Reefer Sadness: The promise of Nebraska hemp farming runs into harsh reality

SMITHFIELD – Yellowing soybean leaves and drying corn husks are early autumn signs that huge combines will soon gobble grain from vast fields of Nebraska’s two main crops. 

They also mark completion of a promising but problematic harvest: The hemp crop at the Schwarz family’s south-central Nebraska farm and a few other spots scattered across the state.

It’s the second year Nebraska farmers can legally grow and process industrial hemp.

Some Nebraska producers and processors envision a future when this crop, used to make wildly popular CBD oil and dozens of other products, could turn into a small but mighty industry in a state known for corn.

They also see daunting barriers to success. Tepid support from the state is making it hard to supercharge production, they say. The market for hemp products, while rapidly growing, is still small and unstable. And there’s a continuing misperception that what hemp farmers are growing is illegal marijuana instead of what they are actually growing — a perfectly legal crop.

The Schwarz farm demonstrates both the promise and the problems.

The promise: Last year Linda and Tom Schwarz and adult children Becky and Alex planted 300 outside plants and 800 smaller plants in greenhouse pots on their Gosper County farm. They dried and bagged 160 pounds of CBD buds and leaves, and 80 pounds of CBD hemp.

A big problem: Most of the Schwarz family’s 2020 crop remains in those bags, stored in the farm’s greenhouse. The family had expected to sell half that hemp to a Hastings bath supply business, but COVID-19-related issues caused the deal to fall through.  

The family harvested hemp again this year, once in mid-July and again in early September. That, too, is still waiting in the greenhouse, hanging from twine and spread out on tables to dry as the farm searches for a buyer.

“If we can’t sell it, there’s no point in growing more,” Alex Schwarz said.

Stores selling CBD products have seemingly popped up in every strip mall and empty retail space in Nebraska. These products can’t legally be sold as medical treatments, though sellers often market it for pain relief, better sleep and reduced anxiety.

Currently, the only approved pharmaceutical-grade CBD product is Epidiolex, used to treat seizure syndromes. But a flurry of medical studies — more than 1,000 just last year — are trying to determine the benefits of CBD. Some key early studies have found it may help exhausted, burnt-out and depressed Americans, but may not help much with pain management. 

The Schwarzes and Nebraska farmers like them are growing the raw material that is processed into CBD oils, creams, candies, dietary supplements, lotions and scores of other products. 

But growing this crop means dealing with regulations that corn and soybean farmers wouldn’t dream of.

For example: Hemp can be legally grown and harvested here only if levels of THC, the psychoactive ingredient in marijuana, is 0.3% or lower. Licensed growers must contact the Nebraska Department of Agriculture to have plant samples tested before harvest. Hemp testing even a smidge too high for THC must be destroyed as a Nebraska farmer watches his or her harvest literally go up in smoke.

It’s not all doom and gloom for hemp growers. Even as they struggle to sell their hemp, the Schwarzes are getting better at growing it. They raised fewer plants this year — 400 CBD and 200 CBG — but expect yields similar to 2020 because of lessons the Gosper County farmers learned in year one. One such lesson: They moved 2021 plants from the greenhouse to outdoor soil earlier, which resulted in larger plants and buds.

They also used auto-flowering varieties that Linda Schwarz said have a set number of days from planting seeds to maturity, similar to corn. That planning allowed the family to finish harvest before Nebraska’s abundant feral hemp, often called “ditch weed,” pollinated.

A decision about how much hemp to plant next year will be made after the farm’s other 2021 crops, mostly corn and soybeans, are harvested. 

“We’re still experimenting at this point,” Tom Schwarz said. “There just isn’t enough movement of CBD and CBG.”

After years of delays and political defeats, Nebraska took its first tentative step toward legal hemp production in 2018. That’s when the U.S. Congress passed a farm bill that made clear that low-THC hemp plants and products aren’t controlled substances. 

The Nebraska Legislature then passed a law, signed by Gov. Pete Ricketts in 2019, that legalized hemp farming. 

By last year, 84 Nebraska growers were licensed to raise hemp, though only 53 actually planted. The area where hemp can legally grow quadrupled in 2021. Nearly 900 acres of Nebraska farmland and 70,000 indoor square feet is now licensed for hemp.

It’s growing but also undeniably tiny. Colorado farmers planted nearly 20 times more hemp than Nebraska did this year, according to the Farm Service Agency. 

And corn is still king in the Cornhusker State. Nebraska growers planted roughly 10 million acres of it this year.

While hemp production is in its infancy, you can still find spots where rural Nebraska entrepreneurs are trying to harness the crop’s potential, like at a 16,000-square-foot plant near Pleasanton. 

