February 14, 2020
Hemp prices have fallen some 80 percent since summer highs as the industry works through a glut of the crop. And while tumbling prices could be a boon for consumers in search of affordable hemp and CBD products, they bode poorly for farmers and businesses that have staked their futures on the burgeoning industry.
“I think there will be a tremendous amount of fallout both on CBD companies and retail companies, as well as farmers...everybody thought it was get rich quick,” said Julie Lerner, CEO and founder of hemp commodities exchange PanXchange. “It is natural that we will see more bankruptcies and more consolidation as time goes on across the supply chain.”
The price of hemp biomass has plunged some 80 percent from $40 per pound in mid-July to less than $8 per pound as of January, according to PanXchange’s latest report on hemp pricing. Although $8 per pound might not sound like much, it translates to about $16,000 per ton — that’s ultra-premium pricing when compared with crops like corn or wheat that go for about $150 per ton, according to USDA.
With prices like that, it’s no wonder cultivators are rushing to get in on the hemp-derived CBD industry that market research firm Brightfield Group predicts could reach $22 billion by 2022. From 2018 to 2019, licensed acres of hemp more than quadrupled, according to Vote Hemp. But considering many bullish market values are based on retail shelf pricing of consumer packaged goods, which PanXchange’s December report cautioned contain “mere milligrams of actual hemp,” the industry may have an oversupply problem on its hands.
“We are heading into this year in an oversupply situation,” she said. “The reality is a little bit goes a long way if we are just focused on the CBD market alone.”
For consumers used to shelling out big bucks for CBD-infused products, this could be good news. With so much hemp on hand, Lerner says, prices are likely to fall. On the flip side, sluggish prices will only exacerbate challenges facing farmers and hemp companies, like GenCanna and Sunstrand, already struggling with financial difficulties of their own.
But it's not all bad news. Lerner said she expects to see the decline of hemp prices decelerate when PanXchange releases its February report later this month. Plus, hemp’s tremendous potential for use as an environmentally friendly industrial material alternative could prove lucrative once those applications are more thoroughly explored.
“CBD is a market where everybody has a story, either it’s affected them personally or they know somebody that it has affected. That market will grow, it's just that we have a little bit of oversupply,” Lerner said. "There is also a completely different side of this market for the industrial fiber...That is an area that has yet to be tapped in this country.”