Cultivation Archives - Page 2 of 11 - Green Market Report

Debra BorchardtFebruary 15, 2022
IMG_0744.jpg?fit=240%2C320&ssl=1

4min11460

Hydroponic equipment company iPower Inc. (Nasdaq: IPW) reported its financial results for its fiscal second quarter ended December 31, 2021, with total revenue increasing 52% to $17.1 million. iPower said that the increase was driven by greater in-house product sales and strong demand for ventilation products. The company reported that its net income increased 39% to $0.8 million or $0.03 per share.

“Our fiscal second quarter marked our strongest period of year-over-year revenue growth since completing our IPO last year,” said Lawrence Tan, CEO of iPower. “We are beginning to realize the benefits of continuously rolling out new high-demand, in-house branded products. During the quarter, our in-house product sales increased approximately 72% from the year ago quarter and accounted for approximately 87% of revenue—a company record. These increases demonstrate how well our products are resonating with consumers. In addition, our ability to deliver these products on a timely basis despite global supply chain headwinds provides an important asset to our channel partners.”

The company also reported that the gross profit in the fiscal second quarter of 2022 increased 53% to $7.6 million compared to $4.9 million for the same quarter in fiscal 2021. As a percentage of revenue, the gross margin was 44.1% compared to 44.0% in the year-ago quarter. This small increase in gross margin was driven by a greater mix of in-house product sales partially offset by higher freight and input costs.

“Over the past few months, we have also executed on multiple key growth initiatives, including the launch of our first in-house nutrient line, Flourish™, as well as our initial expansion into Europe through the UK and Germany. Although both initiatives are in their infancy, we believe they present compelling new avenues to drive growth and increase market share.”

iPower noted that the total operating expenses in the fiscal second quarter were $6.4 million compared to $4.1 million for the same period in fiscal 2021. As a percentage of revenue, operating expenses were 37.5% compared to 36.4% in the year-ago quarter. The increase was driven by higher sales volumes, increased advertising to support the launch of new products, as well as increased headcount for new channel sales.

iPower CFO Kevin Vassily added, “We are continuing to navigate the volatile supply chain environment, which has not materially improved since our last quarterly report despite signs of recovery last fall. We plan to continue mitigating the cost volatility through our diversified network of partners and continue to expect fiscal 2022 to be another strong year of growth and execution for iPower.”

Cash and cash equivalents were $1.0 million at December 31, 2021, compared to $6.7 million on June 30, 2021. The decrease was attributed to the timing of accounts receivables with the company’s largest channel partner and is not an indication of any other business or operating trend. Total long-term debt as of December 31, 2021, was $7.4 million compared to $0.5 million as of June 30, 2021. The increase was attributable to increased working capital expenses.


Debra BorchardtFebruary 2, 2022
agrify2-2-scaled.jpg?fit=960%2C1047&ssl=1

4min16030

Agrify Corporation (Nasdaq: AGFY)  is buying the distillation company Lab Society in a deal valued at $8 million. Agrify said in a statement that Lab Society’s annual revenue for 2021 was approximately $10 million, and the acquisition is expected to be accretive in early 2022. The acquisition is part of Agrify’s strategy to expand beyond just lighting and cultivation software. 

“We are ecstatic to add Lab Society to our portfolio of high-quality extraction solutions,” said  Raymond Chang, Chairman, and CEO of Agrify. “As federal legalization edges closer to reality, we believe the United States government will likely increase its role in setting the quality,  consistency, and safety standards for medical and recreational cannabis products. By owning  the top key solutions that produce the highest quality and the widest range of extracted cannabis  products at scale, we expect it will provide Agrify with a significant competitive differentiation,  enhanced customer value-add, superior industry leadership position and significant growth  opportunities globally.” 

Since September 2021, Agrify has been on a tear buying up companies in the extraction space. These acquisitions include Precision Extraction Solutions, which is involved in developing and producing high-quality hydrocarbon extraction solutions, Cascade Sciences which is known for developing and producing high-quality vacuum purge ovens and decarboxylation ovens, and also PurePressure, a maker of high-quality solventless extraction solutions. Lab Society brings distillation and solvent separation extraction solutions to the table.

Despite a recent short-seller report, Agrify stock has been moving higher over the past few days. Shares were lately selling at $6.39, moving up from a recent low of $5.28.

