Oversupply Of US Hemp Hampered By Lack Of Processing Outlets

By William Sumner, Hemp Business Journal

Whoever said that there is no such thing as too much success probably did not cultivate hemp. Spurred by passage of the 2018 Farm Bill, and an uncanny popular appetite for cannabidiol (CBD), thousands of American farmers have made major investments in hemp cultivation. According to the Hemp Business Journal's newly released U.S. Hemp Market: 2019 States Ranking, approximately 480,334 acres have been licensed so far this year for hemp cultivation.

While proponents like Senate Majority Leader Mitch McConnell (R-Ky.) would likely claim the relative profusion of hemp cultivation as a net positive – McConnell put his clout behind legalizing hemp as an agricultural commodity, musing about its becoming "the next tobacco" – a downside has been revealed in this autumn's harvest.  Overall supply has reached a saturation point where the nation's nascent hemp processors cannot keep pace.

Using Oregon for example: Though the Beaver State is the second-largest hemp producer in the country, and it is currently the only West Coast state allowing inclusion of hemp-derived CBD in food and beverages, the supply chain is rife with kinks. According to data from the Oregon Department of Agriculture and economist Clarissa Allen, the state has licensed approximately 62,773 acres of land for hemp cultivation. Conversely, there are roughly 1,945 hemp cultivators versus 527 processors, about 3.7 growers per each hemp processor. Assuming that an average acre of licensed land produced 2,000 pounds of hemp per harvest, then each processor would have to maintain an output of approximately 238,000 pounds each harvest season.

For context: Hemp processors typically favor either ethanol- or CO2-based extraction machines. Ethanol-based extractors can process around 700 pounds per day. For C02 extractors, a 20-liter system can handle about 40 pounds per day, with a 100-liter system yielding about 200 pounds per day. By those averages, it would take a 20-liter CO2 extraction system 16 years to process 238,000 pounds of hemp, 3.3 years for a 100-liter system, and roughly 340 days for an ethanol extractor.

Though the glut of biomass may present an opportunity for some, so far, the industry has not to date seen a swell in the number of processors hoping to meet the challenge. According to engineer Anthony Zaca, the reason for the lack of hemp processors boils down oversupply and a shortage of proper equipment.

"If you build the equipment to match the plant material, processing is not really a problem," says Zaca. "Sometimes, people push their technology onto the public, and sometimes it's not the right fit."

Zaca works for the hemp extraction company Global Extraction, which is owned by the Oregon-based American Hemp Seed Genetics. Zaca goes on to say that even those processors that have the right equipment may not always be prepared to keep up with the volume.

"A hemp processor should be someone that can, at minimum, process 1,000 or 2,000 pounds in a given run. Even then, it may not be enough."

With an oversupply of hemp biomass, there is a significant economic opportunity for those with the means to go into hemp extraction. However, this opportunity may not remain as the market moves towards equilibrium in either the form of more processors or fewer cultivators.

William Sumner

William Sumner is a writer for the hemp and cannabis industry. Hailing from Panama City, Florida, William covers various topics such as hemp legislation, investment, and business. William's writing has appeared in publications such as Green Market Report, Civilized, and MJINews. You can follow William on Twitter: @W_Sumner.

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