Industrial Hemp Attorney Denver Colorado
Historically, hemp has had a unique relationship with American farmers, however, after the passing of the 2018 Farm Bill, interest in the plant’s cultivation has grown to new heights.

Cannabidiol (“CBD”) products have garnered unprecedented levels of market interest following the Agriculture Improvement Act of 2018 (“2018 Farm Bill”). Indeed, even though the Food and Drug Administration (“FDA”) still considers ingestible CBD consumer products to be prohibited – the drug Epidiolex is the only ingestible CBD product currently permitted by FDA – businesses appear eager to pioneer the budding industry. Retailers and consumers are not the only hopeful industry participants hoping to cash in on the CBD rush; farmers have enthusiastically embraced hemp cultivation for some time now, even more so since the 2018 Farm Bill passed. In 2017, 25,713 acres in the US were designated as hemp farms, yet the number tripled last year to over 78,000, with even higher acreage projected for this year.1 Given the immense interest, estimates continue to note the potential market value for CBD,2 however, reports from the independent price-reporting agency, Hemp Benchmarks, suggest a much more complicated reality for the nascent industry.

industrial hemp, CBD, CBD isolate, price report, data
Figure 1

As the above chart indicates, while certain hemp products like dry flower or feminized CBD seeds may be seeing an increase in observed prices, many others appear to be declining (Figure 1).3 Both crude and refined hemp oil have seen steep drops in price since the start of the summer, however, what is arguably more surprising is the noticeable fall in CBD Isolate pricing, as it averaged over $6,000 in April.

The report later cites expected versus actual seed quality and logistical limitations as two sources of the worsening downward pressure on product prices. Seed quality, in particular, has created a particular problem as hemp does not have the foundation of an established measurement to base operations on. Jay Noller, lead researcher and director of Oregon State University’s Global Hemp Innovation Center recently spoke to The Associated Press on the industry’s uncertain footing and stated, “If you look at a lot of financial markets, they’re all saying, ‘People are investing in this,’ and we have no idea what to divide it by.”5 This is further complicated by numerous accounts of farmers losing entire crops after discovering THC levels above the legal limit or surprise male crops. The industry is so new that there are very few established metrics, and even less in the way of track records, which leaves cultivators open to the risk of purchasing seeds with varying germination rates and seeds and clones with inconsistent THC and/or CBD levels.6

In addition to these significant genetic issues, a lack of infrastructure adds further complication to the process of handling hemp grown to meet the boom’s demand. George Weiblen, professor of plant systematics and molecular phylogenetics at the University of Minnesota, spoke to CNBC on the fundamental difficulties of cultivating hemp, noting, “There are huge challenges to producing the industrial hemp required for meeting the demand. It’s not as simple as growing tomatoes. It’s just not… The possibility of failure to produce quality cannabis extracts is huge.”7 While some states may have existing means to accommodate the needs of new hemp farms, others are not as lucky. Clarence Laub, a farmer in North Dakota with thousands of acreage in hemp and other crops, spoke to magazine Farm Journal about his experience with the lack of an established groundwork for hemp operations. “I don’t have many options for processing, and my best bet is contracting with the Canadians,” Laub explained. “We need infrastructure and people working together, because you always feel alone.”8

The hempy industry’s current difficulties can be traced to the absence of comprehensive federal guidelines. Occasional updates from the United States Department of Agriculture (“USDA”) have addressed aspects of the hemp industry, but the agency has yet to issue updated regulations for the plant. In late May, the agency issued a statement in support of interstate hemp shipping, but, similar to the FDA, the USDA has not produced new rules to fully address the 2018 Farm Bill.

hemp, hemp seeds, industrial hemp, CBD
While the industry is still in its infancy, lack of USDA or FDA action has forced hemp cultivators to operate without comprehensive federal guidelines.

Roughly half a year after the 2018 Farm Bill’s passing and with CBD’s boom in full swing, some analysts argue that surplus product is an additional factor. For example, Hemp Benchmarks’ research listed Oregon as an example of an oversupply of hemp, where worried farmers struggle to determine how much to plant.9 In early April, some hemp production experts began cautioning, “if too many farmers get into the hemp business, the market could become saturated and prices could start falling,”10 a concern reiterated by USDA head, Sonny Perdue just earlier this month.

“This may be a real salvation-type crop for farmers along the way,” Perdue told Kentucky news station, WLKY in an interview on the state’s role in hemp production. “But farmers are so productive, I’m concerned they may overproduce like they do a lot of things in that way and the price may go down.”11

Looking to CBD in particular, other industry experts claim that the boom itself has already created an excess of material and that the price drop is a reflection of an updated supply-demand chain. “Extractors sell CBD Isolate below market price to pay their bills, and the market price drops,” Kush.com founder, Michael Gordon, claims. “Now, extractors must sell more material for the same amount of profit. To drive more sales they drop the price, and the cycle repeats.”12 Additionally, Gordon claims that decreasing prices have been influenced by the late May decision by Elavon Merchant Services to cease accepting applications for CBD merchant accounts,13 as many business-to-consumer transactions for CBD occur online.

