Hemp prices remain depressed causing hemp farmers to decide against planting crops for 2022.
Hemp Benchmarks reported that December pricing for hemp crops remained in the doldrums as past overproduction led to too much supply and not enough buyers. Despite some promising end markets, the demand just isn’t enough for the farmers to take the chance. In addition to the low prices and oversupply, the hemp market is also facing supply chain issues like increased trucking costs. Plus, other crops like corn and soybeans have experienced price increases prompting some farmers to abandon hemp.
There are big hopes for industrial hemp fiber, but that market is also hobbled by a lack of processing facilities and a lack of industry standards. There are no government guidelines for hemp fibers like there are for say cotton, which has had standards defined since 1918.
Price Declines
Delta-8 cannabis had been seen as the saving grace for hemp farmers when CBD product demand wasn’t able to keep up with the supply. However, several states began banning Delta-8 as the product faced little regulation. Hemp Benchmarks wrote, “The observed price for Delta-8 THC Distillate declined for the sixth consecutive month, slipping 4% from November to average $839 per kilogram in December. The low end of the reported price range fell to $450 per kilogram, down from $650 per kilogram in November. The high end of the observed price range declined as well, from $1,200 per kilogram in November to $1,100 per kilogram this month.”
The Benchmarks also posted the following prices for CBD:
Greenhouse-Grown CBD Flower (Bulk)
- Average $384 per pound (down 2% from November)
- Low – High: $80 – $700 per pound
- The average price is 44% higher than the overall
CBD Flower spot price. Outdoor-Grown CBD Flower (Bulk)
- Average: $156 per pound (up 2% from November)
- Low – High: $50 – $400 per pound
- The average price is 41% lower than the overall CBD Flower spot price
Reduced Acres
Colorado was once one of the biggest states for hemp production is a prime example of the reduction of hemp acres being planted. The 2022 Colorado Business Outlook published in December even addressed the hemp market in its report. It wrote, “Hemp, which experienced a huge boom when first legalized as a commercial crop, has dropped from 2,000 registered Colorado growers in 2019 to about 500 in 2021, and from 87,000 acres to 21,000. Growers cite the lack of a market and processing facilities for hemp fiber and competition from other states legalizing industrial hemp, creating an abundant supply on the market. State government support for hemp remains strong, and there are still many ardent supporters of the crop. The Department of Agriculture continues to work on development projects for hemp flour, fiber, and other uses.”
Farmers also faced extreme weather conditions. The west has experienced massive wild fires in Calirfornia and Oregon. Louisiana and Vermont both drowned in excessive rain, while Texas started the year with a catastrophic cold snap. Hemp Benchmarks also wrote that one veteran hemp cultivator in New York, Allan Gendlemen, told WSHU Radio that he lost one of his six acres to rain in 2021.“This whole thing got completely flooded and the plants literally just died,” he said. “And so now, this is empty field.”
Expensive Travel
If all that bad news wasn’t enough to scare away most hemp farmers, just getting the product to a processing facility also costs more. Hemp Benchmarks said in its December report that hemp logistics company Fide Freight provided data on rates to ship bulk hemp products by truck that showed significant increases in average shipping prices compared to last year. The report said, “As of this month, average rates to move bulk hemp products in a “dry van” from Denver, Colorado to various selected locations increased anywhere from 22% to 94% year-on-year, with the route from Denver to Los Angeles, California seeing the largest jump.”
Regulations Are A Mess
The lack of guidance from the FDA has certainly not helped CBD producers and hemp farmers. Last month New York Representative Kathleen Rice, Morgan Griffith (VA-09), Angie Craig (MN-02), and Dan Crenshaw (TX-02) introduced a bipartisan bill that would establish federal standards for CBD food and beverage products to protect consumers and provide marketplace stability for farmers, producers, and retailers. CBD companies have faced penalties regarding product labeling and website claims, yet get no direction from the government hampering their ability to promote and sell their products.
“CBD products are exploding in popularity, but the lack of federal regulation surrounding them has put consumers at risk and left businesses looking for clarity,” said Representative Rice. “The bipartisan CBD Product Safety and Standardization Act will establish the clear regulatory framework needed to provide stability for business and ensure unsafe products stay off the shelves.” The bipartisan CBD Product Safety and Standardization Act would allow FDA to regulate CBD as it would any other food ingredient and subject these products to enforceable safeguards to ensure accountability. It also charges the agency with establishing CBD content limits and packaging and labeling requirements and determining in which categories of food CBD is appropriate for use.
“We strongly support requiring the FDA to regulate hemp extracts like CBD as food and beverage ingredients,” said Jonathan Miller, General Counsel, U.S. Hemp Roundtable, the hemp industry’s national advocacy organization.
States have also complicated the regulatory landscape with whipsaw decisions around Delta-8. Texas for example tried define Delta-8 as a schedule 1 substance causing retailers to fight back winning a lawsuit that temporarily lifted the ban. However, an appeal was filed causing the ban to go back into enforcement. The fate of Delta-8 in Texas is now mired in the courts.
Promising Markets
Hemp farmers remain optimistic even in the face of so many obstacles. Even as CBD demand flattened, the projected market for hemp fiber and grain is $32 billion by 2030. Hemp Benchmarks wrote that Melissa Nelson-Baldwin is co-owner of South Bend Industrial Hemp in Kansas and that the company has been growing hemp grain and fiber since 2019 and opened its processing facility this past June. “NelsonBaldwin told Hemp Benchmarks that their decortication facility, believed to be the first of its kind in the Midwest, has been busy ever since it was first switched on. Business for hemp fiber, she said, has ‘grown exponentially. There was none three years ago, and now I need three shifts at my facility.’”
Many believe that industrial hemp will be a bigger market than the diet supplement market. The National Hemp Association wrote in its Economic Impact report, “The average hemp fiber & grain processing facility employs 117 people, with an annual payroll of $6.1 million. The total economic output attributed to a single processing facility is estimated at more than $30 million.” It went on to say, “By 2030 industrial hemp can account for over $9 billion of economic output in rural areas.”
So, the potential promise of hemp keeps many in the industry focused even as the current environment remains difficult. It looks as if only the strong will survive and growing hemp is definitely becoming a labor of love.
Source: greenmarketreport
Image: Unsplashed
