+ 0.43
+ 0.14%
+ 0.85
+ 0.28%
+ 1.26
+ 0.81%
+ 1.27
+ 0.74%

US Hemp: Field Of Pipe Dreams?

November 7, 2019 4:55 pm
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More

In 2017 the state of Tennessee licensed 200 acres for the cultivation of hemp. That figure shot up to 3,338 acres in 2018 — and 38,000 acres in the first seven months of 2019.

The exponential growth in acreage is one of the startling new data points revealed in a report released Nov. 7 examining the U.S. hemp cultivation industry since the signing of the 2018 U.S. Farm Bill, a law that legalized the production of hemp.

The study, titled "Field of Dreams," is based on interviews with 431 licensed hemp cultivators and processors from across the U.S. One of the key findings is that 65% of the respondents did not have buyers for their crops. 

"People really jumped into the market because it was legal, and they saw the economic opportunities, particularly with CBD," Beau Whitney, the founder and CEO of Whitney Economics and a report co-author, told FreightWaves.

"But in jumping in, they didn't necessarily do their due diligence with respect to setting up a new business."

Fits And Starts

Legalization laid the groundwork for a new industry. But the regulatory environment is still in development, and the industry is fraught with business risk. The supply chain is in its infancy, and lack of processors and transportation providers hinders farmer efforts to bring their product to market. Although banks are permitted to offer services to hemp companies, many have yet to do so.

The report is called "Field of Dreams" for a reason, Whitney said. "People thought, ‘I'll grow this and have buyers lining up,' and that just not the case. They had a leap of faith, but it's not going to turn out successfully for everybody."

Whitney Economics estimates that only $3.96 billion of hemp will be able to be realized in the market in 2019. That equates to 320 million pounds or only 160,000 acres of the total 453,220 acres licensed.

Rosier Outlook

The report is not all gloom and doom. Although the challenges facing the market are considerable, the report predicts that commercial hemp cultivation could become the nation's third-most lucrative crop in coming years. 

If the supply chain issues are resolved and the full value of the acreage is realized, the total value of the hemp biomass is an estimated $11.3 billion, or roughly 6% of the total value of the entire U.S. cash crops, the report states.

"Even in this unregulated environment, the scale with which it deployed  — and to find it's poised to be the third-largest crop — that was really staggering," Whitney said.

How Hemp Will Save The World

Among the report's most intriguing data points are the statewide breakdowns, which provide snapshots of regional economies in transition.

Along with Colorado, Kentucky, Oregon and Wisconsin, Tennessee registered the greatest increase in licensed hemp acreage.  

One explanation is Tennessee has a long history of illegal cannabis cultivation for export, Whitney said. The state also is looking for alternatives to some of the economic impacts associated with a decrease in tobacco cultivation and consumption.

The state of Kentucky, facing declining coal production, licensed 42,000 hemp acres in 2019. Kentucky Sen. Mitch McConnell played a key role in getting the hemp provision into the U.S. Farm Bill last year.

Image by Rex Medlen from Pixabay

Related Articles

Gaby Buys Mankind Cannabis Dispensary For $36.5M, Confirms $8.5M Private Placement

Shares of GABY Inc. (OTCQB: GABLF) are trading up almost 6% on Thursday afternoon, after the cannabis company announced a merger with Mankind Dispensary, one of the first licensed dispensaries in California. read more

420 Investor: 'This Is The Most Excited I've Ever Been' In Cannabis

Alan Brochstein, author of 420 Investor and founding partner of New Cannabis Ventures, says the recent political momentum behind the cannabis legalization push in the US — and the resulting rebound in cannabis stocks since the U.S. election — has him feeling extremely optimistic about the industry's future. read more

Canadian Cannabis Stocks Are Becoming Less Desirable Investments, Data Suggests

Cannabis stocks have taken a hit since Election Day, Nov. 3. The latest Hifyre cannabis sales data out of Canada suggests some concerning trends in the market. The Numbers: Month-over-month, Canadian retail cannabis sales were up just 4% in October and down 3% in November, Hifyre estimates. read more

PreMarket Prep Stock Of The Day: GW Pharmaceuticals

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session. read more

New Cannabis Products: A Hemp Spirit, A New Jane West Collab, CBD From Citrus Peels

As the cannabis market expands, it's hard to keep track of the many products that launch every week. Benzinga put together a short list of some of the most interesting new cannabis products. read more