In December 2018, the Trump administration legalized hemp at the federal level. Hemp is a type of cannabis that contains a lower amount of psychoactive THC and more CBD. Currently, hemp with less than 0.3% THC can be grown legally. CBD helps treat various medical conditions. In June 2019, Arcview Market Research and BDS Analytics estimated that the CBD market in the US would reach $20 billion by 2024. So, the euphoria surrounding CBD led many farmers to take up hemp cultivation.

Lower hemp prices

Farmers expected high earnings from hemp cultivation. However, hemp prices have fallen. Farmers are struggling to find enough buyers. Citing Whitney Economics’s survey in July, in November 2019, Reuters reported that 65% of US hemp farmers aren’t getting enough buyers.

As reported by BNN Bloomberg yesterday, Julie Lerner, the CEO of PanXchange, stated that the hemp biomass hit $40 per pound in July last year. However, she stated that it has fallen to $10 per pound. She said that the CBD consumer market didn’t expand, which caused hemp prices to fall. She thinks that the FDA’s prohibition on hemp extracts in food or dietary supplements is limiting CBD market growth. As reported by BNN Bloomberg, she said, “Every way you slice it, the physical demand for the CBD market is much, much smaller. I’m a little surprised that retail prices have not started to come down yet. There’s so much competition.”

Analyzing the hemp market, Lerner stated that Charlotte’s Web Holdings had estimated sales of $95 million in 2019. She said that it requires less than 500 acres of hemp to service its CBD business. So, for a $4 billion US CBD market, she estimated that 20,000 acres of hemp will service the CBD market. However, Lerner said that 115,000 acres were harvested in 2019, which led to supply glut. She expects the problem to get worse. More farmers are planting the crop this year.

Outtake

Currently, the FDA hasn’t approved any CBD products except Epidiolex, which treats seizures. Also, the FDA prohibits hemp extracts in food and dietary supplements. Without FDA approval, it’s illegal to transport CBD products across US states. All of these factors are restricting the CBD market’s expansion. However, on January 14, the House Agriculture Committee chairman, Collin Peterson, introduced the new bill. Notably, the bill would allow companies to market hemp-derived CBD products as dietary supplements. Read Will the New CBD Bill Boost US Businesses? to learn more. We expect the bill to boost the US CBD market.