Hemp prices are dropping due to a “grossly oversupplied” market. Ricardo Ramirez Buxeda/Orlando Sentinel/TNS

NEW YORK — It may not be apparent when you’re spending $70 on CBD foot cream, but hemp prices are plunging amid a “grossly oversupplied” market, according to the head of the industry’s first price provider.

Hemp biomass prices reached a high of over $40 a pound in July, just before the 2019 harvest came in, according to PanXchange Chief Executive Officer Julie Lerner. Today, it’s trading under $10 a pound following a quadrupling of supply from 2018 to 2019.

Meanwhile, the CBD consumer market remains limited as the U.S. Food and Drug Administration continues to prohibit the extract in food or dietary supplements, although many sellers ignore that mandate. CBD is legal in other uses, such as topicals, as long as it contains less than 0.3% THC, the cannabis compound that gets you high.

“Every way you slice it, the physical demand for the CBD market is much, much smaller” than the supply, Lerner said in an interview. “I’m a little surprised that retail prices have not started to come down yet. There’s so much competition.”

Lerner, a former Cargill trader, founded PanXchange in 2011. It started as a trading platform and benchmark pricing service for commodities in East Africa, then expanded into the U.S. via the specialty sand market for oil and gas. PanXchange launched the hemp industry’s first suite of benchmark prices in January 2019, one month after the U.S. farm bill legalized the plant, and added a trading platform in August.

Today, the hemp market is “rife with desperate sellers and opportunist buyers,” Lerner said in her December analysis of the industry. She looked at three different measures of potential CBD demand and found in each case that farmers are growing far more hemp than the industry needs.

For example, Lerner estimated that Charlotte’s Web Holdings Inc., the largest publicly traded CBD company, needed less than 500 acres of hemp to service an estimated $95 million of sales in 2019. Assuming Charlotte’s Web accounts for approximately 2.4% of the $4 billion U.S. CBD market, that means about 20,000 acres of hemp are needed in total.

Instead, Lerner estimated that approximately 115,000 acres were harvested in 2019. And it’s only going to get worse.

“We are hearing that despite the losses people have had this year, they’re still going to increase plantings, and you have Texas, Florida, Wyoming and a bunch of late-comers that are just starting this crop year,” she said.

Lerner predicted that industrial demand for hemp will eventually dwarf the CBD market, but that won’t happen until prices drop even more.

“It’s a little bit chicken and egg,” she said. “There won’t be demand for it until prices drop, and people won’t be planting for the industrial fiber market until there’s huge demand for it, so we’ve got to get over that hump first.”

Cannabis Prices

Meanwhile, U.S. prices for cannabis also fell in most states and categories in 2019 — the opposite of the trend seen north of the border.

An analysis by wholesale cannabis marketplace LeafLink found that statewide pricing across categories fell in every legal state except Washington and Oregon. Prices also dropped in all categories except for edibles and ingestibles.

Notably, prices for smokable flower dropped 8% nationwide, with California prices falling 21% and Oregon tumbling 24%. “This is likely due to the proliferation of non-flower related products as these two markets reach maturity,” LeafLink said in its report.

Despite the price increases in 2019, Washington remained the cheapest state to buy cannabis due to “product over-saturation,” LeafLink said. The most expensive state is Alaska, with its “exceptionally high logistics and shipping costs.”

Tribune Wire

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(1) comment

Porter Parker

Users of Hemp would be pretty much happy because prices of this herb have been significantly dropped because of the decrease in demands of CBD. Now visit our website to get your essay written on any topic. There are rumors that it is because of oversupply of hemp in the local market from last months. Anyhow, decrease in the prices of hemp is pretty advantageous its users.

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