In 2019 market analysts, agriculture officials, and investors gave farmers a simple suggestion – plant hemp. Hundreds of farmers across multiple states planted thousands of acres of CBD-rich hemp at the industry’s suggestion but now many face losses from a dramatic fall in hemp prices.
According to vice president of research and development for Formation Ag Corbett Hefner, the go big or go home strategy is not sustainable for today’s hemp grower. “We saw that happen in Oregon, and many of those farmers went broke,” notes Hefner.
Now thousands of pounds of hemp, known as biomass in the CBD business, sit unordered and unused in warehouses across the country. Unfortunately for farmers with hemp in the ground, prices continue to drop. Spot biomass prices, or prices of industrial hemp, have traded lower every month since the second half of 2019, now averaging $0.64 per percent per pound in the Great Regions and $0.72 in the state of Colorado according to data from panXchange.
Only a year ago the same biomass was valued at $3.50 per percent per pound. The abundance of promises but the lack of dollars has many current hemp growers re-thinking their strategy for 2020.
“If you haven’t seen a lot of buying contracts out there lately, there are reasons for that,” says Dave Neundorfer, CEO of CBD producer Open Book Extracts. According to Neundorfer, the CBD market is not currently driven by farmers and consumers, but by CBD brokers. In the broker world it’s a race to the bottom of a viable price point and most don’t focus on quality crops.
Another reason for the price drop is the lack of direction from the federal government. Industrial hemp is governed by the USDA, but CBD is governed by the FDA. The FDA is currently weighing its options on how to classify CBD, which has kept large name buyers out of the market until guidelines are issued. If you’re looking to buy CBD oil, the good news is potential FDA direction could lead to a more robust, growing industry.
Hefner suggests that potential hemp farmers should still experiment with the crop but should dip their toes into the water instead of diving headlong into hemp. “A 1-acre patch is a good start,” says Hefner, who remind farmers hemp is perfect for crop rotation. “Don’t plant more than you’re comfortable turning under,” he adds. “This crop isn’t like grain—you can’t take it to the elevator.”
Markets outside the CBD trade could help ease the burdens of hemp growers. The Hemp Feed Coalition is currently conducting studies on hemp for animal feed in 12 states, and hemp has long been used as a building material and textile. “Start thinking about how this crop can be used to build houses—that’s what they’re doing in Europe in some areas,” Hefner says. “Those are the kinds of things you need to be thinking about to make money with this crop.”