North American hemp price is set to crash according to a leading Dutch bank. The 2019 harvest is set to be the inflexion point for a market which has too many imperfections due to a welter of conflicting regulations.
Most hemp is currently being grown to satisfy demand for CBD which is legal in most jurisdictions. But the processing of raw hemp into CBD is complex and the technical requirements are beyond most growers.
“The lack of information, and lack of market demand and processing capacity for CBD will lead to a huge glut in Hemp biomass,” says Bourcard Nesin, Rabobank analyst, author of a major new study.
The price crash, when it comes, may occur for two simultaneous reasons”
–farmers producing more CBD biomass than can be processed
-even what can be processed is too great for the market – partly because of lack of transportability.”
Hemp grown in one State in the US cannot legally be transported to a neighbouring State.
“When those market signals come back to the processors (later this year) there will be a further steep decline in demand for biomass,” says Nesin, who is based in the Rabobank New York office.
“Prices are already 75% lower in futures contract than 2 years ago.”
At the moment farmers in some parts of the US are receiving absurdly high revenues for their hemp yields. “In the Pacific Northwest where intensive farming is the norm , the yields are 3-400% higher than most of the rest of the USA,” says Nesin. “They are growing outdoor hemp for CBD and getting yields of 5000 lbs of biomass per acre with 6-10% CBD content – the current price they receive is $3-4 per % CBD – that works out at $150-200,000 per acre.”
The Hop industry in the Pacific Northwest has already implanted many of the skills and technologies needed for successful hemp growing.
But even those growers have not solved the problems of interstate commerce.”Hemp is currently produced under the authority of the 2014 Farm Bill,” says Nisan. “But the interstate transport protections only apply to hemp produced under the authority of the 2018 Farm Bill. These ‘protections’ kick in once the 2018 Farm Bill program is implemented. In the short term, freight companies are either refusing to transport hemp or dramatically increasing the costs of shipping, forcing farmers to sit on their 2018 harvests.”