The Business of CBD - The Modern-Day Gold Rush
Cannabidiol, or CBD as it is commonly known, is a naturally occurring chemical compound derived from the cannabis plant and the production of CBD has become one of the fastest growing industries in America. Unlike THC, the active derivative in marijuana, CBD does not have psychoactive or intoxicating effects and is commonly used for both people and animals today. In fact, CBD can be found in nearly anything from food and dog treats to clothing and even mattresses.3
Hemp, which is a cannabis plant that had been grown for many purposes for thousands of years, had its growth suppressed over 90 years ago. Though it was once legal, and even mandated to grow hemp in some places, it was made illegal in the 1930’s for fear of the potential economic impact that many versatile hemp products could have on other industries ranging from paper to plastics. To justify the law making it illegal, the government used marijuana as their reason, though many people today are led to believe it was the other way around.
With the passing of new federal legislation regarding the legality of growing hemp for the purpose of CBD production, every state in America will be able to grow hemp for CBD production by 2021. Demand within the United States, coupled with the worldwide demand for CBD products overall, is escalating at an exponential rate. Recent studies suggest that CBD sales in the United States will exceed $20 billion by the year 2024.1
CBD is well known for its extensive medicinal benefits which may include anything from claims of reducing stress to curing cancer. This wide variety of potential applications and benefits is creating such hype and demand that we are seeing larger fortune 500 companies jumping into the industry to produce CBD products to bring to market.2 That said, the question becomes, is there any real substance behind all the claims of CBD’s benefits and if so, is there still room to enter the CBD market?
Wholesale CBD is sold by the kilogram. In early 2014, when just a handful of states had begun to legalize hemp, the price per kilogram was as high as $40,000. Today, companies are selling kilograms of CBD for as little as $2,000. All you have to do is Google “CBD” and you will find hundreds if not thousands of companies offering a wide range of CBD products, both wholesale and retail. So, with such a high demand for CBD, why the sudden drop in price?
The reason is that CBD, which was once a boutique and difficult to find ingredient, has now turned into a commodity with buyers, sellers, brokers and market makers. Each year the acres of farmland utilized for growing hemp are nearly doubling and even tripling in some areas. As the production of hemp from these additional farmers comes online, the demand for CBD has not kept up with supply. As a result, we have seen prices plummet. For hemp farmers, what was once a guaranteed sale has turned into a surplus of product for which there aren’t enough buyers. This increased hemp production, coupled with the still limited hemp processing capacity, has created a supply glut.
As is common with many new “hot” industries that grow too fast, growing pains will create a ‘flush out’ period. As the price of CBD continues to decrease, the smaller mom and pop companies, including both hemp farmers and hemp processors, will not be able to survive. That said, once these growing pains balance out again, the price of CBD should stabilize and could potentially even rise again.
In addition to this balance in hemp farming and production, new USDA regulations which require rigorous testing of hemp crops could potentially render a large number of CBD genetics obsolete. USDA regulations now demand that hemp used for the production of CBD may not exceed 0.3% THC, and many, if not most CBD genetics will exceed this threshold, creating a challenge for farmers to find a reliable CBD genetic. The risk of federal prosecution and the potential inability to sell their harvest may cause many hemp farmers to sit on the sidelines or return to farming their original crops rather than growing hemp.
Perhaps even more encouraging to those looking to enter the market, is that in addition to the already booming CBD industry, we are now seeing a great deal of hype for another hemp derived cannabinoid called Cannabigerol, or CBG. CBG is the precursor, or stem cell, for over 113 other cannabinoids including CBD and THC. The potential for this new derivative is creating waves of excitement in the industry and we expect to see explosive growth for CBG in the coming years.
In conclusion, there is most definitely still room to enter the lucrative CBD or CBG market. The potential growth of the CBD and CBG industry is exponential and still in the very early stages. The keys to success when entering this quickly growing market are to stay flexible, the CBD market is changing constantly with new regulations and technology; be well capitalized to ensure your ability to shift gears in this dynamic market; stay ahead of the curve, be an innovator and stay up to speed on the newest trends; and be vertically integrated, with your own farm, processing and products so that you are not reliant upon other companies. With these things in mind, it is possible to achieve great success and stake your claim in the business of CBD – the modern-day Gold Rush.
1. https://www.forbes.com/sites/irisdorbian/2019/05/20/cbd-market-could-reach-20-billion-by-2024-says-new-study/#58a5d53d49d0
2. https://www.fool.com/investing/2019/04/30/4-surprising-companies-now-selling-cbd-products.aspx
3. https://zbdbed.com/
How Hemp is Changing Agriculture
The recently-passed Farm Bill, and its subsequent legalization of hemp growth and distribution, would change the agricultural landscape once and for all. Fast-forward one year, and it's clear that many of the respected financial magazines’ predictions for the future of the hemp industry are already coming true.