Purchase Details

The purchase price for Lab Society consists of $4 million in cash and $4 million in unregistered shares of Agrify common stock, subject to adjustments as set forth in the definitive agreement. There is also an additional earn-out opportunity of up to $3.5 million if the revenue generated from Lab Society’s products reaches certain milestones in 2022 and 2023. 

Lab Society was founded in 2015 and is headquartered in Boulder, Colorado. The company has a proprietary software, called EliteLab that provides the comprehensive ability to maximize hardware utilization featuring control of temperature control units (TCUs), pressure controllers and gauges, balances, and scales, and agitation stir controllers. The company said that the ability to take cannabis compounds distilled into their pure forms, and then recombine them into specific,  purposeful end-products could have significant potential for the pharmaceutical industry in the future. 

“We are excited to be a part of Agrify’s extraction division,” said Michael Maibach Jr., Founder  and CEO of Lab Society. “With a much larger sales team and additional resources, we are  excited to be in a position to drive rapid growth and future innovative product development.”

 


StaffJanuary 31, 2022
growGeneration-logo.jpg?fit=960%2C609&ssl=1

4min8110

GrowGeneration Corp. (NASDAQ: GRWG) has acquired Horticultural Rep Group (HRG) for an undisclosed amount. HRG is a specialty marketing and sales organization of horticultural products based in Ogden, Utah. HRG represents hundreds of product SKU’s for GrowGen and other companies that are popular brands in the hydroponics market. In addition, HRG has participated in the sourcing of products across the horticultural and hydroponics industry. HRG will continue to supply the 800+ retail customers it currently services. HRG generated estimated revenue of $10 million in 2021 from sales agent commissions and distribution activity.

“With this acquisition, GrowGen is strengthening its global product supply chain and adding significant distribution of its growing list of private label products,” said Michael Salaman, President and co-founder of GrowGen. “Keith Harrington is one of the most respected executives and one of the early innovators of the U.S. modern horticultural market. We are excited that he will contribute his multi-decade expertise to the GrowGen team.”

Mr. Harrington has been in the lighting and heavy manufacturing industry his entire career. He started a horticultural lighting supply chain in the 1990’s and was also the majority owner of one of the two major hydroponic distributors at that time, Diamond Garden Supplies. Harrington established manufacturing and product sourcing offices in Xiamen, China in 1995, and he developed many of the original sources of product for the horticultural market coming out of China, many of which are still utilized today. Over the last 25 years, he has helped to develop, manufacture, and distribute many of the environmental/lighting controllers and horticultural lighting fixtures that have been sold in the 52 countries making up the global hydroponic market.

“I am looking forward to working with GrowGen to build out a tri-continent supply chain to offer developing markets around the world a best-of-breed supply of products from AsiaEurope, and the United States on one platform.” said Keith Harrington, Founder and President of HRG. “Given the current pace of consolidation happening in the U.S. market, I chose to partner with GrowGen because I believe it currently has the best management team in the industry and the best understanding of the culture of the market, which is important to me. I am excited to help them grow that culture and their business at the same time.” Mr. Harrington has been appointed Senior Vice President of Business Development at GrowGen.

 

 


Debra BorchardtJanuary 23, 2022
Texas.jpg?fit=960%2C640&ssl=1

7min25703

The legalization of cannabis is already off to a rough start in the state of Texas. The state legalized medical marijuana, but the program is so restrictive that only a handful of dispensaries exist with roughly 16,00 registered patients. 500 physicians have been approved to prescribe medical marijuana in the state.

Texas is also a big agricultural state and the appetite for hemp farming seems stronger than the desire for medical marijuana. It’s also sparking some bad behavior by Texans in and out of the state. This week, Law360 reported that Todd Smith, a political consultant for Texas Department of Agriculture Commissioner Sid Miller, was indicted on soliciting bribes for hemp licenses. He was charged with soliciting a $25,000 payment in exchange for getting a license awarded by the Department in August 2019. The indictment also alleges that Smith managed to score $65,000 in August and November 2019 from two people.

“We are holding accountable powerful actors who abuse the system and break the law,” Travis County District Attorney José Garza said in a statement Tuesday. “Our community needs to know that no one is above the law and will face justice.”

