Hemp farming alone will not create a local hemp industry, the farmers need buyers for their crop, preferably for all parts of the plant to make it economically viable in the long run, without subsidies. It is essential to understand and build industry value chains for hemp – from seed breeding and the utilization of all parts of the plant (seed,  fiber, hurd and leaves) to the consumer of the hemp products.

Value Chain

Value chains encompass all the activities and interactions required in the creation of a product or service, from primary production to transformation to commercialization and end-consumers.

The term “value chain” refers to the process of continued addition of value that occurs while the product passes from one actor in the chain to the next, gradually increasing its degree of transformation.

Main actors in a value chain are suppliers, producers, processors, marketers and buyers. They are supported by a range of technical, business and financial service providers. In a value chain the various business activities in the different segments become connected and to some degree coordinated.

Fundamental to successful value chain participation is a move away from the confrontational and sometimes adversarial relationships between and amongst players customary in many industries.

Openness, trust and a genuine desire to see all parties succeed are fundamental prerequisites to an effective value chain scenario.

The value chain model is consumer driven and based on the idea that a competitive advantage is gained through collaborations and negotiation as partners.

A Value Chain for Hemp in California

To develop a local value chain for hemp, a complete picture has to be drawn, which should describe the current situation as well as the desired value chain we are planning to build in California.

This can be done with the help of a diagnostic tool provided by the United Nations Industrial Development Organization (UNIDA): Industrial Value Chain Diagnostics Tool

The industrial value chain diagnostics is a useful tool to assist formulating industrial policies, standards and development programmes.

It helps identify constraints as well as technological and market opportunities relating to a particular commodity or element within the hemp value chain.

This tool may also point to an apparent insufficiency of policies and institutions and a lack of service facilities that are preconditions for value chain development.

If done with a broad enough perspective, industrial value chain diagnostics for hemp can lead to sustainable industrial development by contributing to social, economic and environmental goals in California.

Industrial value chains are complex both in terms of the various segments they cover (from primary materials to consumption), and the impacts that their progress and development can generate.

Mapping out a value chain for a local hemp industry has different areas to cover:

  1.  Primary: seed breeding to raw materials 
    Seed breeding to processing the hemp plant into its parts to be used as raw material in diverse industries: seeds, fiber, hurd and leaves or combination of any. –  from Seed Breeder to buyer of raw material
    –> does not currently exist in U.S. – has to be developed from scratch
  2. Secondary: Raw material to consumption
    This part reflects many different value chains dependent on the industry and end product the raw material is used for. Even the same raw material can end up in multiple industries, e.g. fiber could be used for apparel, furnishing, aerospace, automotive, building or sports equipment, among others.
    –> existing industries with diverse policies, standards and processing machinery – what are the entry barriers and opportunities for hemp fiber in each of these industries?

Let’s look at fiber more closely:

The very different nature of the needs end products in these above mentioned industries have, like strength or flexibility, might lead to different requirements for the physical and chemical properties of the raw material fiber, like fiber length, very limited tolerance for irregularities or damage to the fiber structure.

All these functional, chemical and other properties of the fiber have to be already taken into account when breeding the right cultivars for specific uses and when developing processes and technology to seperate the fiber from the hurd (retting and decortication).

Developing a value chain for fiber applications might be a complicated effort, but done right, it can provide a great economical benefit for California serving existing industries with a local and natural fiber alternative.

Hemp Industry Value Chain Diagnostic

The diagnostic tool developed by the United Nations Industrial Development Group (UNIDO) can be used to identify constraints as well as technological and market opportunities for the primary as well as secondary segments of the hemp value chain.

As a first step it is inevitable to get a holistic picture of the value chain for a industry, where hemp is intended to be used. This effort will reveal important areas of opportunities and challenges, e.g.:

  • Overall entry barrier and economical opportunities of different industries
  • A map of requiremenst and standards that need to be met by the raw material
    1. to be able to meet  required properties of end product
    2. to be able to use existing processing equipment (e.g. spinning hemp fiber to yarn on equipment that is currently used for cotton)
  • Technology entry barriers into the industry (e.g. high investment to develop new processing equipment)
  • Map out opportunities due to new laws and trends. E.g. state wide mandate to reduction of CO2 emission, move towards renewables and sustainability in many industries.
  • Provide input for scalable business models
  • Determine industry clusters

This area is a great field for research papers and/or topics for a master’s thesis. The California Hemp Alliance is actively looking for students who would like to work with us and UNIDO to map out a hemp value chain using the UNDIO Industrial Value Chain Diagnostic Tool.