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 ScenarioHigh Scenario
HempseedResidual StalkHempseedResidual Stalk
Cost/ReturnLow 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 
Machinery Operating (4)15.006.0015.006.00
Crop/Hail Insurance (5)6.00 6.00 
Other Costs7.50 7.50 
Land Taxes5.50 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 Operating6.330.368.200.36
Total Operating Costs185.1210.36240.9210.36
Land Investment Costs17.80 17.80 
Machinery Depreciatio17.505.0017.505.00
Machinery Investment7.007.507.007.50
Storage Costs2.
Total Fixed Costs44.4414.6444.4414.64
Total Costs (10)$244.56$40.00$300.36$40.00
Expected Yield (lb/ac)3003,0005005,000
Break-even Price ($/lb)(11)0.820.010.600.01
  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)
Straw & Grain
Fuel, Oil18.4314.0614.0622.25
Transport to Processor27.208.005.6024.00
Total Variable Costs$257.28$155.76$153.36$265.44
Fixed Costs50.2745.0070.7375.05
Operator Labour56.0056.0070.0063.00
Total Enterprise Costs$363.55$256.76$294.09$403.49
Stalk Yield (tons/acre)
\US $Price per Ton$200$120$120$200
Stalk Revenue/Ton$680.00$60.00$60.00$450.00
Seed Yield (lbs/ac.)1,069700700
Price Per Pound$0.39$1.20$0.39
Total Seed Revenue$0.00$416.91$840.00$273.51

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 Only316.45
Hemp, Grain & Straw319.51
Hemp, Certified Seed Only605.91
Alfalfa Hay141.34
Grass Legume Hay, Round Bales161.56
Continuous Corn75.71
Barley-No Till Soybeans, Double Crop, Following Corn158.09
Wheat, Reduced Tillage14.24
Grain Sorghum, Conventional Tillage10.51
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.

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