Replant Hemp to invest $500M to Build Hemp Supply Chain
On the hemp podcast this week, hemp industry advocate Geoff Whaling returns to the show to talk about his latest endeavor to inject much-needed capital into the hemp space to build out the supply chain, develop processing capacity and develop markets.
How does one go about raising $500 million? How will that money be used to develop the industry? How does this venture differ from Collect Growth’s special purpose acquisition fund? And how can you get in on the action? All those questions are answered on today’s show, plus we talk about hot topics in the hemp space, including what we can look forward to in the 2022 Farm Bill.
Replant Hemp Impact Fund
Geoff Whaling: So it’s a $500 million fund, but as we start to raise our first twenty-five, 50 million, we will deploy that money as quickly as we can into the industry and are hoping that we will have, you know, those investments in our first or second quarter.
Eric Hurlock: That’s Geoff Whaling talking about the Replant Hemp Impact Fund, his latest endeavor to inject capital into the hemp industry. This is the Lancaster Farming Industrial Hemp podcast. My name is Eric Hurlock, and today I’ll talk to Geoff Whaling about how one goes about raising $500 million and how that money is going to be used, how companies like yours can benefit from it. We also talk about the upcoming farm bill and a few other topics of hemp-worthy interest. So stick around for that. First, we’re going to have some words from our sponsors, then a few nuggets of hemp news. And then we’ll get into the interview.
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This episode is also brought to you, in part by IND Hemp in Fort Benton, Montana, where their mission is to provide innovative agricultural products and services to connect American farmers with the pioneers and businesses that see him as a way to bring real and lasting change to our communities and planet. IND Hemp.
All right, I’ve got a couple of nuggets of hemp news here for you this week and today is November 19th, 2021, just in case you’re keeping track of time. Here’s one out of Kentucky it’s from the Paducah Sun. It says that Kentucky AG Commissioner Ryan Quals just announced that the Kentucky Department of Agriculture is now accepting applications for 2022. Grower applications, including renewals, must be submitted by March 15th, 2022. The new processor and handler applications may be submitted year-round, but renewals are due December 31st, 2021. Last year, the story says the CDA licensed 450 hemp growers to cultivate up to 12000 acres and 140 hemp processors and handlers for 2021. The department also licensed 3.7 million square feet of greenhouse space for production. The 2021 numbers reflect national trends for hemp production, according to a review of the 40 states with hemp programs, 30 of them reported reduced or significantly reduced applications for 2021. Ryan Carroll says that the nation’s hemp industry continues to face challenging headwinds, including continued regulatory inaction by the FDA toward cannabinoids as we enter the ninth growing season, he says. We encourage all hemp growers and processors to carefully consider all of the factors in this industry. That’s good advice from Commissioner Quals.
Here’s another one from the Dallas Morning News. The headline reads Hemp and CBD businesses to look to alternatives as Delta 8’s legal future remains uncertain. And this whole Delta eight thing is so interesting to me. I’m going to read parts of the story here. It says a recent battle on the legal status of Delta eight has prompted local hemp and CBD businesses to explore alternatives to Delta eight to ensure that they have a product to direct consumers to. If Delta eight is deemed illegal again last week, a Travis County judge granted an injunction that reverted the state’s controlled substance schedule, temporarily legalizing Delta eight products across Texas again. Sellers are cautiously optimistic as they resume operations. Many Texans believe the products have been legal since they ramped up popularity in 2019. But public documents show the Department of State Health Services added it to the drug’s schedule in January. The majority of consumers and sellers were unaware until the state health department published a clarification on its website in mid-October. The notice sent the industry scrambling for answers. Some businesses completely clear their shelves of Delta eight products. Others worried over its impact on their financial circumstances. Currently, the products will remain legal until a full trial next year determines whether the state health department followed the law when its scheduled Delta eight as an illegal substance. About that?
All right, just one more nugget of hemp news here. This is about an event coming up on December 8th. I know you might all be sick of virtual events, but this one looks like it’s going to be a little different. It’s called hemp open space. I’m just going to read parts of the press release here. It says that hemp industry leaders are teaming up on Wednesday, December 8th, 2021, to host hemp open space. The online community event provides an opportunity for hemp experts, industry members and enthusiasts to connect with fellow hipsters to share tips, learn from experience and to tackle common challenges together. No matter which sector of the hemp economy you inhabit, a strong, sustainable hemp industry is good for business, says hemp industry pioneer Eric Steenstra co-founder and current president of Vote Hemp, when experts, entrepreneurs and enthusiasts collaborate to grow the category. Instead of competing for existing market share, everybody wins, he says. So I was intrigued by this event. It seems really interactive compared to a lot of the Zoom meetings that have been happening. I reached out to Eric Steenstra, and I had the chance to talk to him just yesterday, so I will be publishing that conversation on the very next episode of this podcast. I learned a lot from him, not only about this event, but you know he’s been in this space a long time, and it was an absolute honor to talk to him. Anyway, I will have links to all of these news items on the show page for this episode at Lancaster Farming dot com. All right, so let’s get into my interview with Geoff Whaling about the Replant Hemp Impact Fund.
