+ 0.60
+ 0.4%

PanXchange: June 2019 Hemp Market Update

June 27, 2019 5:53 pm
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More
PanXchange: June 2019 Hemp Market Update

Spot Market Updates:
Throughout the month of June, the spot biomass market traded in the range of $3.75 – $4.70 per percentage point of CBD content (/point). Although the prices associated with spot transactions are rising in our assessed locations (shown below), two interesting trends are coming to light. Over the past few weeks, established markets such as Colorado, Kentucky and Oregon saw locational spreads tighten and even erase and are now trading in closer proximity than seen in previous months.

The driving force behind the consolidation of prices illustrates signs of demand exceeding supply as companies react to market dynamics. Not only are processors more willing to source biomass from greater distances to keep extraction facilities operating near capacity, buy-side sentiment is shifting towards procuring whatever product is available. Historically buyers have preferred biomass near 10% CBD concentrations, but due to dwindling local supplies, are more open to buying in the 8% range.

In both the Colorado winterized crude oil and isolate markets, the trend of downward pressure continued. While the winterized crude oil market saw slightly lower prices when compared to May, generally transacting between $1450-$2000/kg, it is far from the values seen in the beginning of the year where some transactions reached $10,000/kg. Volatility in the Colorado Isolate market continued as companies make strides in processing efficiency in an increasingly competitive market. Throughout the month of June, Isolate has traded in the band of $3,900 to $5,500/kg.

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

With the start of the summer, the hemp market focus saw a large transition to cultivation. While many farms have spent the end of May and June preparing fields and planting starts, stories have been popping up that some farms are still yet to complete planting. Erratic weather can be part to blame, however, a lack of quality seeds in the market may preclude some farms from participating in the summer growing season. According to industry partners, many of the quality seed providers are nearing or completely sold out, resulting in those without seeds to look for resellers which inherently carries additional risk.

Preventative measures can be taken to mitigate damage from excess or too little moisture, however, watching weather patterns could uncover areas that would be more susceptible to decreased yields. In particular, the Midwest has been experienced dramatic amounts of precipitation when compared to averages, resulting in historic flooding. While not a major producing area, farms in Illinois have reported heavy rains resulting in crop washouts. Looking at more traditional hemp producing states, Kentucky has seen precipitation ranging anywhere from four to eight inches above historical averages over the last thirty days.


Post-harvest services: 
As hemp crops in the ground begin to mature, we've been continually asked by producers what's going to happen with prices at harvest time. Anyone who gives a concrete answer on what way prices are going should quickly be ignored. With hemp being a new crop in many growing areas, and so many variables inexperience affecting yields, the range of price trajectory is endless.

That being said, producers should know their options and use information from other agricultural markets to make smart decisions to reduce risk, both from post-harvest losses and maximizing prices. Following other agricultural markets, main harvest should bring a large amount of supply to markets, and with the year-over-year increase in planted acres, less developed storage and market options, and demand growth following a somewhat linear path, prices should see downward pressure at harvest. Farmers have a number of options for post harvest services.

At this moment, finding availability and prices for each of these services for harvest time is a major challenge, arguably harder than finding physical product. Our team received numerous inquiries about providing a solution to bring access and transparency to the services market. Interested parties please contact the PanXchange Hemp Team.

Storing and Preservation Options:
Drying relatively quickly is imperative to preservation of cannabinoids and prevention of molding and other degradation. General sentiment for shelf life of dried and stored biomass is in the range of six to twelve months, depending on process. Producers not currently contracted with post-harvest services should know their options and have a few available to mitigate the risk of losses.
On-Site Drying and Drying and Milling Services:
On-site drying is typically the least expensive option for farmers with facilities (barn, shed, outbuildings, warehousing) from a cash outlay perspective. But proper knowledge of best practices for drying and proper drying limits is still in early stages. We have heard of a slew of creative drying techniques to be tried this year from air drying in tobacco barns to stacking corrugated cardboard in warehouses.
Because the elevator model of localized drying and storage is not fully developed and has seen relatively small investment compared to extraction, third party drying and milling is not available in all areas. Daily volume throughput on these facilities is higher than extraction on a per facility basis, but with sparsity of available facilities, pricing will be extremely variable. Beyond drying the product, there’s choices to be made between hammer-milling, pelletizing, bailing, which all come with unique advantages and challenges.
Extraction & Distillation 
While the extraction distillation spaces have seen the most investment in the CBD production supply chain, most facilities and labs have at least some either internally grown hemp acreage or have local producers contract farming.  As such, internal production will take priority for capacity utilization for the immediate months after harvest.
Extracting biomass directly to crude oil is the best option for preserving cannabinoids, particularly those who do not have large storage space available but are able to find climate controlled storage. Extracting to crude oil reduces product volume and increases shelf life significantly over biomass. Discounting the volatility of the market, extracting crude oil on harvest reduces your risk of biomass degrading. But availability of spot contracts for extraction in the months immediately after harvest will likely be difficult to find, as facilities will prioritize their own production and contracted volumes over third-party processing. While crude oil processing was a major bottleneck after the 2018 harvest, it remains to be seen how additional acreage planted in 2019 will offset increased processing capacity that has been built out over the same time period.  

Without a centralized and efficient mechanism to find pricing for these services, producers are at a disadvantage for how to minimize the risk of product loss and maximize cash flow. Parties interested in bringing transparency to service offerings, please contact the PanXchange Hemp team for more information.

If you would like to receive this newsletter when published by PanXchange, sign up here.

Image Sourced by Pixabay

Related Articles

Michigan Cannabis Sales Near $1B In First Year Of Adult-Use Sales

Cannabis sales in Michigan spiked during December, bringing the total to $984.6 million for 2020. read more

Cantor Analyst Raises Aphria And Tilray Price Targets Amid Merger

Cantor Fitzgerald analyst Pablo Zuanic expressed disappointment by Aphria Inc. (TSX: APHA) (NASDAQ: APHA) quarterly results in an analyst note published Friday. read more

Cannabis Movers & Shakers: Next Green, Cannabis Control Commission, Willow, TruTrace, HEXO, Bengal Capital, MediPharm Labs, NIHC

Here is a summary of the latest leadership changes within the cannabis industry. read more

French Energy Firm Backs Hemp-Fueled Gas Plant With $23M

French energy company Qairos Energies is financing a project that will use locally grown hemp for the production of hydrogen and methane, according to HempToday. read more

Jay-Z Touts 'End Of Cannabis Prohibition' As Roc Nation Finalizes SPAC Deal With Caliva, Left Coast Ventures

A consortium made up of CMG Partners Inc., Left Coast Ventures Inc. and Shawn Carter (Jay-Z) —with his company Roc Nation — has finalized its previously announced transaction with Subversive Capital Acquisition Corp. (OTCQX: SBVCF). read more