As hemp acreage booms, pricing confusion bedevils new hemp producers

hemp pricing confusion, As hemp acreage booms, pricing confusion bedevils new hemp producers

Farmers are so bullish on hemp that growers from Wisconsin to Florida are making big investments even before federal agricultural regulators write the rules for how the plant can be grown and sold.

The hemp boom conceals a nagging problem for hemp farmers and manufacturers alike – there is precious little information about how to price the crop.

“No one knows what prices should be,” said Kaelan Castetter, CEO of CSG Hemp, which grows and sells hemp in southern New York. “Farmers are just taking what they can get at this point.”

The market uncertainty comes as states license ever-increasing acreage for hemp.

  • Colorado currently has about 80,000 outdoor acres licensed to grow hemp, up 562% from 2017, when the state licensed 12,042 acres
  • Oregon currently has more than 51,000 outdoor acres licensed for hemp production, an eye-popping increase of more than 1,300% from 2017, when the state had about 3,500 acres

The boom is coming mostly from word-of-mouth reports about hemp’s profitability, rumors underpinned with little data.

“Farmers are looking for financing to expand production, and they don’t even know what to say they’re going to get for the crop,” Castetter said.

Hemp Industry Daily surveyed dozens of farmers for on-the-ground intelligence about wholesale prices in their states. Their responses are included in a free report, “Cultivation Snapshot: U.S. Hemp Prices and Supply,” which gives producers and manufacturers insights into how much hemp is coming from the nation’s top 10 producing states.

Click here to download the report.

2 comments on “As hemp acreage booms, pricing confusion bedevils new hemp producers

    With a total near 294,000 acres of land leased upon which to grow hemp and using a conservative estimate of 2,000 lbs harvest per acre the US yield at 2019 harvest would be 588,000,000 lbs of biomass. Five hundred and eighty-eight million pounds of biomass.

    At a conservative 10% CBD across that biomass as an average with biomass being purchased at a very conservative $25/lb that would be an industry with a gross revenue generation of $14,700,000,000, more than fourteen billion dollars for the biomass alone. Then we must add the fees the extraction companies charge to make crude, and then to make distillate and then to make isolate. Then we must add the gigantic markup made by retail. We can see the infrastructure for a $50,000,000,000 per year gross revenue industry is building very quickly. And there’s more to add to that, ancillary goods and services and more.

    But there are crop losses, 1,000 acres destroyed by hail recently, another few thousand by mold, another few thousand by errant pesticide spray, another few thousand here and there that go hot and are destroyed by the state and more for widely varying reasons. And there are some real, and some not so real seed and propagation shortages, supply chain shortages due to may reason experienced by a new, growing industry.

    So conservatively, let’s say only 50% of those crops are actually planted, and only 50% of those actually come out of the ground, make it to extraction and are actually extracted before they rot and mold in storage if not pelletized and nitro packed.

    Let’s say the US hemp farming vertical sector does better than that, and 100,000 acres of the 2019 crops make it to distillate. So 200,000,000 lbs of biomass hits the market, all of it is turned into distillate selling at a very conservative $1,500 per kg. We can see roughly 10,000,000 kg of distillate being produced by that biomass even though that amount of extraction capacity, (timely extraction capacity), does not exist at this time in the US. With the largest extraction facility in the world expected to produce distillate from 25 acres per day more than six months from completion and testing and ramp up, that facility would need ten years of extraction running 24/7 with no halts in production lines to process the entire 2019 US crop, (Kentucky’s Draconis currently going into initial stages of construction). There are very few extraction facilities that have even a very small fraction of Draconis’ capacity in the entire US.

    So if it makes it through extraction in 2019, we could see $15,000,000,000 in distillate sold into the markets. Add a conservative $3,000,000,000 more to convert some portion of that to isolate.

    Now multiply $18,000,000,000 with a retail markup. You do the math on the retail markup. Add the ancillary services, (yes, even the insurance policies, everything).

    The bottleneck is extraction, and logistics for extraction and it won’t be met in 2019 as lead times on high capacity extraction systems, (1 acre per day), are in a bell curve.

  2. Terrance on

    And….then, in 2020 Who’s buying all that finished product after its put into bottles and sold in retail?

    How many billion doses is that for the American consumer to use until next harvest?

    Shampoo and hand lotions that are ineffective?

    If it was easy everyone would be doing it. Looks like a glut from here. Total US herbal product sales are about 7 to 8 billion.

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