How to Grow Entire Fields of Hemp Without Legal Issues

The Crazy Russian: Building a Hemp Business in Russia

On October 17, 2018, Canada legalized the sale of marijuana, a drug derived from cannabis. In Russia, you can still go to jail for this, but since 2007, the Russian government has allowed the cultivation of industrial hemp varieties. These are used to produce fiber for clothing, shoes, paper, building materials, and even plastic.

Entrepreneur Maxim Uvarov was one of the first in Russia to get into hemp farming. He shares the nuances of growing industrial hemp, exporting raw materials to China, and his plans to build a factory for producing woven and nonwoven materials from hemp.

The Journey Begins

Before 2017, I worked in consulting—I started my own company and advised on investments and mergers & acquisitions. In the spring of 2017, I came across a book about crop farming in the USSR. I read it over a weekend and got interested in the topic.

After learning that it was legal to grow industrial hemp in Russia, I started thinking about a business and decided to attend a hemp producers’ conference. The nearest and largest was in Cologne, Germany, so I went there.

When I arrived, people would come up to me and ask, “How many years have you been in the business? What do you think about hemp?” I replied that I planned to plant a thousand hectares in 2018. For comparison, all of France plants about 15,000 hectares of hemp. No one took me seriously at first—many conference participants had been in the business for decades, and some had family businesses.

When I returned a year later and told them I had planted 1,500 hectares, I became known as the “crazy Russian” who suddenly became one of the largest hemp farmers in the community.

How It All Started

After returning from Cologne, I met with a friend who had lent me the book on crop farming. He owned a sugar factory and 102,000 hectares of land in the Nizhny Novgorod region. The books said that hemp works well in crop rotation with other crops.

Crop rotation is the sequential planting of different crops on the same land. If you plant hemp one year and sugar beets the next, the efficiency of sugar beet cultivation increases by an average of 40%.

In 2017, sugar beet prices dropped sharply, and my friend was looking for alternative ways to make a profit. I told him about this method, and he offered to collaborate.

My partner and I created the company “Nizhny Novgorod Hemp Fibers,” and I leased 1,500 hectares of land from him. We alternate planting—one year sugar beets, the next year hemp. To make the partnership profitable for my friend, I needed to reach large production volumes.

I won’t disclose the rental cost, but for reference, Nizhny Novgorod is the only region in the Volga Federal District that has seen a decline in agricultural land. Land prices here are the lowest in the Volga and Central Federal Districts. With the arrival of a new governor, who actively supports agriculture, prices are expected to rise.

Next, I started looking for a chief agronomist. I found one only in France—the only country in Europe without a ban on hemp, so they have the best cultivation and processing technologies. I was lucky: François Desanlis had retired and agreed to move to Russia. He now lives in Sergach, Nizhny Novgorod region, and has become a local celebrity. François is officially employed and earns at the level of top managers in major Russian companies.

We bought about 70 tons of seeds of various varieties—the cost is confidential. We collected them from all over the country, as no single place had enough seed stock. We then planted the fields and set up a test plot to refine our technologies: different varieties, seeding rates, fertilizers (including none), and sowing times. We analyze fiber quality, refine our process map, and develop our production program for 2019.

The experiment showed that the best seeds came from the “Yuzhnaya” agrofirm in the Kursk region. They plan to invest heavily in seed production, and we guarantee to buy seeds of a certain quality from them.

In total, about 130 million rubles were invested in our company by the founders in one year, mostly in 2018. In fall 2017, expenses were only for acquiring the factory site and land preparation.

Equipment

For sowing, we used standard seeders also used for grain crops. It’s important that the seeder doesn’t plant seeds deeper than two centimeters, or they won’t sprout. Our 12-meter seeder didn’t manage this, so we lost part of the crop. Next year, we’ll try a 9-meter seeder.

To harvest industrial hemp for fiber in the fall (called “green harvesting”), you need specialized equipment, which doesn’t exist in Russia. This year, we tried Rostselmash combines—it was a disaster. We lost a lot of the crop, but the company promised to fix the machines and dedicate a team to hemp. We’ll see if they keep their word.

After combining, the cut straw must be left in the field for several days or weeks to obtain retted straw. Retting is the process of separating the fiber (bast) from the core (wood or hurds). During this time, only a tedder is used. Retting is crucial for obtaining fiber suitable for fabric.

We were lucky with the climate: Nizhny Novgorod has plenty of wind and dew, so the biological retting process works well. If there’s no dew but there’s running water nearby, the stems are soaked for weeks or months and then dried. In warmer, drier regions, retting is poor, so you need to build autoclaves or special tanks, but those regions are better for seed production.

The hard part of the stem—hurds—is a byproduct, but it’s used in many areas: in Russia, it was used to make lightweight concrete (arbolite), as animal bedding, mulch, and for paper production.

