In July last year, before the 2019 harvest hit the market, hemp biomass was selling at $40 per pound. However, a pound of hemp biomass is now going for $10, which is triple the drop from 2018 to 2019, said Lerner.
The CBD consumer market is limited because the United States Food and Drug Administrations has prohibited the infusion of food or dietary supplements with CBD, but some companies have chosen to ignore the directive. Topicals are a legal form of CBD, and they contains less than 0.3%of THC. THC is the psychoactive component of cannabis.
In an interview, Lerner said that even if you package it differently, the demand for CBD in the market is smaller than the supply. He further said that he is surprised that the prices for CBD products have not started to reduce due to increased competition.
Lerner is a former Cargill trader, and she founded PanXchange in 2011. The company was initially a trading platform and a benchmark pricing service for commodities in East Africa, which later expanded into the U.S. market through its specialty in the oil and gas market. In January of 2019, a month after the legalization of hemp production under the 2018 Farm Bill, the PanXchange launched the hemp industry-first set of benchmark prices; and in August 2019, the company added a trading platform.
In her December analysis of the hemp sector, Lerner said that the hemp market is filled with desperate sellers and opportunistic buyers. When she was evaluating the potential of CBD demand, she found that farmers were cultivating more hemp than the industry requires.
Charlotte Web Holdings Inc. is one of the largest publicly traded CBD Companies, and according to Lerner’s estimates, the company requires less than 500 acres of hemp to serve an estimate of $95 million sales in 2019. And this equates to about 2.4% of the overall CBD market in the U.S, which is $4billion. This means that a total of 20,000 acres is enough to serve the whole of the U.S. hemp market. However, according to her estimations, in 2019, more than 115,00 acres of hemp were harvested, and it is only going to worsen since more and more people are entering the industry.
Lerner further said that people are still going to plant hemp this year irrespective of the losses they incurred in 2019, and some of the late-comer states are starting cultivation this season.
Lerner also said that people would not start cultivating hemp for industrial fiber until there is a huge demand. And therein lies the opportunity that experts and industry actors like MCTC Holdings Inc. (OTC: MCTC) see; farmers would be well-advised to diversify the hemp cultivars they select in order to serve other segments, such as the fiber and grain components of the hemp industry.
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