Economics of Shelling Hempseed
The future of Hemp is food. That’s not to say fiber doesn’t have a role to play, as where there is seed there is fiber. It’s a symbiotic relationship, a dual crop with two income streams. But food has more of a social imperative than walls of houses or animal bedding. How often do you eat versus how often do you buy clothes or build houses?
Hempseed is about 1/3 high-quality complete protein and 1/3 essential fatty acids. It tastes great raw, and has few anti-nutritional factors. The best way to use it in commercial foods is after shelling it, removing the non-nutritive fibrous outer coat, that’s about 40% of the weight of the seed. Shelling increases the nutrition found in the Nut, by removing the fiber.
Since it takes about 2.5 pounds of whole seed to get 1 pound of shelled seed, I consider it 250% hemp, and oil 500% hemp because it takes 5 pounds of whole seed to get 1 of oil. The Nut can be used in almost any recipe or formulation at as low as a 5% level, it tastes like sunflower seed or pine nuts and thus improves the flavor of what it is used in.
That same 2.5:1 and 5:1 ratio is why the input cost of seed will dramatically impact your Cost of Goods Sold (COGS). The cheaper the input seed is, the more you will have a price advantage over your competition, as the image at left shows.
When processors in Canada pay farmers as little as 10¢ per pound for whole seed, there’s no reason for South Koreans to be paying half as much as what North Americans do for the same product, shelled hempseed or Hemp Nut.
Defying the laws of economics to this day, the first brand (HempNut, Inc.) had the lowest COGS for shelled hempseed, $1.40 per pound for certified organic. That allowed it to be sold below the cost of production for competitors’ non-organic (all Canadian, the highest-cost producer in the world at the time). In time I believe China will get their COGS down to $1 per pound and remain the world’s lowest-cost producer by far. Shelled seed also makes a better oil and protein powder byproduct, since it has far less gritty fiber.
The cost for shelling and oil pressing infrastructure could easily top $2 million. To feed a shelling line at 500 pounds per hour input for one year will take about 750,000 pounds of whole seed. At 800 pounds per acre yield, that’s about 938 acres. Some varieties yield double that, reducing acreage needed to run one shelling line by half. You’re going to want all that seed grown as close to the factory as possible. Check it out:
Before hempseed oil producers figured out how to market the byproduct, they paid pig farmers to haul it away as it spoiled quickly with a horrific smell. While I was the first to market it, as HempNut Flour in 1998, it took a few more years for the Canadians. Once they did, their profit margin grew from 92¢ per pound of whole seed, to $4.24. Instead of throwing away the byproduct, produced in quantities 4 times greater than the oil, they sold it for almost as much as the oil.
That 450% increase in profit from the same material was not shared with farmers, who often were expecting 70¢ per pound but got only 10¢, and even then only years after harvest. Nor was it shared with consumers, the price of hempseed oil didn’t decrease, it actually increased. While soy protein isolate is 91% protein, hemp protein powder is closer to 45%, that’s why I called it “Flour” and not protein powder.
Here is world hempseed production. That spike might be because of Canada over-producing in anticipation of growing sales in South Korea, just to have China take over that business instead. Also, the U.S. was growing more by that time.
This graph shows the South Korean debacle better. Also, the debacle in 2006 when one famous socially-irresponsible “socially responsible B Corp-certified” California-based hempseed company asked Saskatchewan farmers to grow for them. They did but the company used that over-production to instead get Manitoba farmers to lower their price. It cost the Saskatchewan hemp co-op over $100,000 in losses, and they were understandably turned-off to hemp thereafter. It took another six years for the market to recover.
Hempseed for food became hemp’s first Billion Dollar Industry, starting in the mid-90s. It was such an important development, it’s called “Hemp 2.0,” hemp for fiber of course being “Hemp 1.0.” Today, shelled hempseed for food is 90% of Canadian hemp.
Here’s the production model for “Hemp 2.0”:
Click for free downloads:
The HempNut Cookbook (both editions). Here’s a free download of my The HempNut Cookbook, both editions combined. 200 recipes, 180 pages, tons of original historical and nutritional information. Perhaps the first consumer mention of CBD (2000).
The HempNut Book. This is the original version of the 2nd edition cookbook except without the recipes, but including a Glossary with 48 terms and full Bibliography with 514 references. It was what was sent to the publisher before it was edited to fit into 192 pages printed. I’m offering this version free as it’s a great reference book, with hempseed history, nutritional info, and more. 80 pages, PDF.
The HempNut Story (2001). The history of the first sophisticated international Best Practices hemp food brand, with products sold coast-to-coast in thousands of stores, in three countries.
Hempseed Shelling Analysis, download Hempseed Shelling Analysis, an Excel file by Richard Rose. Use to calculate number of acres or tons of whole hempseed (grain) needed to run a shelling line at 1 shift/day annually, and annual revenue therefrom.
1901 USDA Yearbook on Hemp, 24 pages, by Dr Lyster Dewey on KY hemp seed.