Hemp was legalized in the US last year as part of the Farm Bill of 2018. Almost a year has passed since it was legalized. Let’s take a look at how this crop has turned out for the farmers and how its promises have panned out. In 2018, about 78,000 acres of hemp were planted, which increased from about 25,000 acres in the previous year.
Friendly hemp for farmers
Farmers often grow different crops on their soil. While there are several reasons for doing that, one of them is to enhance soil quality. Hemp is one such crop that farmers can use to rotate on their farms. The USDA has identified hemp crops as a way to suppress insects, weeds, and diseases.
While hemp can do all that, it must also be economically beneficial to farmers. The primary benefit of a crop is profits.
To a buyer, hemp has several uses, with CBD and its low-potency THC as the main focal points. Medical marijuana products, which could be a huge market in the US, utilize CBD as an ingredient.
With a lot of promise, farmers in the US appear to have increased their production. In a November 3 report, Reuters noted that the increased production had created a supply-demand imbalance. As a result, the excess supply has put downward pressure on prices. Lower prices eventually result in lower profits for farmers. In the same report, Reuters found that 65% of hemp in the US had no buyers.
There is still a lot of uncertainty about marijuana products. Legalization has been a major hurdle for cannabis companies such as Canopy Growth (WEED)(CGC) and Aurora Cannabis (ACB)(ACB.TO). Without a proper legal framework, cannabis companies face limited room to grow. For example, cannabis companies could buy hemp from farmers to conduct research. Following successful research, companies may sell these products to consumers in the US.
However, as marijuana products are illegal under federal law, companies have little incentive to conduct research. This implicitly dries up the potential demand for the excess hemp supply.
On the flip side, the US can look to export hemp. However, the smaller size of the hemp market relative to other crops could also pose a hurdle to the farmers.