This apparently isn’t Smith’s first rodeo when it comes to influence peddling. In 2018, the Austin American-Statesman reported that Smith promised a San Antonio businessperson an appointment with the Department of Agriculture in exchange for a $29,000 loan. Miller and Smith’s relationship has been mutually beneficial. In 2016, Miller gave Smith’s wife a newly created assistant commissioner position, one of the highest-paying roles in the department.

“We are disappointed that the Travis County District Attorney has obtained an indictment against Todd Smith, he was not invited to address the grand jury. He is not guilty of these charges and intends to vigorously defend himself against the allegations made by the Travis County District Attorney’s Office,” attorneys Sam Bassett and Perry Minton said in a statement.

Miller who is running for reelection has supposedly cut ties with Miller according to the Dallas News.

Isotex

Separately, Law360 also reported on a case where an Idaho-based machine builder claimed that a Texas company called Isotex Health LLC had planned to build a hemp processing facility in Lincoln, Montana, to extract CBD. Instead, they are accused of running off with $2 million. Idaho resident Jeremiah Skaggs filed the complaint against Isotex.

According to the court filing, in late 2019,  Isotex Health began developing a large facility in coordination with Lincoln County, Montana to process hemp crops into CBD products. As part of the arrangement, Isotex hoped to provide hundreds of jobs to people in Lincoln County, Montana. Skaggs moved to Lincoln County to begin working on the project. Isotex apparently hired a gentleman from Oregon named Clinton Boone to help complete the project.

The complaint alleges that the Texas company Isotex was going to pledge $3.3 million for the project and paid Boone $2.7 million. Skaggs says that when Boone didn’t receive the rest of the payment owed by Isotex – roughly $670,000, he pulled the plug on the project. Skaggs says he had an agreement with Boone on the venture. Skaggs would receive 45% of net proceeds from Isotex Health for creating the machinery and Boone would get the remaining 55%. Skaggs says in his complaint that even without the $670,000, the project could still be completed. Skaggs claims he is owed $156,807 from Boone and alleges he ran off with $2.4 million.

This isn’t the first lawsuit connected with Isotex and the Montana hemp facility. In 2020, The Western News reported that Louisiana-based Kootenai Tec bought the former Stinger building from Fisher Industries and leased it to Isotex in late September. Kootenai alleges Isotex reneged on multiple parts of its contract and should pay $66,067 per month until vacating the property. The Western News reported that Lincoln County, through the Port Authority, invested $3.2 million in the building in an effort to shore up and expand the region’s economy.

The Western News wrote, “The company accused Isotex of failing to make timely interest payments on a $7 million loan facilitated by Kootenai Tec, court documents said. It failed to cooperate in letting Kootenai Tec take payment in kind as outlined in its loan agreement, neglected to provide requested financial documents, and did not maintain insurance, according to the lawsuit. Among the litany of allegations, Isotex also failed to properly document improvements to the site and mishandled the loaned money, court documents said. On Jan. 6, representatives of Kootenai Tec served Isotex with a notice of termination and a notice to quit. Isotex continued to operate in the facility despite the notification, court documents said.”

Byron Gruber, attorney for Isotex Health, LLC, issued a press release on January 23, 2020 stating, in part, that “Isotex will no longer remain silent. Isotex has gathered evidence exposing a conspiracy aimed at taking-over the company. As such, Isotex began filing lawsuits today in Lincoln County, Montana against these conspiring investors, contractors, and their in-state associates.”


Debra BorchardtJanuary 20, 2022
agrify.jpg?fit=602%2C321&ssl=1

3min11810

Agrify Corporation (Nasdaq: AGFY) reported that its fourth-quarter 2021 new bookings exceeded $250 million and the company reaffirmed its fourth-quarter 2021 revenue guidance of $26 million to $28 million, subject to the completion of its standard audit process.

“Our record-high revenue and bookings this quarter are a testament to the current strength of our business and our growth trajectory,” said Raymond Chang, Chairman, and CEO of Agrify. “2021 was a transformational year for Agrify. We have seen significant and consistent improvement in our financial results quarter-over-quarter. Additionally, the introduction of our TTK Solution has proven to address multiple pain points in the rapidly evolving cannabis and hemp industry, while simultaneously creating compelling and long-term value for our shareholders. We look forward to providing a more detailed update on our recent progress and future prospects during our next earnings call.”