After retting, the straw (hemp stalks) must be baled. We tried different balers, also called press-pickers, similar to those shown in the Soviet cartoon “Nu, pogodi!” The bales need to be as compact as possible—the bigger the bale, the more storage space you need, which is unprofitable.

We settled on French-made Kuhn balers. Russian-made balers didn’t work for us. After baling, all bales must be collected. For this, we bought Spanish Arcusin equipment—very convenient, and we’re the only hemp farmers in the country with such a machine.

Currently, about 15-20 people work in the fields. We really need machine operators—combine drivers. There aren’t enough qualified people in the region who want to do this. It was easier for me to find a chief agronomist in France.

Chinese Clients

My first client was the Chinese Ministry of Defense. I met their representatives at the Cologne conference. They were the only ones who took me seriously.

The Chinese Ministry of Defense has approved a program to develop the hemp industry. Currently, 150,000 hectares of hemp are planted worldwide, over a third of which are in China. They want to increase their hemp acreage tenfold by 2020.

The Chinese Ministry of Defense plans to replace cotton uniforms with hemp ones—not entirely, but as blends: hemp with cotton for summer clothes, hemp with wool for winter. Mixing wool with hemp makes clothes moth-resistant—one of hemp’s properties. Hemp is also a natural antiseptic and hypoallergenic, which is important for China.

The Ministry conducted a study: some soldiers went on a march in cotton uniforms, others in hemp. When they returned, those in cotton had lice and infections, while those in hemp had no lice and their wounds had healed. At a Ministry presentation, they showcased military shoes made from hemp, highlighting their main advantage—no foot odor. I’d like to tell our own Ministry of Defense about this so they’d see the benefits and buy domestic hemp instead of imported cotton.

Besides textiles, hemp is used in other industries. We’ll focus on two areas—woven and nonwoven materials. Nonwovens include geotextiles, tarpaulins, and armor.

We also have clients in Russia—companies from Ivanovo and Vladimir regions. We’re currently discussing options for selling hurds in Nizhny Novgorod. I want all our customers to be in Russia to develop our market and not export anything until the domestic market is saturated.

Government Support

In June 2018, we received a preferential loan from the Industrial Development Fund under the Russian Ministry of Industry and Trade. The Nizhny Novgorod government helped us a lot, allowing us to quickly get into the fund. The current governor previously worked at the Ministry and oversaw hemp in the automotive industry, so he supported us.

The fund gave us money to buy hemp processing equipment—401 million rubles for five years at 5% annual interest. It took eight months from application to receiving the funds.

The application process is clear: submit an application, business plan, financial project, and technical assignment. All instructions are detailed on the fund’s website, and documents are submitted through a personal account online.

We prepared well—conducted international and Russian market and competitor research. Before applying, I also got expert support: I went to the Ministry, presented my project, and got approval.

After the loan, we started negotiating with banks. Previously, banks wouldn’t give us loans, saying hemp was not a serious business. But once we got the fund’s money, their attitude changed. Now we’re looking for funds to build the factory and buy farm equipment for next year.

Competitors

Besides us, hemp is also grown this year in Penza (KonoPlex), Mordovia (Mordovian Hemp Plant), and the Kursk region (Yuzhnaya agrofirm). About 700 more hectares are scattered in other regions. I’ve learned about all of them, but haven’t met some of the farmers in person yet.

There’s no real competition in the hemp industry. You can make over a thousand different products from hemp. I focus on woven and nonwoven materials, the Mordovian plant on construction and automotive industries, Yuzhnaya on seeds, and in Irkutsk, they grow hemp for cellulose. We don’t interfere with each other; we share experiences and often visit each other’s fields. We’re developing the industry together.

Mistakes

We made a lot of mistakes in our first year—there was no one to learn from. We did the right thing by hiring a foreign expert and using international technologies.

One mistake was sowing the field at the seeding rate we read in a book. Experiments on the test plot showed we should have used a different amount. Also, the 12-meter seeder let us down, and we lost part of the crop.

On some fields, we didn’t use fertilizer; on others, we used simple and complex fertilizers. It turned out there’s no difference between simple and complex fertilizers except price. We wasted money on that, and the equipment was too old and spread fertilizer unevenly.

Another mistake was buying Rostselmash combines. If I’d known they’d take our project so lightly, I wouldn’t have spent money on them. Now, all our efforts are focused on producing the best fiber in the country for woven and nonwoven materials—that’s our main strategy.

Next year, we plan to plant twice as much hemp. We also plan to launch our own production and start generating revenue in the fourth quarter. I’m not disclosing the project’s profitability yet. We’ve finished the project documentation and are now undergoing expert review.

This will be an automated plant producing the best hemp fiber in the country, matching cotton in quality. Employees will only deliver and remove raw materials. Construction will start once we resolve all documentation and review issues. According to the plan, this will be the largest plant in the country.

If someone had told me a few years ago that I’d be a hemp farmer, I wouldn’t have believed it.