State Ag Department Wants $5 Million to Improve Colorado Hemp Processing

The Colorado Department of Agriculture has requested $5 million for a new program aimed at improving hemp fiber processing throughout the state.

Colorado's adoption of recreational marijuana provided an early lead in hemp production, with the state eventually topping the country in registered acreage for hemp farming in 2019. But Colorado's registered hemp farming dropped nearly 42 percent from 2019 to 2020, according to the CDA, and last year's numbers are expected to show another dip, too.

State officials and hemp industry representatives blame the drop on market saturation following hemp's federal legalization in 2018. To turn that around and get numbers back up, the CDA wants to make Colorado a stronger contender in hemp processing — not that there are that many states competing in the field.

Industrial hemp is grown for a variety of uses: Fibers can be turned into rope, clothing and even construction alternatives to concrete. The plant requires relatively little maintenance during the cultivation stage, but turning a hemp stalk into usable fiber is new and complicated for American manufacturers, who are still behind competitors in Canada, China and Europe.

Processing hemp fibers requires separating hemp's stringy outer layer from its woody core, known as the hurd. Traditional farming equipment like wood chippers gets jammed up by the fibers, however, making it necessary for the industry to use machines called decorticators. According to the CDA, Colorado only had one working decorticator as of November, and the department believes there are only two more across the United States.

Building a facility with one of these special processing machines can cost upwards of seven figures, the CDA notes, which is why the department has requested a little over $5 million for grants for hemp decortication. According to a CDA 2022-23 budget request briefing sent to the Colorado Legislature's Joint Budget Committee, the program would split the money between three private companies.

"The concept of hemp decortication is a fairly new idea to the industry, but an initial estimate from the Department expects that these decortication machines can cost anywhere from $600,000 to $3 million," the briefing reads. "With the approval of this program the Department is hoping to continue Colorado’s status as a national leader in the hemp production industry."

According to the proposal, a new Agricultural Future Loan Program would give the CDA the right to award farm-to-market infrastructure grants or loans to eligible entities. The CDA proposes that the decortication program be funded by the state's Marijuana Tax Cash Fund, with applicants required to match grant money they receive from the CDA.

The briefing admits that using the Marijuana Tax Cash Fund, which is intended for state programs related to legal and commercial marijuana, could face opposition down the road, but the CDA says there is language in the Marijuana Tax Cash Fund that permits money for hemp-centric programs.

"Statute clearly defines the acceptable uses of the fund, of which there is one that specifically
mentions hemp," the briefing adds.

A proposal for a hemp decortication program has yet to be officially introduced in the legislature.