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Hemp Farmers Face An Uncertain Future With Declining Demand—But There’s Hope

Industry News Brian Holler

CBD is a thriving product in the cannabis industry: it’s worth more than $4.6 billion worldwide. CBD products are popular for consumers who want the benefits of cannabis without the effects of THC, the psychoactive compound found in cannabis.

However, hemp-based CBD used to face a litany of strict government regulations. This made it a challenge to grow and sell CBD, and it meant farmers growing hemp were often in murky legal territory. 

Fortunately, the 2018 Farm Bill legalized hemp at the federal level, which encouraged thousands of farmers to grow hemp for the CBD industry. Farmers saw this as their opportunity to take advantage of the Green Rush. 

But as they ramp up production, it’s apparent that the industry didn’t keep up with the farmers. To transform raw hemp into a consumable product, farmers need access to an extraction plant. Processing facilities didn’t develop alongside the farmers, which means there are thousands of pounds of hemp in America that farmers can’t process—or sell. 

There was a 130% growth in hemp production between 2018 - 2019. At the same time, there was a 75% reduction in the price of CBD products. With higher production and more competition, the prices for hemp dropped substantially. Any existing hemp processing plants were forced to close up shop, citing high costs and low profits. 

Farmers spent thousands of dollars trying to grow hemp, only to have nowhere to process or sell their goods. Economic conditions are bad for both processors and farmers, many of which are deciding not to grow hemp in 2020. 

What’s the solution? 

Hemp has so much potential, but the industry has to build the infrastructure to keep up with hemp farmers. 

Some processors have gone to a split-profit model, like Prairie Products in Fargo, North Dakota. This processor doesn’t buy hemp from the farmers, but will process and sell it on the farmers’ behalf. This gives small-scale farmers the opportunity to process their crops without sky-high fees. Best of all, the processor in a split-profit model gets to keep hemp byproducts, like fiber. 

Another solution is coming out of Canopy Growth’s former leadership team, including Geoff Whaling from the National Hemp Association. Their new company, called Collective Growth, will build processing infrastructure throughout the United States in the next 12 months to keep farmers profitable. 

Lower CBD prices might be nice for consumers, but it’s important to remember that price cuts have a tremendous effect on the supply chain. New models and ventures are shaping up to help hemp farmers, but time will tell if it’s too little, too late.

Photo: Sharon McCutcheon

Author Brian Holler

 

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