Paper from Dutch hemp?

Hayo M. G. van der Werf

International Hemp Association, Postbus 75007, 1070 AA Amsterdam, The Netherlands

        From January 1990 until December 1993, a total of 12 research institutes in the Netherlands spent Dfl 17 million (US $9 million) on a hemp research programme.  The objective of this programme was to establish whether fibre hemp can be of economic interest to farmers and to the pulp and paper industry in the Netherlands.  The major research disciplines within the programme were: plant breeding, crop physiology, plant pathology, harvest and storage technology, pulp technology, and economics and market research.  This research yielded a large amount of factual information, which was recently summarized in two reports in Dutch (Bakker et al. 1993, Van Berlo 1993).
        Several researchers who were involved in the Hemp Research Programme will contribute papers on the results they obtained in their field to this and following issues of this Journal.  One of the major results of the programme: a business concept, outlining the required specifications for a viable hemp-paper business to be set up in the Netherlands, is summarized in this article (Van Berlo 1993).

The business concept

Pulp markets
      Market research has shown that both high-value and low-value markets are relevant for fibre hemp grown in the Netherlands.  High-value pulp markets consist of applications in Light-Weight Coated paper (LWC), sanitary papers and tissues, and 'fluff', which is used in the production of diapers.  In the Netherlands, the size of each of these three markets is about 10,000 ton/year.  Low-value pulp markets consist of applications in the production of massive and corrugated cardboard.  In the Netherlands, the market for hemp pulp for cardboard production is about 160,000 ton/year.  Pulp quality specifications, such as whiteness and purity, are lower for low-value markets than for high-value markets.
        The high-value market is the eventual major objective, but initially pulp will be made for the low-value cardboard market, because it does not require top quality specifications.  Pulp technology will be gradually optimised, and pulp production for high-value markets will then be possible.  First the LWC market will be approached, and finally the sanitary paper, tissue and fluff markets.  The low-value market will continue to be served, as the high-value market probably can not absorb all the pulp produced.  Initially, when pulp is produced for low-value markets only, a market price of Dfl 600/ton of pulp is expected.  After several years, when pulp will be produced for both high- and low-value markets, a price of Dfl 1,000/ton is possible.

Hemp production
      A hemp-growers cooperative should be set up by arable farmers in the north-east of the Netherlands.   In the first year, the members of this cooperative will grow 2,500 hectares (1 hectare or ha = 2.47 acres) of fibre hemp.  Over a period of 6 to 7 years, this area will expand to 11,000 ha and the cooperative will consist of a total of 1,000 to 1,100 farmers.  In the crop rotation, hemp will replace cereals.  Initially a yield of 10 ton/ha of stem dry matter is expected.  After 5 years, improved cultivars will be available and an average stem yield of 12 ton/ha is expected.  Initially farmers will get Dfl 130/ton of stem dry matter, this price will increase to Dfl 180/ton as pulp production is geared more to high-value pulp markets.  In addition, the European Union (EU) supplies a Dfl 1,700/ha subsidy to hemp growers.  The crop is harvested in September by contractors who will use modified silage maize harvesters.  The crop is ensiled on the farm and sodium hydroxide is added to the chopped stems for preservation.
        Provided the EU maintains its Dfl 1,700/ha subsidy, and if a an average yield of 12 ton/ha at a price of Dfl 180/ton is obtained five years after the start of the project, the farmer's gross margin (financial yield minus direct costs) will be Dfl 2,343/ha.  This is more than the gross margin of wheat and less than that of potato.

Pulp production
      The pulp factory will be set up stepwise.  It will start at a production capacity of 20,000 ton/year of pulp.  Ensiled hemp will be brought from the farms to the factory and separated into bark and core using a flotation system.  Both fractions will be pulped using chemo-mechanical pulp technology.  The resulting pulp will meet the requirements of the low-value market.  At this scale, pulp technology and waste water treatment technology will be further optimised.
        The size of the factory will then be increased to 40,000 and finally to 90,000 ton/year by adding parallel chemo-mechanical pulp lines.   As the pulping process will be more sophisticated, pulps for the high-value markets will be produced.  A total investment of Dfl 127 million would be required for a pulp factory producing 90,000 ton/year for both high- and low-value markets.

      In order to be economically feasible, the pulp factory should reach a capacity of at least 40,000 ton/year.  This would require an investment of Dfl 57 million.  Three sources could contribute to this investment:
        a)  Shares.  Shares are owned by the hemp growers (Dfl 500/ha), other farmer cooperatives, banks and paper factories.   Shares should finance 50 % of the total investment.
        b)  Subsidies.  Subsidies from several sources should supply 25 % of the total investment.
        c)  Low-interest loans.  These should be supplied by national and regional governments, and make up the remaining 25 % of the total investment.
        Based on this financial structure and on the other assumptions outlined above, the shares would yield a return on investment of 16 % with a pay back time of 4.8 years.

Feasibility of the business concept

        A committee, consisting of representatives of farmers, the paper industry, farmers cooperatives and of the provincial and national government, was asked to give its advice on the business plan.  This committee concluded that some of the assumptions the business plan relies on are uncertain, which make it impossible to decide on its feasibility.  The committee recommends further research to resolve the uncertainties.  This research should include setting up a pilot plant producing 1,000-5,000 ton/year of pulp, and growing the hemp required to supply the pilot plant.  The pilot plant would allow improvement of the pulp technology and a better estimate of the costs involved.  This additional research would take about 2 years and cost Dfl 8-10 million.  Currently, funding for this pilot research is being solicited from the paper industry and the national and provincial governments.