The Agricultural Improvement Act of 2018, commonly referred to as the 2018 Farm Bill, removed hemp from the controlled substances list. This change effectively legalized hemp production in the United States at the federal level which has paved the way for many new opportunities.
Popularly today, hemp is used for cannabidiol, commonly known as CBD, which is extracted from it. We have previously covered CBD in this series. However, the entire hemp plant can be utilized for a myriad of uses. Globally, the demand for hemp is expected to increase rapidly with a projected compounded annual growth rate of 16.2% from 2019-2026. It was worth 4.41 billion dollars in 2018, projected to grow to 14.67 billion dollars by 2026.
With hemp now legal on a national level, the high and growing demand for hemp-derived CBD, and hemp itself, has created a need for increased hemp farming. Hemp farming is also appealing because it has a much higher yield than most common crops in the United States and can grow relatively quickly to harvest.
In any business venture, there are risks.
In any business venture, there are risks. Hemp farming is no exception. While there is tremendous opportunity there are many considerations, especially in the current landscape.
As defined in the 2018 Farm Bill, legal hemp is cannabis with less than 0.3% tetrahydrocannabinol or THC; the chemical component that gives cannabis its psychoactive effects. However, controlling the amount of THC is not an exact science. There are no guarantees plants will have the appropriate THC level and no way to know until the plant begins to grow.
In addition, competition is becoming fierce.
The breadth of the financial potential of the cannabis sector has created what some are referring to as the “green rush”; the urgent move towards and interest in the growing of hemp and other legal cannabis. In 2018, there were 78,000 acres of hemp grown in the United States (in states where it was legal). Due to the passage of the 2018 Farm Bill, that final number for 2019 is expected to be upwards of 200,000 acres. Not only are current farms converting their crops or cycling in hemp, but there is also an onslaught of new farms and new farmers entering the market.
This competition is leading to a decrease in the overall price per acre. Hemp is not proving to be as profitable as early predictions indicated or as easy to sell. The primary market for hemp is still overseas, where hemp growing has largely been legal for some time. So, new hemp producers from the U.S. also must compete with established foreign farmers.
These are just a few of the hurdles and risks with hemp growing. Hemp growing in the United States is still in its infancy. Some of these issues are natural growing pains of an emerging and rapidly expanding sector that will resolve themselves in time. However, others are challenges and risks that hemp growers will always face.
Despite the challenges,
there is still tremendous promise in entering this booming sector. Although there is a hemp frenzy, entering this space should not be done hastily and should include thorough research and expert guidance. Success will require very careful planning, long-term considerations, and the ability to sustain potential short-term losses. Joorney is well-positioned and current on all issues in this space and ready to help you plan and evaluate your hemp-growing business.
