Hemp Benchmarks Archives - Green Market Report

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.

As hemp prices continue to fall, farmers are leaving. When the Farm Bill of 2018 passed, farmers rejoiced at the ability to legally grow hemp. Visions of massive demand for CBD products caused farmers to plant thousands of acres. Indeed, it seemed a sure-fire thing. Seemingly overnight numerous products on retailers’ shelves had some version with CBD included. Body products, foods, and supplements all touted the benefits of having CBD added. Then it all fell apart as several problems combined to crash the market.

The problems ranged from a lack of guidance from the FDA, falling prices, less demand for CBD than expected, weather-related issues, and a pandemic. The crops planted in 2019  led to a glut of biomass that persists today. Farmers that were unable to make any money have left the business leaving only the truly committed. 

Price Crash

The glut of biomass caused the prices to slide as the market worked its way through the supply. Hemp Benchmarks’ latest August report wrote, “CBG Biomass and extracted CBG products also saw their observed wholesale prices continue to slide this month. In regard to Crude CBD Oil, Hemp Benchmarks observed USDA Certified Organic and THC Free product that helped to buttress the category’s spot price somewhat, but this month’s assessed price for Crude saw an overall decline on an increase in the frequency of reported deals settling under $100 per kilogram.” Indoor-grown CBD flower is down 3% from July, greenhouse-grown CBD flower has dropped 5% from July and only outdoor grown CBD flower saw its price rise by 7% from July according to the Benchmarks data.

One example of the drastic fall in prices comes from North Dakota, where Veronica Michael told the Hemp Benchmark, “When we first started extraction [in the spring of 2019], crude had been around $1,400 [per kilogram],” she remembered. “I got a call from two buyers in the last two weeks. One was in Colorado and one was in Washington. Both were offering from about $80 to $120 [per kilogram] for crude. That’s ridiculously low. When you look at distillates and isolates, the numbers aren’t good either. People want to buy distillates and isolates for less than we can make them for unless you’re a really big producer. It makes me nervous and scared for the future.”

Farmers Leaving

Hemp Benchmarks reported that it counted 10,881 hemp farming licenses issued nationwide for the 2021 season, down 45% from 19,799 hemp cultivation licenses documented in 2020. Brett Eaton, CEO and founder of Green Cherry Organics in Fort Collins, Colorado Told Hemp Benchmarks that “24 of the 28 hemp farmers he works with regularly are not planting hemp this year. Eaton’s company created the first USDA-certified organic hemp greenhouse in the United States. It also sells its CBD products and clones nationally, and works with hemp farmers in 11 different states.”

With no one to buy the hemp or prices so low that it doesn’t cover the expense of growing, many farmers returned to more traditional crops whose prices have soared. Corn and wheat crops affected by droughts have seen prices at three-month highs. The droughts in some areas contrast with overly heavy rains in other areas. The market has also seen a shift where hemp is being planted. Colorado hemp acres have fallen from 2020 to 2021, while Texas and Illinois have dramatically increased planting. Oregon, which has been a big state for hemp farmers, is seeing those acres face the criticism that the hemp plantings are masking actual illegal THC heavy cannabis farming. 

Outlook

For now, the outlook remains challenging. Many of the farmers cited in the August Hemp Benchmark report said that if the FDA would settle the issues around hemp regulations the market could recover. However, the FDA seems to be punting back to Congress and isn’t moving to take a stand. No one can do anything about the weather or pandemic forced quarantine issues. The industry could be helped by consolidation, but that doesn’t look to be happening. The THC side of the cannabis industry is awash in M&A deals, but the hemp side has just seen businesses close versus being acquired or merging. 

One thing that could help with the 2019 glut is that some of the remaining product is now turning brown and moldy. That suggests that at some point CBD brands will need to buy new CBD products and with fewer farmers planting less acreage, prices would surely rise. Still, the hemp farming industry is clearly becoming one for long-term players. It is not the quick turn on investment that the THC cannabis industry enjoys. 

July 2021 saw record-setting temperatures in parts of the country, alarming spikes in Delta variant Covid infections, and large numbers of Americans returning to summer vacationing after having last summer’s dreams of ocean breezes and lakeshore barbecues dashed by the pandemic. It was also a notable, if not promising month for hemp. Hemp Benchmarks, a division of New Leaf Data Services and leading provider of financial, business, and industry data for the North American hemp markets, recently issued its report for July, which touches on some of the most high-profile talking points of the hemp market to date.

Wholesale cannabis prices have been experiencing a steady decline overall, with the exception of Crude CBD Oil and Broad Spectrum CBD Distillate. These products saw modest price rises in July but still fell short of the prices they topped out at a few months ago. There have been increases in transaction frequency and volume for CBD Biomass and extracted CBD products thanks to strong demand for delta-8 THC, which is synthesized from these products, but this has not been sufficient to move the needle on prices. Despite a steady demand, assessed prices for Delta-8 THC Distillate and Smokable CBD flower both dropped for the second month running, with indoor and greenhouse-grown products earning higher rates from buyers.

Delta-8 Demand

You might wonder why, with its steady-and-still-growing demand among consumers, Delta-8 THC has not been the rising tide that lifts all boats in terms of hemp sales. It may be due in part to state-by-state regulations and restrictions regarding its sale and use. As of July 1, The Connecticut Department of Consumer Protection established that businesses may no longer offer or sell products made using hemp or hemp-derived products with any concentration of THC, including deltas-7,8,9 and 10. A Senate bill signed into law on June 22, 2021 affirmed that products containing deltas-7,8,9 and 10 may only be sold by licensed cannabis retailers or medical marijuana dispensaries. New York has instituted similar restrictions. Delta-8 is also facing some opposition in states with legal cannabis markets as it is cheaper to manufacture than cannabis, is not taxed, and is cheaper to produce.

On the agricultural side, there has been an ongoing decline in the amount of acreage devoted to hemp production in 2021 due to farmers downsizing operations, fewer startups, and those who have cultivated in the past choosing not to grow this season. Meanwhile, existing hemp acreage endured threats posed by extreme weather conditions and the continued onslaught of Covid-19. 

In better news, fiber hemp is getting increased interest from farmers this year as a less volatile corner of the hemp market, being less prone to fluctuation due to changing regulations governing its use. Innovations in the industry abound as interest surges, such as the development of more precise and efficient processing equipment and proprietary technologies that meet the unique needs of customers. This is not to say that no hurdles exist, including developing cultivars that produce higher yields to make fiber hemp economically viable for farmers and the lure of growing other more financially rewarding row crops over hemp. And while there is less controversy around fiber hemp as opposed to hemp grown for CBD products, there is still a strong need for uniformity of regulation between states and better infrastructure in order for this market to flourish. 

The overall decline of the hemp market points to dramatic consolidation, a trend borne out by new data from The Brightfield Group revealing that the number of brands in the CBD industry has dropped from 3,500 at the end of 2019 to 2,000 today. Still, with new innovations on the rise and Delta-8’s stubborn but steady ascendance, there is hope that the rebound of the hemp market will not be a matter of “if” but “when”.