Hemp Farmers Are Panicking
The CBD industry might be growing, but the hemp industry that supplies it is about to temporarily crumble. This may or may not affect CBD users in a meaningful way, but it will greatly impact hemp farmers.
We Have Too Much Hemp
To put it bluntly, we have grown too much hemp in America. CBD was legalized in most states at an alarming rate, and the buzz surrounding it inspired many farmers to start growing entire fields worth of hemp plants specifically to extract CBD from them.
That may sound like a good thing. After all, doesn’t that mean that we can all enjoy a surplus of CBD? Well, that’s not what’s happening. Our country can only consume so much CBD at a time, and we currently have more than eight times the amount of hemp we need to provide tons of CBD to the entirety of the country.
That means that a lot of the hemp farmers have grown is useless, and the worth of their crops is dropping dramatically. A year ago, CBD isolate was selling for more than $5000 a kilogram. Now, a kilogram of CBD isolate costs $3000. That number will continue to rapidly drop throughout 2020, and that has hemp farmers in a panicked state.
How This Happened
The price of hemp has dropped so much because so many people became hemp farmers the second it was legalized, and there aren’t enough CBD consumers to actually consume the amount of hemp that has been produced. Some of it can be turned into construction materials, but that market has already been cornered, and most of these hemp farmers made their crops specifically for CBD manufacturers.
How Long Will It Last?
Most farmers should expect the price drop to stick around for about 18 months. That’s about how long it’ll take for some of the less efficient farmers to go out of business, and then the market will stabilize as the amount of hemp drops.
However, farmers on the west coast can expect to deal with the price drops for as long as 36 months. That’s due to the way that the western states are set up economically, and they’re also where a lot of the country’s biggest hemp farms are.
Over the course of the market crash, most farms will suffer greatly throughout 2020, and they’ll spend 2021 and 2022 struggling to get ahead again. However, the majority of the smaller companies will probably find themselves in an endless spiral towards bankruptcy.
The problem will persist far longer than that for some companies. It’s inevitable that a lot of the smaller companies will be bought out by inexperienced investors, and those investors will do the exact same things that the farmers are currently doing. Luckily, that will only affect some companies after the 18 months of price drops are over with. Every other company will already know if they’re going to fail or succeed, and they can react to that knowledge appropriately.
How It Affects CBD Consumers
CBD consumers probably don’t have much to worry about. The farmers are going to have to sell their hemp plants for far less than what they were originally worth, but manufacturers are most likely going to keep their prices the same to maximize their profits and capitalize on the price crash.
However, some companies might try to go another route. Don’t forget that there are a lot of different companies trying to cash in with CBD. As the price of hemp drops, some companies might try to offer their products at massive discounts to gain a competitive edge over the greedier companies. If you’re smart, you’ll want to look for companies that are willing to drop their prices while you have the chance. The price of hemp will rise again once the market stabilizes, and any deals that come out of this situation will dry up fairly quickly.
This isn’t a situation that we’ve never seen before. The marijuana industry had this issue in California when marijuana was first legalized. Now, the marijuana industry has fixed itself.
The CBD industry will probably experience the same issues, and then it’ll correct itself once the number of farms drops. It’s sad to hear about so many new entrepreneurs and farmers who are going to lose everything they’ve worked for, but this is a common occurrence when industries grow very quickly.
If you’re a hemp farmer, it’s probably time for you to carefully examine the condition of your farm, and you should decide whether or not you want to risk keeping your farm open and potentially going bankrupt. If you do decide to keep supplying CBD manufacturers with hemp, experts are recommending hemp farmers to look for large and long-term contracts with prominent CBD manufacturers. A way to utilize leftover plants will also help minimize the financial losses that many farmers will experience.