USDA Releases Hemp Valuation

On February 17 of this year, the National Agricultural Statistics Service (NASS) released the results of a landmark survey of hemp production in the National Hemp Report of 2021. The survey polled data from around 65% of a sample of over 20,000 U.S. hemp producers, which valued the national hemp production market at $834 million across 54.2 thousand acres of federally approved farming operations.

According to the Agricultural Improvement Act of 2018, hemp is defined as a plant species of Cannabis sativa L. and is accepted as a separate entity from the marijuana plant, with no more than 0.3% concentration of THC – a requirement that cultivators must meet before they can sell their hemp at the market.

KEY FINDINGS

While fiber hemp outpaced floral hemp by 13.5 million pounds grown, floral hemp’s market value totaled $623 million compared to just $41.4 million for fiber hemp. The finding highlights the importance of floral hemp’s applications in the pharmaceutical and cosmetics industries.  

The study found that the biggest planter and harvester states for hemp in 2021 were Colorado, Montana, Minnesota, California, and Utah. However, there are notable differences in the ratio between the acreage of hemp that states planted and what they harvested in 2021, especially compared to estimated projections of previous years.  

The survey also gives us a clear picture of the demographics of America’s hemp growers: 82% are male, 48% cultivate hemp as a secondary or tertiary occupation, 58% are new to farming, 90% are white, and the average age of farmers is 51 years.

The survey also offers a lens into hemp’s efficiency as a biofuel and bioplastic alternative to petroleum-based oil and plastics, which could enable significant savings for the government and corporations and provide global environmental benefits.

PAVING THE HEMP GOLD ROAD

The report was made possible by the 2018 Farm Bill, which allowed for the cultivation, transportation, and extensive research of industrial hemp. Reaching far beyond the 2014 Farm Bill’s pilot production programs, the 2018 Farm Bill significantly lifted restrictions on the hemp market from the field to the consumer, with close federal and state oversight of individuals and businesses. This oversight included a 0.3 THC threshold for all hemp produced, USDA-approved licenses, specialized processing, and strict disposal procedures within the 46 legally sanctioned states.

THE GOOD, BAD AND UGLY

While the value revealed by the report was within speculated industry estimates for U.S. production, unfortunately, the survey highlighted an unexpected two-fold trend that was previously unverifiable: Hemp production is falling, and hemp demand isn’t matching supply.

Contrary to the survey’s timing and reporting schedule, the COVID-19 pandemic was not a primary cause of the mismatched expectations for the industry. Most farmers were optimistic about the lifted regulations opening channels to sell hemp into various industries. But that simply didn’t happen. This left farmers with a surplus of hemp sitting in farms and warehouses across the country. This was further coupled with confusion about how wholesale hemp should be priced, ultimately culminating in a pricing collapse.

Farmers also largely blamed government regulation of CBD for the surplus. Kentucky Senate Majority Leader Mitch McConnell, who approved the 2018 Farm Bill, stated in 2019 that “There are ongoing conversations with the FDA on CBD products" on the House floor. However, the government disallows hemp producers to fully supply hemp products to the food industry due to CBD’s federally recognized label as a pharmaceutical drug.

Ultimately, the lack of supply resulted in about 65% of hemp farmers without a buyer and little profit to invest in next year's crop. This can leave many farmers unable to participate in the market even if hemp sales soar as expected over the next five years. Big business hemp farmers with already integrated supply and demand channels will be better positioned to supply demand from the country’s prospective buyers.

New and small hemp growers can expect a minimal margin for error with crop quality and regulation in the coming years. Finding reliable buyers and lessening the gap between planted and harvested hemp crops are vital to competing in the market.

For hemp buyers, the market is wide open and diverse. With low prices, this is the best time to experiment with the performance of various hemp varieties in your respective industry's products. Companies interested in switching to hemp-based products can easily build relationships directly with farmers without losing too much money on R&D.

As more producer information becomes available from the 2017 Census of Agriculture, the industry can paint a fuller picture of who is growing hemp. For now, farmers thinking about growing hemp are better informed about the long path that hemp must go before becoming a stable and sizably profitable market year over year.