The more than $250 million in new bookings for the fourth quarter of 2021 is $150 million greater than the previously provided fourth-quarter guidance of $100 million and over $220 million greater than the bookings the company generated in the third quarter of 2021. The new bookings are an operational metric comprised of Agrify’s sales of its state-of-the-art cultivation and extraction solutions, including its Vertical Farming Units, as well as the expected revenue from Agrify’s Total Turn-Key Solution agreements over the first three years of cultivation. The company said it expects to generate substantially more value over the full 10-year term of the TTK partnerships.

The Agrify TTK Solution is a first-of-its-kind program in which Agrify partners with qualified cannabis and hemp cultivators in the early phases of their business plans and provides critical support over a 10-year period, which includes: access to capital, design, and buildout of their cultivation and extraction facilities, state-of-the-art cultivation and extraction equipment, process design, training, implementation, data analytics, and consumer branding. The company was recently the subject of a short-seller attack that criticized Agrify for working with early-stage companies suggesting that Agrify was working with unlicensed producers. The stock has lost half its value since that report was issued.

Despite that, Agrify noted that it has contractual commitments for over 3,000 VFUs that will be powered by the Agrify Insights SaaS cultivation software as well as the value-added services mentioned above. Cumulatively, all of the 10-year agreements under Agrify’s TTK Solution program are currently projected to generate an estimated $850 million in total revenue.

 


Debra BorchardtJanuary 13, 2022
growGeneration-logo.jpg?fit=960%2C609&ssl=1

4min12840

Hydroponic chain GrowGeneration Corp. (NASDAQ: GRWG) announced revised full-year 2021 revenue expectations of $420 million to $422 million, versus $193 million for 2020, an increase of 118%.  The important news though was that same stores sales are expected to decline in the fourth quarter by 12.3%. This follows other hydroponic companies like Hydrofarm and Scotts Miracle-Gro that also warned of slowing sales.

Having said that, the fourth quarter revenue expectation is between $88 million to $90 million and same-store-sales for 2021 is expected to grow 24.4% for the full year.

“We delivered strong shareholder value in 2021 with triple digit revenue growth despite unprecedented persistent challenges and an uncertain operating environment. Although we continue to grow our business significantly, we experienced stronger-than-expected pressures in Q4 from the general slowdown in the hydroponics market. The sales results for Q4 combined with one-time expenses will result in a loss for the quarter of between $2 million and $4 million in EBITDA on an adjusted basis. We did improve our inventory position throughout the quarter to align inventory levels with sales activities,” said GrowGen CEO Darren Lampert.

2021 Financial Highlights:

  • Full year 2021 projected revenue between $420 million to $422 million, versus $193 million for full-year 2020
  • Full year 2021 projected EBITDA adjusted for stock-based compensation between $31.5 million to $33.5 million, versus $19.2 million for full-year 2020
  • Same-store-sales increase of 24.4% for full-year 2021 compared to 2020
  • Same-store sales decrease of 12.3% for fourth quarter 2021 compared to the same year-ago period
  • A total of 24 new and acquired store locations in 2021, now with 62 locations nationwide
  • On January 1, 2022, we acquired Mobile Media, Inc, a leading indoor vertical mobile racking and benching system manufacturer

Lampert added, “As we remain focused on our long-term strategy, we continue to use the Company’s strong balance sheet and cash flow generation to drive growth by focusing energies and investments on new greenfield stores, business technology, distribution capabilities, private and proprietary brands, and integration of the Company’s e-commerce distribution channels. These initiatives, supported by a team-oriented approach, give us confidence in our ability to deliver revenue and EBITDA growth in 2022. We believe the management team in place now is better suited than any other team in the industry to drive profitable growth over the next decade.”

 


Debra BorchardtJanuary 7, 2022
shutterstock_1274768347-scaled.jpg?fit=960%2C720&ssl=1

3min14970

Despite the sales warning, Hydroponic company Hydrofarm Holdings Group, Inc. (Nasdaq: HYFM) reaffirmed its net sales and adjusted its EBITDA outlook for the full fiscal year 2021. Hydrofarm has forecast net sales of approximately $470.0 million to $490.0 million, representing growth of 37% to 43% versus fiscal 2020. However, Hydrofarm also noted that its fourth-quarter 2021 net sales will be attributed to M&A and partially offset by a decline in organic sales. The company estimated that the organic sales decline experienced in the fourth quarter was in the low-to-mid teens, driven by a sales mix that is primarily consumable products as opposed to durable products.