Geoff Whaling, welcome back to our podcast. How are you doing?
Geoff Whaling: We’re doing really well, Eric, can’t thank you enough for your contribution to webinars. Certainly, you are helping us educate farmers and industry, and I’m happy to be here. Good. Well, yeah, we can’t do without the farmers. We can’t do without education. So yeah, this is good work. All right. So you made some news. This past week, I saw the announcement about Replant Hemp Impact Fund. Can you tell me what that is?
Geoff Whaling: Yeah. So I was happy to make the announcement that we continue to look at ways that we can bring funding capital to stand up the hemp industry. So I announce there Replant Hemp Fund, which will be a venture capital fund but will be really focused on funding coming from those groups who are looking at patient investments or philanthropic investments, knowing that standing up the hemp industry is going to take some time and the returns are going to be slow. But certainly there’s a lot of groups that are looking at ESG investments, and certainly, hemp can play a big role in providing them with those returns. So it’s a $500 million fund. But as we start to raise our first twenty 50 million, we won’t deploy that money as quickly as we can into the industry and are hoping that we will have those investments in our first or second quarter.
So what kind of companies are you looking to invest in?
Geoff Whaling: Yeah, it’s strictly going to be our hemp industry. Obviously, your listeners will remember that I was involved in a special purpose acquisition company called Collective Growth, where we raised one hundred and fifty million. We scoured the Earth and looked at 200 companies that were in the hemp space, and we realized that all of them could use private capital. The unfortunate thing is that none of them qualified for an investment from a special purpose acquisition company. So we had to pass on that.
Is that more about the rules of a SPAC than anything else or?
Geoff Whaling: Yeah. And and you know, a SPAC is a financial instrument that’s approved by the FCC, and there are very specific rules as to how that blank check company can operate. And certainly, we were really successful and I guess it’s because of our track record. We were offered two hundred and forty-two million dollars for a fund that was only looking to raise one hundred and fifty million. But we raised that one hundred and fifty million and the requirements of a SPAC were that we needed to invest 80 percent to one hundred and twenty million dollars in either acquiring one company or combining a number of companies that fit that criteria. We looked at 200 companies that were in the hemp space. We signed kind of investment documents with seven of them looked at how we might be able to bring them to the public market. And at the end of the day, most, if not all, of those companies didn’t meet the one most important criteria, which was to have two years’ worth of audits done okay. And of those companies that had the ability to have audits done, then it was a question of, you know, we could not justify an investment in them to meet the requirement of one hundred and twenty million. So at the end of the day, we were looking at combining five or six companies. And that for anybody that is in the investment space knows is an almost impossible task to combine all of them on one day and one accounting system, which is where we would have to happen. So we went looking other places and we ended up doing a deal that brought BMW and Magna International together. Obviously, your listeners know that BMW is one of the big uses of sustainable fiber and hemp. So by doing a deal, as we did, that resulted in a $1.4 billion transaction. We brought BMW Magna together and that cemented that relationship and hopefully we’ll be able to advance hemp in our discussions with them.
Excellent. So all of that research you did on those 200 companies for the SPAC that you have that in your pocket now and that’s going to help with the impact fund.
Geoff Whaling: Absolutely. So it will allow us to be able to put together our investing. Investment thesis and then our subscription will allow us to go to the market quite quickly. And that’s why I really do believe that once we raise some capital and meet those milestones of twenty five or 50 million that we’ll be able to deploy those funds quickly into the marketplace.
So we’ll maybe start to see some of this in the next year.
Geoff Whaling: Absolutely.
Talk about, you know what, what it would actually look like on the ground, like what what these companies would would get, what they would just get a big pile of money or you would be involved in helping them set stuff up or, you know, what does it look like?
Yeah. So, you know, I think again, as fund managers, our role is to do due diligence to represent our shareholders and to find good investments. But certainly, there are many companies that are out there that we think are very worthy of an investment and would meet that criteria would not be up to us. In fact, it would be a violation of our fiduciary role to get involved with their day to day operations. But our our our model is that we would look at the skills that we have to help market promote the investments that we’ve made. And obviously they would be hopefully investments that would help build this out the supply chain. So by promoting the supply chain, advancing and educating on him. And certainly it would in turn help promote market those companies, right?
