An Emerging U.S. Hemp Market Awaits Its First Fall Harvest

By Sean Murphy, Director of Hemp, New Frontier Data

Explosive growth in the U.S. hemp industry as spurred by passage of the 2018 Farm Bill is keenly analyzed in the Hemp Business Journal (HBJ)'s forthcoming U.S. State Hemp Rankings Report. Insights about state-by-state licensing and cultivation data include breakdowns on total nationwide 2019 acreage under license, as well as market comparisons and implications between cultivation and processing licenses.

Key trends emerge by analyzing the licensing data and acreage under license cultivation data.

The first is that cultivation is way up, with a boom both in issued licenses issued and through production in historically top-producing states including Colorado, Oregon, Kentucky, and Montana.

It is important to distinguish between acreage under license, and acreage harvested. Beyond the acreage under license that is being actively planted and harvested, at any given time there is also acreage that has been planted though not yet harvested, and acreage which has been licensed but not yet seeded.

So noted, U.S. acreage under license for 2019 totaled 483,000 acres (according to the U.S Departments of Agriculture and Vote Hemp), though by HBJ's projections only some 225,000 of those acres will be harvested. Thus, while less than half (46.6%) of the total licensed acreage will yield a harvest, that output nevertheless represents an increase of more than 187% from the 78,176 total acres harvested in 2018.

Perhaps chief among the nascent industry's growing pains will be concerns about oversupply.  As new farmers and new processors rush to establish their respective footholds within the space, a limited number of actual buyers are prepared to buy up the raw goods, which mainly include crude CBD, full-spectrum CBD oil, CBD distillates, and CBD isolates.

Whereas pricing for such raw goods was generally high last spring (when demand outpaced available supply) the market now nears its November harvest season with an opposite shift looming.

More than two months out, farmers find themselves scrambling to get acres under contract (i.e., future contracts) to lock in assurances that their crops will sell.

Such dynamics drive the market and add pressure to decreasing prices, which can only go so low given cultivators' costs to produce the raw goods. If prices drop below the set floor for production, the raw goods simply will not get produced – even if sacrificing the harvest to fallow rather than lose money as the emerging market finds correction through dramatically increased supply.

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