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COWEN
COLLABORATIVE INSIGHTS
February 25, 2019

Figure 6 – 2017 Production Less Operating Costs Per Acre (Cash Grower Margin/Acre)

per acre | Corn | Soybeans
--- | --- | ---
Gross Value of Production | $620 | $455
Operating Costs | |
Seed | $99 | $58
Fertilizer | $116 | $25
Chemicals | $35 | $27
Other Operating Costs | $85 | $48
Total Operating Costs | $335 | $158
Cash Grower Margin | $285 | $297
Source: USDA, Cowen and Company

Kentucky Hemp Growth Provides An Indication For Near-Term Acceleration

Figure 7 shows hemp production in Kentucky under Kentucky Department of Agriculture (KDA) Industrial Hemp Research Pilot Program. The figure shows the increase in planted acres in 2018 (Sept) as well as the shift toward CBD as a percentage of total hemp (planted acres for CBD rising to 4,121 acres in 2018 from 864 in 2017). In 2018, there were 158 greenhouses in Kentucky representing 764,000 sq. ft., which is included in the 2018 acreage below. (Note 1 acre = 43,560 sq. ft.)

On January 22, 2019, the Kentucky Department of Agriculture approved 1,035 applications to cultivate up to 42,086 acres of industrial hemp in 2019, up from 16,100 acres in 2018 and 33 acres in 2014, which was the first growing year. (67 acres of greenhouse space was also approved for hemp cultivation.) We note that of the 16,100 acres approved in 2018, less than half (6,700) was planted.

Figure 7 – Kentucky Department of Agriculture Industrial Hemp Research Pilot Program

Production Year | Approved Processors | Approved Growers | Approved Acres | Planted Acres | Harvested Acres | % of Grain or Seeds | % Fiber | % CBD | % CBD & Grain | % Grain & Fiber
--- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ---
2014 | 9 | 20 | | 33 | - | 47% | 32% | 21% | 0% | 0%
2015 | 29 | 99 | 1,742 | 922 | 500 | 47% | 6% | 47% | 0% | 0%
2016 | 45 | 137 | 4,600 | 2,300 | 2,000 | 34% | 6% | 60% | 0% | 0%
2017 | 49 | 204 | 12,800 | 3,200 | 2,300 | 36% | 5% | 27% | 32% | 0%
2018 (Sept) | 72 | 210 | 16,100 | 6,700 | TBD | 18% | 4% | 62% | 14% | 2%
2019 | N/A | N/A | 42,086 | N/A | N/A | N/A | N/A | N/A | N/A | N/A
Source: kyagr.com/hemp, Cowen and Company

Outlook For Growth

The expected growth for hemp is supported by the economics offered. However, there are limitations related to required cultivation methods.

Conversations with industry experts estimate planted hemp acres in 2019 could reach 200,000, up from 78,176 in 2018. The growth is supported by expansion like Kentucky’s and new states entering the market (only 23 states participated in 2018).

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