PanXchange: May 2019 Hemp Market Report

The spot biomass market traded in the range of $3.45 – $4.50 per percentage point of CBD content (/point) throughout May. Prices are expected to start realizing upward pressure due to the cyclical nature of the market in June, continuing throughout the summer until the 2019 crop is harvested. Although conversations with industry participants have consistently reported a tight market, transactions are still occurring within this price range.

The Colorado winterized crude market traded lower throughout May compared to April, generally trading in the band of $1,600-$2,000/kg as processing capacity has fully caught up to raw hemp production from 2018. Due to new entrants to the market, and thus increased competition, the price of winterized crude oil saw downward pressure throughout May, however, smaller volume transactions occurred near the $3,000/kg mark.

Colorado isolate transacted in the range of $4,6000-$6,500/kg throughout May. Isolate prices have been the most volatile compared with crude oil and biomass as several offers to sell product came in around $4,100/kg. Notably, there has been less activity on long term contracts, especially for refined products. Many firms are seeing the volatility in the space and uncertainty of where pricing is headed over the next few months, leaving them reluctant to lock down flat price contracts.

Due to overwhelming demand, PanXchange is actively working to expand the data-points covered in our market assessment to include additional products and locations for the price indices. For more information on this project, please reach out to the PanXchange staff at r.hopp@panxchange.com.

Spot Market Updates:

Planting Update:
The next few weeks are crunch time for planting decisions. Germination to harvest time for hemp is in the range of 90-120 days depending on location, genetics, weather, and a slew of other variables. Most of the farmers we’ve spoken with are planting from plugs versus seeds, thus gives an extra cushion for hemp farmers yet to plant. So what are current conditions like?

Although the USDA is not currently publishing official hemp specific data, looking at data from the Crop Progress Report, including current soil conditions, historical precipitation levels, and days suitable for planting, we can assess weather and soil conditions for those states expected to plant significant hemp acreage. Additionally, statistics on corn planted is a relevant proxy for hemp planting conditions where applicable as both crops are planted during the same time of the year and have a similar timeline to maturity.

As of late, news programs have run endless reports of flooding across the Midwest, with farms underwater and disaster relief on the way. Indeed, uncharacteristic weather has affected much of the United States over the past few weeks, especially when looking at the agriculture heavy states Illinois, Indiana, Nebraska and Iowa. In many of these areas, traditional grain farmers are currently deciding between planting late corn and hoping for conditions conducive to rapid maturity, planting shorter growing season soybeans whose pricing is currently in a slump from large carryout and trade wars, or taking prevented planting insurance coverage as the deadline approaches. But due to slower adoption of hemp regulations, these states were not slated to be major producers of hemp for the 2019 crop year.

While general commodity market sentiment is that the major growing areas of the US are affected by adverse planting conditions, the data show that major hemp producing areas of the US generally have a favorable outlook and fundamentals are in place for a strong planting season. Below is a breakdown of conditions in the major hemp growing areas.

Colorado:
Colorado has experienced above average precipitation (year to date) basis, especially in the southwestern part of the state.

Colorado is slightly behind historical average when looking at planted acres of corn coming in at 71% compared to the historical average of 83%. Due to the increased moisture realized throughout the state over the past few weeks, the slight decrease in acres planted is not alarming.

Topsoil moisture conditions in Colorado look very promising as 87% of the state is reporting adequate moisture content, with only 8% of the state reporting short. From various conversations held with farmers within Colorado, hemp seedlings will start being planted this week.

Oregon:
Oregon has experienced a record-breaking April in terms of historical precipitation levels for the month, resulting in improvements to drought conditions throughout the state. More specifically, Bend, Oregon received approximately 2.25 inches of rain in April, making it the second wettest April over the past 118 years. Overall, the western side of the state is generally in line with historical averages in terms of year to date precipitation ranging from 90% to 105%, while the eastern side is above-average ranging from 111% to 121%.

Corn acres planted cannot be used as an indication of planting conditions due to Oregon not having significant corn production, however, for the last two weeks at least five out of seven days have been categorized as suitable for planting and fieldwork.

Topsoil moisture conditions throughout the state are positive as 73% is categorized as adequate, while 14% is short and 11% is surplus.

Southeast:
Precipitation throughout the Southeast has been above average for the region as Kentucky has experienced 136% of normal precipitation for the past year compared to historical averages. Some areas of western North Carolina have exceeded historical averages for the month of April by six inches, while southwestern, central and eastern parts of Tennessee experienced 150% or more precipitation compared to historical averages. 
Corn planted in the southeast is generally on schedule as North Carolina is behind by two percent compared to historical averages (95% versus 97%), Tennessee is behind by four percent (93% versus 97%), and Kentucky is behind by seven percent (82% versus 89%).

Topsoil moisture conditions in the southeast are generally favorable as 72% and 77% in Tennessee and Kentucky are categorized as adequate, while 21% and 15% are labeled short respectively. Although topsoil conditions are not everything, it is a slightly different story in the Carolinas. In North Carolina, 60% of the state is considered short or very short, while 39% is adequate. In South Carolina, 58% of the state is short, 28% is very short, leaving the remaining 14% as adequate. Throughout conversations the PanXchange team has had, planting conditions have been good when looking at Tennessee and Kentucky, and many farmers are reporting that they have already planted or intend to do so this week.

The planting conditions for these main regions are currently strong but are only one part of the equation as farmers face increased risk this year when contemplating planting hemp. There is strong interest from farmers across the demographic spectrum but applying for permits for acreage doesn’t always correlate to farmers exercising on those rights. And as a brand-new crop in many markets, a lack of generally accepted and widely available agronomic knowledge regarding how to plant, how to control plant gender, harvest techniques, drying and curing best practices, and even when the ideal time to harvest is, all add to uncertainty around quantity and quality of harvestable biomass that will make it to processing or storage facilities. Finally, a lack of crop insurance creates a risky environment for farmers making the switch. This environment will create a huge amount of opportunities for farmers up to the risk, and this crop year will bring to light more efficient techniques.

Image sourced from Pixabay