Forefront Communications

The Globe And Mail: U.S. Hemp ‘Grossly Oversupplied’ – And Pressuring CBD Prices: PanXchange

Alexandra Hamer

Alexandra Hamer

The oversupply of U.S. hemp, which was largely grown last year for CBD extraction, could be significantly bigger than expected after prices tumbled in 2019 and farmers struggled to find buyers, deal-flow calculations by one trading platform show.

Colorado-based PanXchange, Inc., which launched its institutional grade trading platform for hemp byproducts in August 2019, said in its December report that the U.S. CBD industry likely requires just 18 per cent of the hemp that was harvested in 2019. While reliable hemp data is lacking due to the newness of the industry, PanXchange crunched numbers based on deal flows and various scenarios.

Analyzing the financial reports of Charlotte’s Web, one of the biggest CBD product manufacturers in the United States, PanXchange determined that only 500 acres, or 800 kg of distillate, were required to reach US$95-million in revenue.

“If we assume a uniform efficiency in hemp growth to consumer packaged good production, the United States hemp market would need just shy of 20,000 acres,” PanXchange said in the report that was released Thursday.

This compares with Vote Hemp’s estimate for the 2019 hemp yield at 115,000 acres. With 77 per cent of this planted for CBD extraction, this brings U.S. hemp biomass production to an estimated 168 million pounds.

“If all biomass was converted to distillate, this would total 2.3 million kg,” the report said.

“We know that the U.S. current processing capacity is not that large and not every pound will be harvested and converted into distillate. Nonetheless, it illustrates the enormity of the market’s total oversupply.”

In its second scenario, PanXchange used the same math looking at Brightfield Group’s U.S. CBD sales estimates for a market value of US$24-billion in 2025.

“If the same math was used, the 2025 market would be supplied on just shy of 200,000 kg of distillate, which would still be covered by the 2018 harvest,” PanXchange said, adding this does not account for smokable hemp or non-CBD industrial purposes.

In its last scenario, based on 10 per cent of the U.S. population consuming 30 mg of CBD daily, PanXchange estimated the United States would consume nearly 424,000 kg of 85 per cent potency distillate a year. This would require 40 million pounds of biomass, which can be grown on 20,700 acres.

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