In the article that I read, it was in MarketWatch. It opened up with, you know, they described the IND Hemp plant in Montana. And you know, this is great. This is what we need now. We just need 524 more of them in the United States.
Geoff Whaling: Well, and that scenario is really based on the National Hemp Association’s economics study that we presented to the White House. We worked on and we work with USDA and the White House on agreeing as to a scenario. And the scenario was what if we were able to take existing commodities like corn, soy and wheat and look at those farmers and ask them to add in, not replace, but add in a rotation of hemp into their plantings? And if we could get five percent of them to do so, if we were able to do that over 10 years, that translates into about 12 million acres of hemp fiber and grain. The question is then how do you scale the processing of that? We know that in the hemp that’s turning on their facility this week, this month, their expectation is that they will be able to process fifteen thousand acres of hemp in that one facility. So if we have 12 million over the next 10 years, that will require that we have five hundred and twenty four of those facilities, like indie hemp and at $25 million each, that translates to $1.4 billion. That’s a lot of capital that’s going to be needed thousands of jobs. And all of a sudden, when people in government start to look at that, then that scenario, which is very conservative, is real, right? And is it worthy of them investing? Those numbers kind of make it.
So that’s amazing. But for these, because we were talking about sequestering carbon with hemp, that’s like for me, that seems to be the most important thing here. But we would need to have the farming practices. You know, they would have to adopt regenerative ag practices because if you start telling the land, you lose all of that carbon, how do we do that? How do we convince all these farmers to to switch to no-till?
Geoff Whaling: Well, I think first of all, we have to it’s an educational process, and certainly we need to really have some research undertaken as to what that carbon sequestration looks like and what the benefits of it. And certainly, farmers are smart people. If they’re going to see that they can replenish the soil, get a better yield out of that same acreage using another growing another crop, then you know that becomes a win win to them. So one of the stocking factors that I have discovered along the way is the story of one of the farmers who is does a lot of commercial harvesting in Montana. I think he also has 15000 acres of his own land. And when he calculated at the end of the day, the profit that he and his family took off of their fifteen thousand acres ticket was something like fourteen dollars and. A. And although 14 dollars an acre times, fifteen thousand is a large number. At the end of the day, it’s fourteen dollars profit off of an acre of land. If we can introduce him and make that land more profitable by looking at it being a triple revenue source, fiber, grain or feed and carbon credits, then that becomes a win win for for the farmers and for the industry. And I think more people will gravitate to it and with more people gravitating to it. That then starts to address some of the issues that the administration is looking at wanting to address, such as carbon sequestration. And if we can create a regenerative crop that can do that, then it becomes a win win for the planet. I think groups like Ben Dobson that is running Hudson Carbon, who really is one of the smartest minds in carbon sequestration, needs to advance the research on this to really create a baseline. You know, the National Hemp Association has played its role in getting support and seeing passage of Senator Braun’s Growing Climate Solution Act. We hope that now that that’s passed the Senate 98, I’m sorry, 92 to eight, I think it’s going to go to the House, get it passed. That mandates that USDA form an advisory group so that we can figure out what a carbon credit initiative looks like. And I hope that USDA is smart enough to bring people like Ben Dobson to the table so that we can not only have somebody that can look at it for other commodities but, you know, have some experience with hemp as well.
Eric Hurlock: Yeah, right. You were involved in the Cop 26 summit that’s happening now. Can you talk about that? And was there a lot of discussion of hemp there?
Geoff Whaling: Yeah. So I think, you know, I was the the the the leading voice of hemp because again, you know, most of the world doesn’t know what the potential campus and many of the players United Nation countries are just discovering hemp. Remember, it’s been, you know, not only absent America’s landscape, it’s been absent the rest of the world. So what I thoroughly enjoyed and I participated in an outreach to the youth that were supporters and protesters messaging that went to them. They are looking for a sustainable future, and hemp can be part of that. They will be able to be carriers of the message about the potential of hemp, but then to participate in some of the panel discussions with American and worldwide advocates on how they’re looking at reducing carbon footprint. Looking at recycling of things like textiles, you know, adopting a carbon credit initiative and trying to find, if not a global standard, but a regional standard for carbon credits. I think that the world is now starting to really focus on what this potential is. And for me, as we create the Replant Hemp Impact Fund to look at the groups like Goldman Sachs and others who are really looking at investing in ESG, I think that it gives me a lot of thought that building out the refined help fund is not going to be a big challenge. Oh, it’s good.