For example. The 2018 Forbes article forecast a "hemp renaissance" in America that would drastically overhaul our country's relation to hemp, allowing consumers to discover the literal hundreds of uses of the plant, in industries from textiles to cooking. Of course, we can attest that this is happening- a quick scan of the shelves of your neighborhood pharmacy will show that CBD-infused products are big business. Hemp-derived oils are popping up everywhere, from skincare products to natural supplements, and even in unexpected places like chocolate and hemp dog treats!
The reason for the sudden surge of popularity in CBD-infused products is the sudden availability of hemp, thanks to the passing of the Farm Bill. Additionally, and perhaps more unexpectedly, the "Green Rush" has caused numerous young people to switch gears and ditch their chosen career paths to become hemp farmers.
There is a phenomenon happening, calling hemp a "gateway crop" for young farmers who originally set out to lead a completely different life in an entirely different industry. This can be a boon for the agricultural industry as a whole; in recent decades, farming, which was once the top profession among early Americans, is facing serious decline. A recent Time Magazine article details the financial crisis among small farmers in America as they face extinction due to insurmountable debt. However, with rising interest in growing hemp as more and more states decriminalize and legalize cannabis products, the number of farmers under the age of 35 has begun to grow exponentially, an industry in danger of dying out as older farmers retire or pass away may become revitalized, thanks in large part to the massive hemp trend.
And it's only the beginning- since hemp is a relatively easy crop to grow, farmers of other crops who are seeing the sudden boom in the CBD industry are likely to want to begin growing hemp themselves. After all, growing hemp is not much different from growing any other type of crop, and seasoned farmers with a solid agricultural background are used to changing up the types of products they grow and harvest in response to consumer demand. The global industrial hemp market size is predicted to reach $10.6 billion by 2025 - that's not the sort of thing a farmer would want to pass up!
One of the most exciting things about hemp is the fact that we've barely even scratched the surface in terms of understanding how the plant can benefit our daily lives. Because it was considered an illegal crop for 81 years up until the passing of the 2018 Farm Bill, little research has been conducted on hemp in relationship to other crops like corn. However, scientists believe that hemp can hold the key to re-imagining the way we live and even potentially help us to lessen our dependence on diminishing natural resources. As we push to get away from depending upon the use of fossil fuels in favor of sustainable resources, hemp has shown significant potential as a biodiesel fuel. Furthermore, because hemp takes out significantly larger amounts of carbon dioxide per acre than other plants, it can also be considered effective against global warming and climate change. This means that any fuel produced from hemp would have the additional benefit of reducing, rather than increasing, carbon dioxide levels in our atmosphere.
If legal hemp becomes a key player in the clean technology race, as many scientists believe it will, the demand for hemp farmers will surge even greater than it already has. In addition to hemp as a fuel source, it has a variety of potential uses that can help make greener, more sustainable products and help us protect the environment. 100% biodegradable and able to be composted, recycled, and reused, hemp is an ideal material to help us lessen and perhaps eventually eliminate our global dependency upon single-use plastics and other non-biodegradable materials. As we collectively strive to reduce our carbon footprint and look for new, sustainable materials that are as convenient as plastics, hemp is likely to come up in more and more conversations. By positioning themselves as hemp farmers now, cannabis growers stand to see a considerable potential profit when hemp inevitably catches on among manufacturers and consumers alike. This may cause a serious uptick in an already surging cannabis industry, pushing more and more farmers to begin growing hemp as one of their chief crops.
For farmers who wish to capitalize on the growing CBD boom, it is essential that they first establish themselves as reputable hemp growers. This all begins with high-quality products grown from hardy, reliable feminized hemp seed from an experienced hemp seed company. By ensuring that each crop is of premium quality, hemp farmers can build a reputation as producers and attract big-name companies to contract exclusively with their farm for hemp supply. Thanks to the relative ease with which hemp clones can be planted and harvested, novice farmers will be able to grow cannabis that is of exceptionally high quality, even with little previous experience.
The face of agriculture may be changing, but the demand for quality crops will always remain the same. Hemp farmers who want to compete in this growing market need to be sure that their crops meet or exceed the exacting standards of companies who are ready to embrace the CBD trend. Quality factors still matter! A cultivar consistently high in CBD, organic growing practices, extraction, storage, and supply chain issues are all vital to success. The Green Rush is in full swing, and agriculture will never be the same again. Hemp has breathed new life into a proud and necessary industry, and people are taking notice!