one contract for their seed/flower, and another contract for their stalks. As the Cooperative distributes all excess revenues back to the Shareholders, growers will get a third check as Shareholders. Because hemp can be utilized as a construction material, we would like to make the processing facility a Showcase prototype so growers and potential Shareholders can see the importance of the construction material market to the success of the Cooperative. To provide room for expansion, it is projected that CHPC will need an 80-100,000 square foot facility or a construction method that provides a mechanism that allows for quick and efficient expansion. We are working with a company that has the expertise to provide this and will reveal more about them as soon as their Official Construction Certifications are completed sometime in September or October. By incorporating a Biochar oven into the plans we will also be able to generate some of the power needed for the facility from the waste biomass as well as provide less dependence on fossil fuels. Solar and wind power generation incorporated into the facility will also be seriously considered to put the least amount of dependence on the electrical grid, be as green as possible, and control the Cooperative’s expenses for power in order to maximize excess revenue generation.
As we are finalizing the exact specifications for the Processing Facility, we will also be recruiting other companies who wish to utilize the raw materials we will produce for their own production facilities. This is the Second Step of the Hemp materials and goods supply chain. The goal is to have a number of these collaborative companies located within a dedicated Business Park or “Hemp Cottage Industry” center to minimize the transportation costs of the raw materials produced by the whole plant Processing Facility. Transportation costs continue to spiral upwards and the more we can minimize those costs, the lower our carbon footprint will be and the higher our generation of excess revenues will be. In addition, by minimizing transportation costs, the Cooperative and all other companies involved will be able to price their raw materials and finished goods at the most competitively advantageous prices possible. Having these other companies located in a Hemp Cottage Industry Business Park will also bring more jobs and an additional tax base to Weld County which is one of the Primary Goals of the Cooperative. With fully mechanized automation, a good percentage of these employment positions will be on the higher end of the pay scale providing financial security to those employed. The Economic Development Directors will be a key in helping us to draw those 2nd Tier production facilities to the Business Park as well as the Local Government’s ability and willingness to work with the Cooperative and these other companies to make the establishment and long term viability of their facilities attractive and cost effective.
The Third Step of the supply chain in Weld County will be to provide opportunities to those innovative companies who have chosen to work with us a retail environment for the sale of their finished goods. An area of Weld County needs to be identified that is close to the Hemp Cottage Industry Business Park and which is suitable for a collaborative retail environment close to major highways and populations. In this Collaborative Retail Center we can provide a specialty All-Hemp-Goods wholesale and retail environment that will not compete with merchandise that is typically offered by the big box stores. We will need to brand and market this wholesale/retail environment and make it one of the first of its kind in the nation. Just like the outlet stores in Castle Rock and Silverthorne we can create a destination for those wishing to purchase any type of goods made from hemp. Again, this wholesale/retail environment will create more jobs and generate more taxes for the community. In addition we can also make this a showcase that will be one of the first of its kind to economically further stimulate the Weld County communities in a positive manner utilizing the versatile hemp plant.
With the collaboration and willingness to sacrifice short term gains with long term economic stimulus and prosperity, all of the Collaborators in this endeavor need to seriously define what the short and long term goals may be. The CHPC’s whole plant Processing Facility is the necessary First Step of this entire process as is the recruitment of Hemp growers. However, the ultimate success of this Vision will need to have all of the parties involved working together toward the greatest and highest good for every entity involved. This is the true meaning of Collaboration! Without that All-For-One Collaboration and a Spirit of Collective Cooperation this Vision should not even be attempted as it will be quickly derailed by pettiness and a lack of creative long-term thinking. We can and should make this Vision work for the overall good of Weld County. As more people get priced out of the large urban markets, Communities like those in Weld County will become increasingly more attractive. With this Project, we can provide opportunities to all those who currently live there as well as those willing to relocate there. With a successful deployment of all of the steps outlined in this Summary, the local community will be able to offer all Weld County citizens an even more adequate and stable employment environment and an increase in the tax base so they and their families can enjoy the better quality of life that is found all in most areas of Colorado.
The Colorado Hemp Processing Cooperative is registered with the Colorado Secretary of State as a Limited Cooperative Association (LCA). Of all the business models available, this Cooperative/Corporate hybrid stood out as the most fair to all parties involved. LCAs are a fairly new type of Cooperative. LCAs were outlined and approved by the US Government in 2008. Because Cooperatives are state specific, individual states have to adapt and approve a state model using the Federal Guidelines. Only a handful of states have done this, but Colorado took this action in 2012. The major advantage of an LCA over more traditional cooperatives is that it protects traditional Patron Shareholders, those in the business doing the work, but additionally allows for Investor Shareholders. It is common knowledge that agricultural Patron Members are often land rich and cash poor. Cooperatives do not generate profits, but generate excess revenues over and above projected operating expenses and cash reserves. These excess revenues are distributed back to Shareholders once a year and the Shareholders are responsible for all taxes on those revenues. By LCA Statute, a minimum of 50% of all excess revenue distributions have to go to the Patron Shareholders. The percentages to Patron Shareholders can exceed 50% but that is the minimum. The CHPC will initially distribute 50% of all excess revenues to the Patron Shareholders, but will take the other 50% of excess revenues and distribute those to the Investor Shareholders. Once the Investor Shareholders have been paid back their full investment, their Investment Shares will revert to Patron Shares and they will continue to share in the Patron Shareholder’s excess revenue distributions in perpetuity. Currently, Patron Shares are only $100 a share and Investor shares are $1000 apiece. We have intentionally set a low value on Patron Shares so no potential Patron will be unable to become a collaborator in the Cooperative due to financial restraints. This business model currently equates to a ten percent return on investment for the Investor Shareholders once their initial investment has been fully remunerated. As in more traditional Cooperatives, all Shareholders receive one vote per Shareholder regardless of how many shares they own. This gives the smaller investors the assurance that their voices matter just as much as the larger investors which results in a true collaboration for all Shareholders. Thank for your interest in this Vision, and we hope you will join us in this unprecedented opportunity to revive the 80 year dormant Hemp Industry utilizing the latest in Business Models and 21st Century technology.