There, the Sweetwater Hemp Company, owned by the Cruise family, uses a technique called ice-water extraction to pull CBD and CBG out of legally grown hemp plants. It’s the largest processing plant of its kind in the United States.

The family has long grown corn and soybeans, and also runs a business that grows herbs and trucks them to Walmart stores in 13 states. 

Rory Cruise is Sweetwater Hemp’s chief executive officer. His brother-in-law Brett Mayo, chief marketing and extraction officer, oversees day-to-day operations at a plant that processed 20,000 pounds of hemp between January and early September. 

“We aren’t running even close to capacity,” he said. “… We are in full sales mode, retail and wholesale.” 

Two-thirds of Sweetwater Hemp tinctures, gummies and topical products are sold through the company’s website. The rest are sold at places like chiropractor’s offices and clinics in Grand Island, Hastings and Kearney. 

Sales are hampered because big box stores won’t yet touch CBD and CBG, Mayo said, anxious because hemp regulations vary from state to state. 

In Gosper county, the Schwarzes have ample experience following regulations and filling out paperwork — they are certified organic and grow organic corn, soybeans and alfalfa. 

Linda Schwarz does the paperwork. Because she’s listed as the business owner on the state hemp license, she must be fingerprinted and get an FBI background check in Omaha each year.

“Some state rules seem to be written for people with huge acreages,” Alex Schwarz said. “If you’re under five acres, they’re stupid because they limit your ability to do research and development.”

The Schwarzes believe industry growth depends on a state focus to produce fiber so the whole hemp plant can be used, not just buds and leaves. They think hemp has soil benefits and could work well in their crop rotations.

But Sweetwater Hemp’s Mayo said businesses like his and farmers like the Schwarzes aren’t receiving enough support from the state. Sweetwater Hemp currently employs five full-time workers, including Mayo.

“If I’m running this plant at full capacity, I don’t even know how many jobs we’d have,” he said.

“This could be a thing that could make the state a lot of money. They’re limiting what we have and could grow in the state that could fund schools, roads, law enforcement and other things.”

Steve Wellman, director of the Nebraska Department of Agriculture, said hemp might qualify for existing state economic development incentives available for many types of businesses, but said he’s unaware of any specific to the crop.

“Dairy, sorghum, wheat, hemp. Processing could help any of those commodities grow in Nebraska,” Wellman said. 

The difficulty, he said, is a crop like hemp having the economic viability needed to generate investment interest in processing.

Part of the problem, Tom Schwarz said, is changing the thinking of Nebraskans who still don’t distinguish between high-THC marijuana and low-THC hemp.

Hemp often gets snared in the political fight about whether to legalize marijuana for recreational or medical use.

“We’re still suffering from ‘Reefer Madness’,” Becky Schwarz said, referring to a 1936 movie that focused on marijuana as the “devil weed.”

Mayo got a taste of that madness while staffing a Sweetwater Hemp booth at the state fair. “I probably had three or four people tell me that what I was doing is illegal,” he said. “And we were in the Grow Nebraska section in the Pinnacle Bank Expo Center.”

Wellman said the Nebraska Department of Agriculture was given a regulatory role for hemp. He supports having commodity organizations take the lead in promotion.

Wellman said he has seen reports from states where hemp products have long been legally produced. Growers there are also sitting on product, he said.

“It’s a small market and with a small market, it’s easy to overproduce,” Wellman said. “It’s hard to get investments. Profitability will drive the decisions.”

It’s too early to judge the potential for hemp-related products, said Mark Wilkins, director of the University of Nebraska-Lincoln Industrial Agriculture Products Center. The novelty of legalization means there’s a lack of research.

“It’s a chicken-and-egg problem” he said. “Nobody is going to build a processing plant until there are acres to harvest. Nobody is going to plant acres until there is a processing plant.”

UNL is studying how the cellulose in hemp’s inner stalk could be fermented into alcohol or other chemicals. 

Using hemp seed oil in food products may be a clearer path to profitability, he said, but a key question remains: What to do with the leftover plant?

When oil is extracted from soybeans, what’s left is used as livestock feed.

“You can’t do that with hemp seed. Why? I don’t know,” Wilkins said.

Mayo said valuable byproducts from CBD and CBG processing are going to waste. Leftover water could go on hemp fields. Biomass could turn into livestock feed. An oil byproduct could be used as fertilizer. None of those byproducts are currently approved for use by the state, he said.

“It’s not dangerous,” UNL’s Wilkins said about industrial hemp products. “A lot of it is that it’s still viewed like marijuana. So you get these weird rules that you’d never get with corn or soybeans. It’s never going to go forward with those in place.”