What do you think is going to be in the farm bill, hemp wise?
Geoff Whaling: Yeah. So I think, you know, our relationship with USDA Bill Richmond and the group, that’s they’re they’re starting to get their their their feet dirty, their hands wet in this industry and they’re starting to see the challenges and the reality on the ground. I think that they understand that there might be a need to look at hemp a little bit differently. Look at it as a as a horticultural crop. The CBD operates a versus a commodity crop, a field opportunity, and I think that will kind of start to work on language in the farm bill to address those issues and look at ways that hemp can still have a significant role but make it easier for those people who want to grow or horticultural cannabinoid crop can do so with very specific rules and those who. Want to grow a field crop and thousands of acres of it for fiber and carbon will be able to do so with different rules that are not going to require that they test something every acre or two acres. Right. And you know, hopefully the experience that we’re all getting will be able to allow us to come to a compromise so that we can get to the business of expanding this industry.
Good. That sounds promising.
Geoff Whaling: Yeah, very promising and know we have a very good group at USDA. Secretary Vilsack has created an internal working group, so policy advisers, they are actually working with the same group that we work with in the White House. So, you know, hemp is getting attention. You know, we are not a big commodity, so we’re not getting day to day attention, but we’re slowly making it there. And when I start to see the crossover between hemp and its role that it might play with climate, you know, as we talk about, you know, Black Buffalo 3D printing and their approach to incorporating hemp, increasing the standards which, you know, everything coming out of hemp needs to have standards by the international standards groups that oversee the particular, in this case, building with 3D printing concrete and seeing that spill over as an opportunity and how it might create a new cement standard, which is a priority of the White House. I’m starting to see this, this hemp fabric. We kind of cover a whole bunch of areas that are exciting.
That is very exciting. Getting back to the Replant Hemp Impact Fund, if there are listeners out there who are interested in learning more, where do they go? Where can they learn more about this?
Geoff Whaling: Yeah, so they can visit our website. First and foremost, we’ve got a great video that kind of talks about what we’re going to embark upon. So it’s it’s replant hemp, one word dot com, and certainly there’s a link there that they can reach out to us and let us know if they’re interested in the opportunities. I think that there’s not going to be many of your listeners that haven’t already learned about the replanting and because we’re being inundated with outreaches. And since these are all new email inboxes for us, it’s not spam driven. It’s all people who are really serious and reaching out to us. The timeline is that we have announced the fund now. We hope that we will. We will have all of our our subscription documents organized in such a way that will be able to go to the marketplace by the middle of December. And we hope that we’ll have some news quickly within the new year about who can participate. I am. I’m trying to interpret what Jeff Waling fashion my chairman, Michael Woods, and I are trying to make sure that there’s going to be an opportunity for both large institutional investors, as well as small investors, investors that want and have been supporting to him to participate with us. You know, we have a track record of success. I want to make sure that everyone who has done their yeoman’s lift in supporting the hemp industry over the years can also participate with us in this fund, which is going to complicate things. So I think that we’re going to be looking at creating a crowdfunding opportunity for everyone to participate with us, as well as something that will allow the large institutional investors that a million two million, 10, 20, 50 and 100 million participate with us. So it’s going to take us a little bit longer to figure this all out and ensure that it’s legal and done under FCC rules. But we’ll get there.
Awesome. Well, let’s keep in touch, and I look forward to hearing more great news from you about this.
Geoff Whaling: Well, and happy holidays to everyone.
Eric Hurlock: All right. Geoff Whaling from Replant Hemp Impact Fund. Thank you very much.
EH: Well, I don’t know about you, but I sure could use $500 million right about now. Anyway, just like Geoff said, you can go to replant hemp dot com and there’s a connect button and you can get in touch, send them an inquiry and see if you might be one of the people they’re looking for. Anyway. If you’ve got any questions for me about something you heard on the show or something you want me to cover, please get in touch with me. Send an email to the podcast at Lancaster Farming dot com. My name is Eric Hurlock. I am the digital editor at Lancaster Farming newspaper. The. Greatest agricultural newspaper in the world. Give it up for Lancaster Farming. Come on. No, seriously, it’s an amazing resource, especially if you’re a farmer or somehow connected to the agricultural industry. So get yourself a subscription. Just go to Lancaster Farming dot com and find out all about it. Oh, and while you’re there, be sure to sign up for our Hemp podcast newsletter. All right, I’ll have all the links for all the things on the show page there at links to farm income. And until next time, I will see you in the newspaper.
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