In the first year since hemp has been legal for commercial cultivation on the federal level, people across the United States are jumping at the opportunity to try their hand growing the legendary plant.

According to new numbers from the hemp advocacy group Vote Hemp, this year, 16,877 farmers received a license from their state to grow hemp (defined as cannabis with less than 0.3% THC) — for a total of over 500,000 acres of hemp licensed for cultivation in 2019.

Those are staggering numbers compared to 2018, when states issued 3,546 licenses for people to grow hemp and U.S. farmers harvested 78,176 acres of hemp.

However, Eric Steenstra, president of Vote Hemp, noted that many of those farmers are first-time hemp cultivators or even first-time farmers, and that he doesn’t expect all 511,442 acres of hemp to be cultivated.

“It’s still a lot of hemp, but a huge number of people licensed to grow this year had no experience and had never grown hemp before,” Steenstra told Cannabis Now. “It’s a lot of small family farms. They’re growing 1,000 plants, 500 plants. Lots of small producers.”

Because of the number of novice growers, a lack of easily available hemp genetics, late planting (either because of a long winter or because of state licensing delays) and other complicating factors, Steenstra thinks there will be a significant amount of crop failure and unharvested hemp.

“The good news is people are starting small and they’re learning through the process and that’s a good thing,” he said. “But I think it’s clear that there’s a lot of inexperienced people growing this year and that’s why we’re expecting a smaller percentage of licensed acres to be harvested.”

In a press release, Vote Hemp estimated that they believe 230,000 acres of hemp will actually be planted this year, and that only 115,00-138,000 acres of hemp will be harvested this fall.

Has the Hemp Hype Gone Too Far?

Back in March, U.S. Secretary of Agriculture Sonny Perdue warned American hemp farmers that hemp might not be the miracle moneymaker they were hoping for.

“What is the market potential of industrial hemp? Farmers in the United States are so productive, they could crash this market before it gets off the ground,” Perdue told online news agency Cheddar on March 19.

It’s worth noting that the USDA hasn’t even released federal regulations for growing hemp yet. The agency has stated that they’re hoping to have regulations released in the fall, including regulations on things like pesticide use, licensing and hemp testing requirements. That means that all of the licenses farmers have received are under the 2014 Farm Bill, a law that set out a pathway for state pilot hemp programs. Today, 46 states have passed hemp legislation and 34 have active cultivation programs, according to Vote Hemp.

“I think there’s definitely a concern about people growing too much hemp,” Steenstra told Cannabis Now. “Whether or not we reach a saturation point this year, I’m not sure. So far, demand is outstripping supply. This could be the harvest where we finally have so much hemp it could be a buyer’s market, but I don’t know for sure. We’re definitely heading in that direction.”

However, Steenstra says that if hemp farmers this year struggle to find a path to market for their hemp, the United States might not see as many people apply for licenses next year.

“It takes a significant investment of time and money to grow hemp, and if [this year’s farmers] don’t see a return on investment, they won’t be back next year,” he said. “Market forces might solve the problem.”

What Does Hemp Production Mean for Cannabis Farmers?

There’s currently a gulf between the “hemp industry” and the “cannabis industry,” and it’s all thanks to the federal government’s attitude towards one pesky, legendary cannabinoid: THC. Because the federal government has defined hemp as the cannabis plant with less than 0.3% THC, cultivators growing cannabis plants that are chock full of every terpene and cannabinoid except THC can thrive in a hemp industry with less regulation and less taxes than the cannabis industry.

Throw in the fact that the hemp industry has the blessings of the federal government and that many consumers don’t seem to care if their CBD comes from hemp or cannabis, and you’ve got the setting for some potential competition between hemp farmers and cannabis farmers.  

But, “that protectionist mindset isn’t good for anyone,” says Steenstra. “We want hemp and cannabis to coexist and we have to figure out how to make it work…. A combination of too many regulations and too many taxes in the cannabis industry doesn’t benefit anyone, and hemp is a tempting direction for cannabis regulations to head in.”

California, for example, legalized hemp for cultivation in 2019 and Steenstra says it immediately jumped to being one of the top 10 states by licensed hemp acreage. The state is the home to the country’s legacy cannabis growing region, the Emerald Triangle, where many longtime cultivators have been struggling in the face of California’s stringent cannabis regulations and stiff competition from venture-capital-funded corporations.

The state also technically only allows CBD products to be sold through licensed cannabis dispensaries (which increases the burden for hemp-derived CBD products to make it level with cannabis-derived CBD products) — though this rule is rarely enforced. Steenstra said that California is a location where the conflict between the regulations around hemp and cannabis could come to a head, and provide a potential nationwide solution.

Oregon, however, adds another complication. There, cannabis cultivators are reporting that some reckless hemp farmers are using “open pollination” methods, where they leave male plants outside near female plants. That pollen from the male plants can travel far, and ruin entire cannabis crops by forcing the flower-producing female plants to seed.