Later in his interview with Farm Journal, Laub notes his experience with lowering hemp prices over the years, but indicated his intention to continue operations, stating, “Even if prices drop further, I’ll still plant 20-30 acres so I can keep building and learning.”14

While hemp and CBD prices appear to be currently declining, it is important to note that it may be too early to make any conclusions as this year’s hemp planting season is currently underway. Weather is a consistent challenge to farmers, and with inclement weather increasing, projections for the year’s harvest are yet to be determined. That said, decreasing hemp prices seem symptomatic of several deeply-rooted structural issues, further stressing the urgency of USDA and FDA actions to support the market. Without federal guidelines on the plant’s cultivation, American hemp farmers are left unprotected to the risk of overproduction and dwindling demand.

If you or someone you know needs help with their hemp or cannabinoid venture, please do not hesitate to contact us. We can provide our clients with experienced counsel, regulatory compliance, and business guidance, including introductions to farmers, extractors, white labelers, wholesale purchasers, and distributors.

 


  1. Stansbury, Lauren. “Vote Hemp Submits Comments to Food and Drug Administration Regarding Regulation of CBD.” Vote Hemp. July 17, 2019. Accessed July 23, 2019. https://www.votehemp.com/press_releases/vote-hemp-submits-comments-to-food-and-drug-administration-regarding-regulation-of-cbd/
  2. Giammona, Craig, and Bruce Einhorn. “Booming Demand for CBD Is Making Hemp the Cannabis Cash Crop.” Bloomberg.com. July 17, 2019. Accessed July 23, 2019. https://www.bloomberg.com/news/articles/2019-07-18/booming-demand-for-cbd-is-making-hemp-the-cannabis-cash-crop.
  3. Hemp Benchmarks. Hemp Benchmarks Spot Price Index Report. Report. June 26, 2019. Accessed July 23, 2019. https://www.hempbenchmarks.com/june-hemp-report.html.
  4. Hemp Benchmarks. “Hemp Benchmarks Spot Price Index Report – May 2019 Now Available.” Cannabis Benchmarks. May 29, 2019. Accessed July 23, 2019. https://www.cannabisbenchmarks.com/hemp-benchmarks-spot-price-index-report-may-2019-now-available.
  5. The Associated Press. “Growers Hope Standards Bring Order To Hemp Industry ‘Mess’.” CPR News. June 16, 2019. Accessed July 23, 2019. https://www.cpr.org/2019/06/16/growers-hope-standards-bring-order-to-hemp-industry-mess/.
  6. Hemp Benchmarks. Hemp Benchmarks Spot Price Index Report.
  7. LaVito, Angelica. “CBD Is Booming. But US Farmers Struggle to Keep up with Demand for Industrial Hemp.” CNBC. March 24, 2019. Accessed July 23, 2019. https://www.cnbc.com/2019/03/23/cbd-is-booming-but-us-farmers-struggle-to-keep-up-with-demand.html.
  8. Bennett, Chris. “Growing Hemp for CBD, Seed or Fiber.” AG PRO. February 26, 2019. Accessed July 23, 2019. https://www.agprofessional.com/article/growing-hemp-cbd-seed-or-fiber.
  9. Hemp Benchmarks. Hemp Benchmarks Spot Price Index Report.
  10. Kavilanz, Parija. “Hemp Farmers Are Making a Killing on the CBD Industry. Now Corn and Wheat Farmers Want in.” CNN. April 10, 2019. Accessed July 23, 2019. https://www.cnn.com/2019/04/09/success/hemp-farmer/index.html
  11. Dolan, Julie. “U.S. Secretary of Agriculture Sonny Perdue Calls Kentucky the Birthplace of Hemp.” WLKY. July 02, 2019. Accessed July 23, 2019. https://www.wlky.com/article/us-secretary-of-agriculture-sonny-perdue-calls-kentucky-the-birthplace-of-hemp/28267229.
  12. Gordon, Michael. “The CBD Isolate Price Crash of 2019: Hemp Sales Trends.” Kush.com. July 19, 2019. Accessed July 23, 2019. https://kush.com/blog/cbd-isolate-price-crash-2019/
  13. Gordon, Michael. “The CBD Isolate Price Crash of 2019: Hemp Sales Trends.”
  14. Bennett, Chris. “Growing Hemp for CBD, Seed or Fiber.”

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