Hydrofarm also said it would provide a detailed financial outlook for 2022 as part of its fourth-quarter earnings report. “However, at this time, management continues to expect 8% to 10% organic top line growth for the full calendar year of 2022, which will likely be weighted toward the back half of 2022 as the industry laps strong comps in the first half of this year and several states that have recently enacted pro-cannabis legislation build momentum through 2022. In addition, management expects to benefit from the full year of ownership in 2022 of the five businesses acquired during 2021.”

The company has estimated that adjusted EBITDA will range between $47.0 million to $53.0 million. This implies full-year organic growth of approximately 18% to 23% and M&A growth of approximately 19% to 20%. The company said it would release its earnings in March 2022.

Hydrofarm said in a statement that its 2021 outlook includes the following assumptions:

  • Partial period contributions from the following acquisitions:
    • Heavy 16 – net sales and EBITDA contribution for May through December 2021
    • House & Garden – net sales and EBITDA contribution for June through December 2021
    • Aurora Innovations – net sales and EBITDA contribution for July through December 2021
    • Greenstar – net sales and EBITDA contributions for August through December 2021
    • IGE – net sales and EBITDA contributions for November through December 2021

The warning comes on the heels of Scotts Miracle-Gro (NYSE: SMG) also stating that its hydroponic business Hawthorne was seeing a decline in sales.  Scotts said the decline in sales was caused by a slowdown in the cannabis market as well as supply chain disruptions that have delayed the sale of certain product lines. However, the company said it was maintaining its full-year company-wide outlook for adjusted earnings per share.

 

 


StaffJanuary 4, 2022
facility.jpg?fit=960%2C420&ssl=1

4min9290

GrowGeneration Corp. (NASDAQ: GRWG) has bought Mobile Media, Inc and MMI Agriculture, an Ellenville, NY-based mobile shelving manufacturing and warehouse facility in a deal valued at $9.4 million. GrowGen said that MMI generated over $14.0 million in revenue in 2021.

MMI occupies two warehouses totaling over 70,000 sq. ft. and will continue to produce products in its manufacturing facility in New York. MMI has been a manufacturer of high-density mobile shelving systems, commonly referred to as “benching,” to a variety of industries including agriculture, retail, commercial, and government, offering a complete turnkey solution, specializing in design, custom manufacturing, shelving systems, and installation across the United States. High-density mobile systems have become a vital part of agriculture grow facilities by increasing overall canopy space both vertically and across the floor by maintaining one moveable aisle in each grow system. MMI has gained significant traction in the agriculture industry by innovating a tiered decking system incorporated within the mobile system, allowing growers to reach numerous vertical tiers while maintaining total system functionality.

“Indoor vertical farming solutions has become a strategic priority for GrowGen, and a key component of our long-term revenue generation plan. Lighting and benching are the first two key components of a grow facility. Combining the adoption of our Ion LED light and cost savings achieved through indoor vertical cultivation using MMI’s vertical benching systems is an important part of GrowGen’s value proposition. Together, GrowGen and MMI increase opportunities for growers by offering not just GrowGen’s robust selection of hydroponic solutions and products, but also a mobile system to utilize these products,” said Michael Salaman, GrowGen’s President, and Co-Founder. “This key strategic acquisition is especially important, as we expand in newly legalizing East Coast states like New YorkNew JerseyPennsylvania, and the New England states MaineMassachusettsConnecticut, and Vermont, where indoor vertical growing will be the method of growing. MMI offers a great system and solution that is accompanied by an industry best warranty. Every bit of canopy grow space is critical to any grow facility. Being able to design and deliver a space-saving mobile system, then execute the design by adding in irrigation, drainage, air flow, lighting, and automation solutions, gives us a stronger presence in today’s market.”

GrowGeneration carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and hydroponic equipment to be used indoors and outdoors by commercial and home growers. The acquisition comes on the same days as competitor Scotts Miracle-Gro also announced it was buying a lighting company.

“I started MMI, 35 years ago, with the goal of providing the highest-quality vertical racking systems and I’m fortunate to find a partner like GrowGen, one of the most trusted names in hydroponic and organic gardening,” said Lance Pennington, founder of MMI. “GrowGen’s leadership position in selling products into the indoor vertical farming industry combined with MMI’s indoor vertical racking systems now offers our customers a one stop solution for all their indoor cultivation products makes this the perfect partnership.”


