PanXchange reports industrial demand gets a boost from bedding; FSA sees acreage decline
The PanXchange Hemp: Benchmark & Analysis report took an unusual turn this month, calling hemp hurd for animal bedding the most interesting industrial hemp story of August. That may not sound like an exciting development to a casual observer, but it is one segment of the market where the report indicated there is little supply to spare.
In particular, good-quality non-cannabinoid hemp hurd to be used for bedding and building is in demand, commanding prices around the middle of the month’s range. Prices of old-crop true hemp were far lower, up only slightly in August and viewed as competitive with alfalfa prices.
“Animal bedding might not be the most attractive end-use,” the report acknowledges, but demand for it keeps processors working as they develop business plans for other applications of industrial hemp. “Industrial hemp has made considerable strides thus far this year, and markets are taking shape for certain by-products.”
Biomass prices were mostly lower in August. The exceptions were organic and particularly potent biomass, which traded at a premium to the overall markets, the report indicated. Clean and well-prepped CBD-oriented biomass prices also were reported at the upper end of the range in the month of July.
PanXchange said a breakout from current biomass prices would likely be difficult until the end of the harvest, the point when processors are expected to have a better picture of their inventories.
Similarly, prices of smokable flower also are expected to be range-bound as the marketplace works through the 2020 supply. An exception is delta-8 flower, which sells at a premium as long as more states don’t ban it, the exchange said. (For a detailed explanation of delta-8, see JLN’s “Let’s Go Get High On Hemp,” published on March 31, 2021.)
Timing the harvest to ensure maximum potency is critical to price differentials, according to an educational guide published in 2019 by North Carolina State University’s Agricultural Extension program. It estimated that a 1% difference in CBD content among 1,000 pounds of biomass can equal a crop value difference of roughly $20,000 on the open market.
The 2021 hemp harvest has already begun, but it will continue through mid-October.
More about that harvest
In its initial acreage report released in August, the USDA’s Farm Service Agency reported hemp planted for cannabinoid acres totaled 20,131, which PanXchange noted was a 55% decline from the same period a year ago. In 2020, 45,236 acres were planted, down from 122,007 acres in 2019, according to the FSA data.
All but four states — Minnesota, Ohio, Missouri and Oklahoma — that reported plantings of more than 100 acres in 2020 recorded acreage reductions in 2021. Leading state producers like California, New Mexico and North Carolina cut acreage by more than 80%.
“There was too much chaos in [the] market over the past few years to determine exactly why some states declined so severely, but one might expect those states have the most old crop material left to sell,“ PanXchange said.
Colorado appears likely to be the primary seller of new crop material, commanding 34% of total cannabinoid acreage with a total of 6,910.
Separately, on August 10, the Department of Agriculture announced it approved Colorado’s State Hemp Management Plan, which details the practices and procedures that will enable hemp producers to operate in Colorado in compliance with federal laws. The Colorado Department of Agriculture had one of the first state hemp pilot programs, launching it in 2014.
The drop in the number of planted acres for 2021 should eventually offer hope for hemp, a sector where most prices have long been depressed by oversupply. PanXchange questioned if the current reductions were sharp enough. But it allowed that the “inefficiencies of a nascent market and massive yet uncertain demand from delta-8 and other synthesized markets could surely raise the acreage requirement.”
Any price recovery will depend on continued retail growth “as end-use manufacturers have the leverage,” PanXchange said. The exchange has previously estimated projected CBD demand could be fulfilled with approximately 1,500 to 3,100 acres.
Photo of floral hemp in Mills River, North Carolina, by Katie Learn.