Hemp Production and Prices Increase
Earlier this year, hemp was included in the USDA’s Census of Agriculture. When hemp was first legalized in 2018, there was a boom in production under the fervor of new opportunities, spearheaded by the demand for CBD products. This resulted in over production and over supply. The CBD market was over-saturated within a growing season and hemp biomass prices plummeted, along with hemp production. More recently, however, hemp production has leveled out and is even increasing as reported by the USDA on April 17, 2024. As an example, prices for hemp outdoor-grown flower are up 35% and hemp clone and transplant prices are up 61%.
Hemp production and prices are back, but what are the main drivers?
Hemp is an industrial row crop with a multitude of end-uses, including construction materials, oilseed products, fiber and textiles, topicals, and human and animal consumable products. And while there is great promise for industrial hemp, our industrial ag ecosystem has a long way to go before we can fully realize hemp’s economic potential in the textile, construction, and oilseed product markets. Instead, it is our perspective that hemp demand continues to be primarily fueled by human consumable products, this time in the form of “intoxicating hemp” products that many view as outside the purview of the Controlled Substance Act. I view “Intoxicating hemp” to include, but not limited to, Delta 610A THC, Delta-8 THC, Delta-9 THC, Delta-9o, Delta-10, THCA, THCV, HHC, etc…with new cannabinoid products seemingly being created out of thin air on a frequent basis. These products are in the form of concentrates, tinctures, drinks, gummies, flower, chocolate, cookies, brownies, vapes, etc…
Most of these “intoxicating hemp” products give a similar euphoric effect as “marijuana” products that are purchased in states that have legalized medical or adult-use “marijuana”. However, a unique aspect of “intoxicating hemp” products is that they are widely available nationwide, including in states that have prohibited any form of medical or adult-use “marijuana” sales – like Texas.
The “intoxicating hemp” industry is thriving as a multi-billion dollar market being sold via national distribution channels with significantly less regulatory burden than what state-legal marijuana operators face currently. However, I would be reticent if I didn’t mention that numerous states have passed laws banning certain hemp products (like Delta-8 THC) or requiring hemp products only be sold through the state-legal marijuana regulatory regime.
The next few years will be telling for the “intoxicating hemp” industry, as certain States will (i) continue to restrict the sale of such products (like Colorado); (ii) continue to foster the growth of the industry by providing a regulatory framework that allows these products to be sold (like Minnesota); or (iii) just turn a blind-eye to the industry and not regulate it at all (like Texas currently). Further, the next iteration of the Farm Bill might look to restrict “intoxicating hemp” products or potentially even expand it by modifying the definition of “industrial hemp” to allow for higher Delta-9 THC thresholds on a dry weight basis.
What does this all mean?
As a result, we think the industry will continue to see significant increases in yields and prices for hemp this growing season as more market participants enter the “intoxicating hemp” space that will demand unique genetics and specialized seed to make such products.
However, the one thing certain in the cannabis space is that the market will change – sometimes drastically and in unforeseen ways – which will impact both the state-legal marijuana market and the “intoxicating hemp” market. What is clear is that which ever side of the fence you might sit on, be prepared to pivot quickly as interests, priorities and economic wherewithal will be tested, winners forged and losers headed for insolvency.
Husch Blackwell will continue to monitor these issues. In the meantime, if you have any questions, please do not hesitate to contact us.