Debra BorchardtJanuary 4, 2022
plant.jpg?fit=960%2C640&ssl=1

5min13630

The Scotts Miracle-Gro Company (NYSE: SMG) announced two acquisitions, but at the same time warned that sales in its hydroponic division Hawthorne were expected to drop by 40% for the fiscal first quarter that ends at the end of January. Scotts said the decline in sales was caused by a slowdown in the cannabis market as well as supply chain disruptions that have delayed the sale of certain product lines. However, the company said it was maintaining its full-year company-wide outlook for adjusted earnings per share.

“We are optimistic the supply chain disruptions we’ve experienced will be corrected by the end of January and we’ll be able to meet the continued demand we’re seeing for our industry-leading signature products,” said Cory Miller, chief financial officer. “We’re also encouraged by the year-over-year increase we’ve been experiencing in pre-orders for growing media products for delivery to commercial growers in the second and third quarters. However, the decline we’ve seen in the first quarter, against a 71 percent growth comparison a year ago, is greater than we had anticipated. Based on our current view of the market, we are lowering our full-year sales guidance for Hawthorne to a range of 0 to minus 10 percent on a year-over-year basis, including the expected benefit from Luxx. This range assumes a return to growth during the second half of the year.”

Acquisitions

Scotts announced that it was buying Luxx Lighting in a deal valued at $215 million. Scotts said in a statement that the acquisition, which closed December 30, 2021, adds approximately $100 million in sales and $20 million in operating income to Hawthorne on an annualized basis. While approximately $75 million of revenue from Luxx is expected in the remainder of fiscal 2022, the transaction is expected to be neutral to earnings for the year due to the impact of purchase accounting and one-time deal costs.

Scotts also said it has purchased True Liberty Bags in a deal valued at $10 million. , the industry’s leading provider of liners and storage solutions to dry and cure plant products. Hawthorne has been the primary U.S. provider of True Liberty brands, which expands Hawthorne’s harvest portfolio.

“These strategic acquisitions reinforce our commitment to provide commercial cannabis cultivators in state-authorized markets with a complete set of solutions driven by insight and innovation,” said Chris Hagedorn, division president of Hawthorne. “While the cannabis market continues to see near-term challenges from an over-production in recent months, we see the current reality as an opportunity to further distance ourselves from the competition and strengthen our business for long-term success.

Hawthorne, which previously did not distribute Luxx, will expand the marketing and distribution of the brand in emerging markets, including the East Coast. that significantly strengthens The Hawthorne Gardening Company’s industry-leading lighting portfolio.

These deals follow the August 2021 acquisitions of HydroLogic Purification Systems, which moved Hawthorne into the water reclamation and purification category, and Rhizoflora, whose industry-leading Terpinator and Purpinator brands expanded Hawthorne’s nutrient offering.

Retail Sales

Despite the troubles at Hawthorne, Scotts said that its U.S. Consumer segment continues to perform well with POS growth in both dollars and units in every major product category and continued support in all retail channels. U.S. Consumer segment sales in the first quarter are expected to decline less than 20%, which is better than it originally anticipated.

“Consumer purchases, in units, were up 3 percent in the quarter against a 40 percent growth comparison a year earlier, and POS dollars increased 9 percent in the quarter,” Miller said. “Retail inventory levels are appropriate for this time of the year, and we remain optimistic about the potential for the segment as we prepare for the upcoming lawn and garden season.”

“While it’s too early to raise our guidance for this segment, the current trends and our continued optimism about the upcoming season, coupled with a focus on expense control in both Hawthorne and U.S. Consumer, allow us to maintain our guidance for adjusted earnings in a range of $8.50 to $8.90 per share,” Miller said.


Debra BorchardtJanuary 3, 2022
Seed.jpg?fit=960%2C407&ssl=1

10min33920

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.


Choose Your News

Subscribe to the Green Market Report newsletter that gives you original content delivered straight to your inbox.

 Subscribe

We respect your privacy. See our privacy policy.


About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


READ MORE



Recent Tweets

@GreenMarketRpt – 14 hours

Jazz Pharmaceuticals MS Study Misses Its Mark

@GreenMarketRpt – 15 hours

Analysts Are Warming Up To Aurora Cannabis

Back to Top

Choose Your News

Subscribe to the Green Market Report newsletter that gives you original content delivered straight to your inbox.

 Subscribe

We respect your privacy. See our privacy policy.