Currently, no state has regulations that make sure all of 2019’s new hemp farmers know what they’re doing with their male plants.

Everyone was expecting that the legalization of adult-use marijuana would create a “supernova” on the stock market. There was a stellar explosion but only in the valuations of the cannabis companies.

People are starting to realize that cannabis stocks are overhyped. The sky-high valuations are coming down and the period of reckoning is at hand. Hexo (TSX:HEXO)(NYSE:HEXO), Canopy Growth (TSX:WEED)(NYSE:CGC), and Cronos (TSX:CRON)(NASDAQ:CRON) are the overhyped cannabis stocks you should avoid.

Hard sell mode

The medical application of marijuana as pain management in various illnesses is enough to heighten interest among pot stock investors. There’s no need to prop up this market that could reach US$148.35 billion by 2028

But Hexo wants to exploit the marijuana craze and be on the spotlight. The cannabis grower entered into a joint venture with Molson Coors Brewing. Because of the perceived medical benefits of cannabidiol (CBD), the two companies announced plans to introduce CBD-infused beverages.

Hexo believes that non-alcoholic CBD-infused beverages would be a big hit. Meanwhile, Molson Coors is banking on the enormous potential sales of this new line of drinks to offset the weakening beer sales.

Canopy Growth was able to entice beer giant Constellation Brands to invest $4 billion and become a partner in its quest to gain a significant share of the CBD beverages market. Hexo and Canopy are on hard sell mode when Health Canada has yet to legalize CBD-infused beverages and other derivatives.

The tentative launch date of the new products is December this year. However, Hexo and Canopy are entering a crowded space with big names like Anheuser-Busch InBev joining the fray. Sales could go flat as the stiff competition would lower prices and drive down profit margins.

Still, the first hurdle is the legalization by the regulatory agency.

Overpriced cannabis stocks

The industry heavyweights along with the second-tier cannabis operators are in a tailspin since April of this year. Investment analysts agree that cannabis stocks are overvalued and overpriced.

After sealing a deal with global tobacco giant Altria, Cronos had the resources to gain substantial market share, and its stock price rose to as high as $31.77 in early March. But the high growth didn’t come, which was a big disappoint to eager investors. As of this writing, CRON is down 51.36% to $15.45 from the said high.

Cronos is overvalued compared with industry peers. The $1.8 billion Altria investment was the main reason for its sky-high valuation. Thus far in 2019, Cronos is reporting sub-par financial results.  Cronos is undeserving of the premium valuation it enjoys today.

The company needs to accelerate growth because it has the slowest year-over-year revenue growth in the industry.

High risk, high reward

The depressed prices of Hexo, Canopy Growth, and Cronos are tempting but be very cautious. There’s a strong potential these cannabis stocks will deliver high returns to you in the future. However, let the companies execute the respective strategies first and not rely on the hype.

“The Seri Ruam Thai party leader said that he was not afraid that he might be sued for providing information to the Australian media.”

Seri Ruam Thai party leader Gen Seripisut Temiyavet claims that he was the source who tipped off the Sydney Morning Herald newspaper in Australia to investigate the details surrounding the conviction, in the heroin trafficking case, of Deputy Agriculture Minister Thammanat Prompao.

Thai PBS World reports that the former police chief today assigned an MP from his party, Pol Lt-Gen Wissanu Muangpraesee, to submit an interpellation to the House Speaker, demanding an explanation from Prime Minister Prayut Chan-o-cha about the appointment of Thammanat as a member of his cabinet, despite the latter’s criminal background in Australia.

He said that people involved in narcotics trafficking are not good people and he could not understand how Thammanat was given a cabinet post, despite the fact that he had spent time in prison in Australia following conviction on drug charges.

The Seri Ruam Thai party leader said that he was not afraid that he might be sued for providing information to the Australian media. Even though Thammanat’s case in Australia was many years ago, Seripisut said he doubted the former was qualified to be an MP.

Answering an interpellation of the Seri Ruam Thai party in the House about his drug conviction in Australia several decades ago, Thammanat said that he welcomed the opportunity to talk about his past so that it will not return to haunt him and undermine his resolve to pay back to society.

Thammanat, well known for his role as the government’s fixer, claimed that he was never jailed for drug charges in Australia, but was detained for about eight months during the plea bargaining process.

He said he was sent to a farm to look after young hooligans who were detained there for about six months and then sent back to Sydney where he worked for about four years.  

The deputy agriculture minister further added that, after four years, he didn’t want to return to Thailand, but wanted to spend more time there with his family. However, he decided to return home as a free man, without a past record of drug dealing, as claimed by the SMH newspaper.

After his clarification in the House today, Thammanat said he hoped his nightmare of the past 30 years would be over adding, however, that he was willing to clarify in private if anyone still has doubts about his past.