New Report on Hemp Shows the Crop’s Vast Potential, but Also Severe Supply-Chain Issues

Economist Beau Whitney, who led the report, says the supply chain issues are "indicative of how immature the overall industry is."

A new report published by the Oregon-based firm Whitney Economics says commercial hemp cultivation has the potential to become the nation's third most lucrative crop in coming years.

But it also warns that 65 percent of the American hemp growers surveyed didn't have a buyer for their crop.

This raises the possibility of a glut, similar to the oversupply of cannabis that has driven down Oregon's prices ("Too Much Weed," WW, April 18, 2019). But it also might just be a "hiccup," says Beau Whitney, who owns the economics firm and oversaw the report.

"It's indicative of how immature the overall industry is," says Whitney.

The report shows 62,000 acres of hemp are currently being grown in Oregon by roughly 1,700 licensed growers. That's within shouting distance of Oregon's flagship crop: hazelnuts, or filberts, which cover 70,000 acres. (But it's nowhere near the largest crop, wheat, and its nearly 800,000 acres.)

Whitney says that though hemp acres may not compare to acres of wheat, the value of hemp "dwarfs wheat."

The report notes that 20,000 hemp-growing licenses have been doled out in 34 states since the passage of the 2018 Farm Bill, which legalized hemp cultivation and transportation of hemp across state lines.

Already, hemp has emerged as Oregon's newest cash crop. And in the state's southern counties, which have a perfectly situated climate for growing cannabis plants, hemp grows have sprouted at an eyebrow-raising rate.

The lack of certain buyers, says Whitney, shows that "there has been little focus and little data on the supply side."

That, the report says, is a symptom of broker middlemen who aren't doing responsible business, and may be taking advantage of growers who don't have the business savvy to know any better.

"Currently there are a lot of brokers in the middle between buyer and sellers, in many instances, brokers do not have the supply available to sell (even though they say they do) or do not have a buyer in place that they claim to have," the report reads. "This is creating a lot of wasted efforts and failed deals."

Because of the lack of buyers for hemp right now, the report notes that growers must find ways to "utilize tools to dry and store the crop while they figure out how to bring their product to market" so it doesn't perish.

But the amount of processors in the market are vastly outnumbered by the number of growers, creating a bloated supply of biomass with nowhere to go. The report shows that for every four growers, there is one processor available.

One of the ways to prevent perished plant is to extract the plant into a product like cannabidiol (or CBD), which has a longer shelf life.

Another issue, the report says, is the inconsistent status of hemp regulations and rules across states. Individual states can still prohibit the cultivation of hemp, making transportation across states where it's illegal a risky endeavor.

"Issues of crop insurance, banking, FDA regulation of CBD, interstate transportation, and confusion by law enforcement have surfaced in recent months," the report reads.

But despite the setbacks, Whitney says hemp is a "transformative product" and says it's "just the beginning right now" of a potentially huge revenue-garnering crop in the U.S.

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