The hemp market bottleneck
As big of a cash crop as hemp is, there are even bigger issues concerning getting the product to market to extract CBD.
Since 2018, when Congress approved the planting of hemp in the U.S., hemp as a crop has surged by over 300%. According to the Department of Agriculture, growers seeded an estimated 142,691 acres in 2019. However, taking into consideration farmers who may not have reported complete data to the government, the number of total acres may be as high as 230,000, according to the advocacy group Vote Hemp.
As big of a cash crop as hemp is, there are even bigger issues concerning getting the product to market to extract CBD — the nonpsychoactive cannabis ingredient that is being added to a variety of beauty products and health supplements. According to New Frontier, a data firm that tracks the cannabis industry, the market has matured and expanded at such a rapid rate that the federal government hasn’t been able to keep pace with the production. Unfortunately, this has resulted in a multitude of farming operations across the nation sitting on acres of hemp with no place to go.
Processing
Processing is one of many key areas slowing the marketing of hemp. While Congress has given the green light for hemp cultivation, the Food and Drug Administration hasn’t cleared CBD yet for use in mainstream food and drinks. This has resulted in a very limited expansion in the processing sector and is causing an estimated $7.5 billion in unprocessed hemp on farms going to waste.
Harvest protocols and financing
To further exacerbate the problem, hemp requires specific harvest protocols in order to be used for CBD, such as drying after harvest and before extraction. Farmers who lack the experience and equipment to adhere to specific harvest guidelines for drying may simply be allowing the plants to dry in the fields. This can leave acres of hemp crops exposed to weather-related risks — primarily rot and mold. Adding to the processing bottleneck is the fact that many banks continue to remain apprehensive about lending to marijuana operations, making it difficult to secure financing for processing equipment.
A limited number of buyers
Finally, there remains the issue of a limited number of hemp buyers in the current marketplace. A July survey by Whitney Economics found that 65% of hemp farmers were unable to find a crop buyer in 2019. The reason can be attributed to the slump in the expected expansion of supplies for some CBD products, according to the Denver-based price platform PanXchange.
Norman Ives (nives@wwfi.com) is cannabis practice leader and wholesale insurance broker, and Morgan Moore is life science practice leader and wholesale insurance broker at NutraRisk, a division of Worldwide Facilities. As a wholesale insurance broker and program manager, NutraRisk specializes in insurance coverage for the nutraceutical and cannabis industries.
This article first appeared on NutraRisk’s blog and is republished here with the authors’ consent.
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