The cultivation of industrial hemp in Ukraine has significant potential; however, Ukrainian farmers are hesitant to develop this business direction. From one hectare of hemp, it is possible to obtain up to 2 tons of fiber, which is sold at stable prices on the global market. Nevertheless, the industry remains underdeveloped due to a number of objective reasons.
This is reported by Finway
High Investments and Difficulty in Scaling
To start industrial hemp production, farmers must invest substantial funds in specialized agricultural machinery and equipment. According to Andriy Mykytiy, co-owner of Ma’Rijany Hemp Company, investments for 1,000 hectares of crops can range from $3 to $5 million. Thus, for the cultivation of 10,000 hectares, approximately $30 million is needed. This significantly complicates the expansion of production capacities and makes scaling the industry problematic.
“Each hectare of hemp cultivation requires significant capital investments in agricultural machinery – from $3 to $5 million for 1,000 hectares. Therefore, for 10,000 hectares, $30 million is needed. This demonstrates how difficult it is to scale the industry. Current capacities do not allow for justifying deep processing at the required scale, so they need to be multiplied,” emphasized Mykytiy.
Market Features and Regulation
Another restraining factor is the pricing of the products. The cost of hemp fiber today depends on its quality and ranges from $1.5 to $7 per kilogram. For large and medium-sized farms to actively invest in this direction, the profitability of cultivation must be no lower than 30-40% – similar to other agricultural crops.
In addition to financial issues, farmers are also hindered by excessive regulation of the industry, which has persisted in Ukraine for many years. This complicates the entry of new players into the market and slows down the spread of modern technologies for growing and processing hemp.