A Maritime Industrial Hemp Product Marketing Study

Appendix C

Estimated Costs of Production

Note:

The information provided here is the most recent cost of production data found in Canada. Accurate cost and returns for the 1998 growing season are not expected to be available until spring 1999. Interested growers are strongly advised to carefully examine the data and compare it to their own situation.

Table C.1: Estimated Costs of Production of Hemp: Manitoba
	Low Scenario		High Scenario
	Hempseed	Residual Stalk	Hempseed	Residual Stalk
Cost/Return	Low seed rates, yield and $/Ac.	Low $/Ac.	High seed rates, yield and $/Ac.	High $/Ac.
Seed (1)	49.50		100.00
Fertilizer (2)	38.15		38.15
Chemicals (3)	10.00		10.00
Fuel	11.00	4.00	11.00	4.00
Machinery Operating (4)	15.00	6.00	15.00	6.00
Crop/Hail Insurance (5)	6.00		6.00
Other Costs	7.50		7.50
Land Taxes	5.50		5.50
Licensing Fee (6)>	15.00		15.00
Sampling/Analy. Fee (7)	16.00		16.00
Drying Costs (8)	2.14		3.57
Cleaning Costs (9)	3.00		5.00
Interest in Operating	6.33	0.36	8.20	0.36
Total Operating Costs	185.12	10.36	240.92	10.36
Land Investment Costs	17.80		17.80
Machinery Depreciatio	17.50	5.00	17.50	5.00
Machinery Investment	7.00	7.50	7.00	7.50
Storage Costs	2.14	2.14	2.14	2.14
Total Fixed Costs	44.44	14.64	44.44	14.64
EM>Sum	229.56	25.00	285.36	25.00
Labour	15.00	15.00	15.00	15.00
Total Costs (10)	$244.56	$40.00	$300.36	$40.00
Expected Yield (lb/ac)	300	3,000	500	5,000
Break-even Price ($/lb)(11)	0.82	0.01	0.60	0.01

1. Seeding rate of 15 lbs/acre @ $3.30 (Low Scenario) and 20 lbs/acre @ $5 lb for High Scenario.
2. 100 lbs N/ac. and 45 lbs P₂0₅/acre.
3. Roundup was applied prior to seeding.
4. Machinery operating costs assumed to be 50% higher than canola.
5. Crop insurance not expected to be available for several years, private hail insurance may be available earlier, assumed premium in upper range for specialty crops.
6. Health Canada has not yet announced plans for licensing fees. Given the trend toward government cost recovery, this may be an eventuality. This analysis assumed $300/licensed location for a 20 acre field.
7. Sampling cost assumed to be $130/field, THC analysis @ $170/sample/20 acres.
8. Drying likely required for safe grain storage.
9. Cleaning required for food grade.
10. The total cost of producing one acre of grain and the residual stalk is $284.56 in the Low Scenario, $340.36 in the High Scenario.
11. At these yields, growers will require at least 60¢/lb for the grain and 1¢/lb for the residual stalk to break-even under the High Scenario.

Source: Dr. Jack Moes in his presentation at the Alberta Hemp Low-THC Hemp Symposia, March 1998.

Table C.2: Estimated Growing Costs and Returns for Hemp in Kentucky Using Current Technology, Yields and Prices ($US/Acre)
Cost/Return	Straw	Seed Grain	Seed Certified	Straw & Grain
Seed	$125.00	$25.00	$25.00	$125.00
Fertilizer	<45.01	45.01	45.01	45.01
Herbicides	0.00	10.95	10.95	0.00
Lime	12.12	12.12	12.12	12.12
Fuel, Oil	18.43	14.06	14.06	22.25
Repair	16.14	30.38	30.38	23.12
Interest	8.38	5.24	5.24	8.94
Storage	5.00	5.00	5.00	5.00
Transport to Processor	27.20	8.00	5.60	24.00
Total Variable Costs	$257.28	$155.76	$153.36	$265.44
Fixed Costs	50.27	45.00	70.73	75.05
Operator Labour	56.00	56.00	70.00	63.00
Total Enterprise Costs	$363.55	$256.76	$294.09	$403.49
Stalk Yield (tons/acre)	3.4	0.5	0.5	2.25
\US $Price per Ton	$200	$120	$120	$200
Stalk Revenue/Ton	$680.00	$60.00	$60.00	$450.00
Seed Yield (lbs/ac.)	–	1,069	700	700
Price Per Pound	–	$0.39	$1.20	$0.39
Total Seed Revenue	$0.00	$416.91	$840.00	$273.51
Profit	$316.45	$220.15	$605.91	$319.51

Fixed Costs include depreciation, taxes and insurance. Figures are updated to 1997 based on estimates by Dave Spalding in the report to the Governor’s Hemp and Related Fiber Crops Task Force. Several additional adjustments are included in the text. Herbicide, storage and transportation to processor costs have been added to these estimates. Spalding’s repair estimates were increased by 50% and seeding rates for fibre increased form 40 lbs/ac. to 50lbs/ac. It is worth mentioning Hempline Inc. of Ontario is recommending growers use 60-65 lbs/ac (Kime, 1998).

Source:

Table 3, Economic Impact of Hemp in Kentucky, July 1998 by Dr. Eric C. Thompson, Dr.Mark C. Berger and Steve N. Allen of the University of Kentucky Centre for Business and Economic Research.

Table C.3: Estimated Relative Returns to Land, Capital and Management per Acre for Hemp and Common Kentucky Crops ($US/Acre)
Hemp, Grain Only	$220.15
Hemp, Straw Only	316.45
Hemp, Grain & Straw	319.51
Hemp, Certified Seed Only	605.91
Alfalfa Hay	141.34
Grass Legume Hay, Round Bales	161.56
Continuous Corn	75.71
Barley-No Till Soybeans, Double Crop, Following Corn	158.09
Wheat, Reduced Tillage	14.24
Grain Sorghum, Conventional Tillage	10.51

Source:

Table 4, Economic Impact of Hemp in Kentucky, July 1998, by Dr. Eric C. Thompson, Dr.Mark C. Berger and Steve N. Allen of the University of Kentucky Centre for Business and Economic Research.