Hemp Market Participants Assess Impact of 2020 Harvest, Look Ahead to 2021

Hemp Market Participants Assess Impact of 2020 Harvest, Look Ahead to 2021
Image Source: Kelly Sikkema on Unsplash
December 02, 2020

As we outlined in our initial 2020 CBD Biomass production estimate, it is virtually certain that this year’s output of cannabinoid-rich biomass will be down significantly from last year, likely by roughly half. However, how wholesale prices will respond in the months ahead remains to be seen, with a large overhang from 2019’s harvest still weighing on the market. 

Higher Prices Expected for 2020’s CBD Biomass

Andrew Bish is the founder of Hemp Harvest Works and COO of Bish Enterprises, both based in Giltner, Nebraska. He is a harvesting equipment designer, manufacturer, and researcher, as well as the founder of the Nebraska Hemp Industries Association.

Bish told Hemp Benchmarks he spent 60 days, from mid-September to mid-November, traveling to 15 states, where he visited hemp fields and worked with producers. The primary conversation he had with those producers, he said, “is around the price point. A lot of people are very concerned about $1.65 a pound [for biomass]; and whether or not the market is going to improve. In Tennessee and Kentucky especially, there’s a lot of material from last year’s [crop] and guys are sitting on that, looking for places to go.”

He added that many are looking for a price rebound as hemp from the 2020 harvest enters the marketplace and takes priority over the tons of unsold biomass from 2019 that is in storage, losing potency. “Personally I think with the 2020 material we’re going to see a little higher price point and we’re going to start to see some stabilization there,” he said. “There’s not as much of that material.” 

Remains of 2019 Crop Face Viability Questions

“We’re still not going to see the actual market result impact of the 2020 season for, in my opinion, for another three or four months until we’re into 2021,” said Andrew Follett – a Pennsylvania-based cultivator and retailer who also advises hemp companies on supply chain issues. He continued, “A lot of people are still dealing with 2019 material.” However, 80% of the biomass left over from last year is not optimal for extraction, based on Follett’s assessment.

“The 2019 material,” Bish stated, “[producers] got to take the hit on it, they’re going to take a hit on it expiring or the price point. They got to bite the bullet on that one.” One big issue for many hemp farmers, he noted, is they were not adequately prepared to store the 2019 glut of hemp for the long-term. He also pointed out that there is a nationwide lack of cold storage facilities for hemp, which many consider the best method for preserving quality and potency in cannabinoid biomass.

Looking Ahead to 2021

Even as the oversupply of CBD biomass persists and the post-harvest storage and processing landscape remains uneven, some in the industry are already looking ahead to next year with a sense of renewed purpose. “I feel more optimistic about 2021 than I felt about 2020,” stated Bish. “The price point still sucks, however I think a lot of people are aware that some of this older material is moving its way through the market, they’re seeing some higher price points on the newer material. It’s not great, it’s hard to grow at those prices with the current farm models. People have to change how they’re doing things.”

Some CBD hemp farmers are doing just that, experimenting with ways to lower production costs via increased mechanization. Texas A&M AgriLife Extension agronomist Calvin Trostle, who also serves as the agency’s statewide hemp expert, told Hemp Benchmarks about a large-scale cultivation operation in the West Texas town of Slaton. He wrote in an email that the grower initially used a grain drill to plant straight-run seed. Then, “got their 800 [plus] acres cut, baled, and dried in about a three to four week period,” using mechanized harvest techniques. Trostle described other ways in which the operation cut costs, including planting non-feminized seed and leaving males in the field, rather than undergoing the time-consuming process of removing them by hand. 

This approach appears designed so that the efficiency and high volume output of the operation will compensate for potentially lower-potency biomass. Whether the tradeoff will be worth it remains to be seen. Trostle said that yields were much higher than projected, “but I reserve final thoughts until I know what the actual dried material per acre for extraction is and the whole plant [CBD potency].” He did note, “It appears that per-acre production costs might have come in well under the projected $3,500 – $4,000 per acre.” This would be a major reduction compared to some CBD hemp growing operations, where production costs have been pegged at as high as over $13,000 per acre, according to research from Cornell University.  

High Hopes for Fiber in 2021

Trostle also added, “I understand they are moving a decorticator to Slaton to also process hurd from the biomass.” While utilizing the stalks for fiber is a secondary production target in this case, some market participants anticipate increased fiber production as early as next year. For his part, Andrew Bish believes more investments will be made in hemp fiber starting this winter and going into 2021.

“Fiber is going to come out this next year in a way that I think is going to be shocking for most people,” he said. “I think when we look at the growing statistics for 2021, we’re going to be blown away. We’re going to have more acres planted in 2021 than we did in 2019 for sure.” Bish estimates that somewhere between 350,000 to 400,000 acres of hemp fiber could be grown next season, fueled by large scale cultivators in Texas, Kansas, and Montana. Such production capacity would on its own vastly exceed the amount of hemp of all types planted nationwide this year. 

“There’s going to be more of a demand for fiber and seed crop in ‘21 than there was in the last few years,” said Andrew Follett. “I’m not seeing much of a switchover to fiber or seed yet, but I think that’s going to be an issue for 2021 as some of these [fiber processing] plants get up and running. Here in Pennsylvania we have a decorticator but are not running it. It has some material, but not that much.”  

The best case scenario for the hemp fiber supply chain, according to Follett, is an expansion of cultivation for fiber in Florida and other southern states, with cultivators in the Northeast adding fiber and seed hemp to their farms, while identifying traditional fabric buyers who want to make the transition over to hemp. In addition to those regions, there is interest in growing hemp for fiber in the Midwest, as demonstrated by a recent press release announcing the launch of the Heartland Hemp Cooperative, which “will focus on the production and processing of hemp for fiber.”

Hemp Industries Association Midwest Hemp Council National Hemp Association