The Hemp Sector and the Coronavirus Outbreak

The Hemp Sector and the Coronavirus Outbreak
March 18, 2020

The ongoing coronavirus health crisis is having a significant financial and cultural impact on the nation’s hemp sector. It is also expected to have a long-term ripple effect on the hemp market for months to come.

Expos Closed for Now

As part of the preventive measures mandated by health authorities, a wide variety of hemp expos and business conferences have been postponed due to the coronavirus outbreak.

The seventh annual NoCo Hemp Expo, one of the biggest conferences of its kind, was supposed to take place in Denver in late March, but has been rescheduled for August. The NoCo Hemp Expo’s producers are also putting their Southern Hemp Expo, originally scheduled for August in Nashville, Tennessee, on hold.

“The decision to shift the timing of this year’s Expo has not been an easy one,” Morris Beegle, the expo’s producer, said in a press release. “The health and safety of all participants remains a top priority.” Beegle added that expo organizers are currently exploring “options for a potential online digital conference in the upcoming weeks to continue the conversation about hemp.”

Supply Chain Issues

The coronavirus outbreak is also creating disruptions for hemp cultivators, processors, and other companies that rely on overseas businesses for their packaging and product needs.

One East Coast hemp cultivator and supply chain consultant said he was shocked at how the coronavirus created interruptions for his business. “A lot of the jars that are used on the concentrate side, and the CBD side, from glass bottles to small glass jars, have been a real pain in the butt to get,” he told Hemp Benchmarks. “I had to switch suppliers. I just had an inventory of a completely different type of product, jar-wise, because the jars I’ve been using for years I can’t get anymore. The ships [from China] aren’t coming; they’re not sending them out.”

Those supply chain difficulties are also being felt by KushCo Holdings; a California-based producer of ancillary products and services to the legal cannabis and CBD industries. In its most recent corporate update, the company said the coronavirus crisis was creating a “small, but manageable, disruption” in its Chinese-manufactured inventory.

“With the recent coronavirus outbreak, our business was briefly and minimally affected by temporary [Chinese] factory shutdowns, production delays, and product shortages,” Rodrigo de Oliveira, KushCo’s Chief Operating Officer, added in the press release. “Fortunately, we entered Chinese New Year with healthy inventory levels, whereas some of our peers who don’t have the same scale, resources, supplier relationships, or inventory quickly ran out of product. Overall, we’re pleased to see the situation slowly improving and for new shipments to make their way into our warehouses again, from which we can accelerate our sales again.”

An Oregon-based hemp processor, meanwhile, says his company is debating whether they should order less-expensive extraction equipment from China, considering the production disruptions caused by the coronavirus outbreak. “It is affecting our decisions on how and where to source equipment,” he told Hemp Benchmarks. “Because we want to move quickly, China may not be an option.”

Changing How Business is Done

That same processor said new requirements for “social distancing” due to the virus are also affecting how people in the hemp sector now do business. “People are not scheduling meetings if they don’t have to; it’s, ‘Can we do this by phone, instead?’” he said. He also expects the coronavirus outbreak will start to affect product transfers. “People are worried about whether the product and packaging is infected,” he added. “That includes everything, including raw hemp.”

At the retail level, reports from across the country have told of people stockpiling groceries and other goods, including cannabis in states where it is legal. Whether the current situation will result in consumers purchasing additional hemp-derived CBD products is uncertain at this point. If government officials proceed with more extreme measures to contain the pandemic, such as ordering non-essential businesses to close, many small specialty retailers that sell CBD products may be compelled to shut their doors. Consumers would likely still be able to obtain CBD products at large pharmacy and grocery chains, which are typically considered essential businesses and excepted from shutdown orders, though whether they would continue to spend money on such products in an emergency situation is unknown.

The East Coast cultivator, meanwhile, believes that while the coronavirus outbreak may be causing issues for the hemp industry, it’s also creating some new opportunities. “I’ve gotten a lot of phone calls the last two weeks for hemp fabric, from domestic manufacturers,” he said. “We’re also in the process of fast-tracking a non-woven facility for hemp textiles, and reducing our dependence on foreign raw materials.”

Subscribe to Hemp Spot Price Index Report to stay informed