Using hemp for industrial purposes — such as grain and fiber — is the next big thing since the passage of a farm bill legalizing production in 2018.
Since then, a parallel market has sprung up alongside the cannabinoid industry.
Unfettered optimism was high early on, sparking a moon planting in 2019.
Four years later, seasoned farmers and venture capitalists are grappling with a saturated market and oversold expectations at both ends of the industry.
Historically, proponents have marketed hemp as some sort of miracle crop with flying colors. The movement gained traction as an investment in the United States once cannabidiol (CBD) gained a reputation for medicinal benefits, which began in California in 1996.
Industrial applications followed once the United States Department of Agriculture (USDA) approved the bill to officially legalize hemp as an agricultural product, removing the plant’s long-stigmatized status.
Just a year after legalization, licensed hemp plantations catapulted to 511,442 acres nationwide in 2019. Although in 2021, that number dropped to just 107,702 acres.
This year, hemp acreage under license has fallen another 53%.
Some experts attribute this in part to the return of supply greatly exceeding demand at the start of the game.
“There were a lot of farmers who got involved in hemp in 2019 – it was overproduced that year, and a lot of farmers ended up with big bills and very little return,” Mike Leago, Founder from iHempx, told The Epoch Times.
As CEO of an international hemp exchange, Leago has been working across the entire hemp supply chain since 2016.
He says many “dishonest and malicious bad actors” within the industry have thrown a wrench into the nascent market. Some of this was achieved through unrealistic forecasts on spreadsheets, leading to an investment gold rush.
“Oversupply has become a reality,” he said.
Due to continued market congestion in 2021, some growers in Oregon have found themselves stuck with thousands of pounds of hemp crops bagged and stacked in their barns. In July, many could not sell their harvest at an equilibrium price.
It’s a situation that has become all too familiar among hemp growers: a cash crop that pays nothing. Additionally, growers in the southwestern United States face additional challenges, such as severe drought conditions.
In Texas, hemp enthusiasts touted the crop as a drought-resistant economic lifeline. Although as of 2019, farmers have yet to see a return on their investments.
Texas Hemp Growers Association president Kyle Bingham told reporters that “the interest isn’t there with farmers” this year. He added that growers don’t want to waste time, money, land or anything else on hemp right now.
Part of that unhappy sentiment is due to a noticeable underperformance amid widespread drought, which has affected 61% of the continental United States this year.
Water issues are paramount in the notoriously arid Lone Star state, where farmers can’t afford to waste a single drop of water on crops that literally can’t stand the heat.
And despite hemp’s street reputation as drought resistant, little research exists to support this.
On the contrary, a Colorado Water study of hemp’s drought tolerance led by Katie Russell of Colorado State University noted that hemp is not an ideal “dryland crop.” .
“To be blunt, hemp is a plant, and extreme weather conditions are tough on crops,” Nathan Murphy, director of hemp fiber and carbon offset division for Global Smart Commodity Group, told The Epoch Times.
Murphy claimed that misplaced expectations and poor long-term strategic planning are a big part of early failures within the hemp industry. He also agrees with Leago’s assessment that self-proclaimed experts sabotaged the emerging market.
“I’ve heard them called hemp prophets, making overly optimistic promises to benefit from the ‘green rush’, at a cost of course, to unsuspecting vulnerable farmers,” he said.
On top of that, says Murphy, when you add an “uneducated producer base”, cumbersome regulations and completely underdeveloped value chains, it creates the “perfect recipe for disaster”.
Farmers in states like Maine, Arkansas, Tennessee, and Washington are also feeling the not-so-green effects of thousands of dollars wasted on hemp crops.
Aside from deflated prices, oppressive regulations and high taxes are among the top complaints of most growers.
The USDA announced on May 16 that hemp growers who lost crops to natural disasters in 2020 and 2021 are eligible for relief payments. While this was a breath of fresh air for struggling growers, it did little to deter an exodus to more stable and reliable crops.
When it comes to the wholesale supply of cannabis, including popular items like CBD oil, Leago said the oversaturation of 2019 had a monumental impact on prices and has kept them low ever since.
But he added that there may be hope on the horizon for non-cannabinoid hemp.
“On the real industrial side of the plant, we are seeing strong momentum and prices have started to rise.”
And while some insiders say the industry is likely to rebound after a few years of growing pains, Murphy thinks it’s important to put expectations in the right context.
“Will hemp production replace 100% of paper or plastic production? No, it’s not,” he said.
“These are unreasonable expectations. Can industrial hemp replace “some” of the production of paper, plastic, biodiesel, human food, textiles, animal feed, building materials and other industries? Yes, it is possible, and in the long term, it probably will be.