In past reports we have discussed how numerous stakeholders are pivoting away from what appears at the moment to be a limited market for hemp-derived cannabinoids and towards the cultivation, processing, and manufacture of hemp fiber, grain, and related products. Hemp Benchmarks recently interviewed Chad Rosen, Founder and CEO of Kentucky-based Victory Hemp Foods, to get a picture of the state of the U.S. hemp grain market. According to Rosen, his sector of the industry is facing headwinds from a variety of external factors as it attempts to develop and expand.
Major players in the industrial side of the industry say they are also at the mercy of current events, as they try to expand hemp fiber and grain cultivation, production, infrastructure, and supply chains. “While the stock market and inflation are the main sources of concerns for Wall Street and ‘Main Street,’ very few industries and businesses are not affected in some way by the changes we’ve seen related to commodity price increases and supply chain disruptions,” Chad Rosen, Founder and CEO of Kentucky-based Victory Hemp Foods, said in an email to Hemp Benchmarks.
Rosen said his company – a major processor and manufacturer of hemp seeds, hemp seed oils, and hemp protein concentrates, along with other hemp grain-derived products – is not insulated from such issues. “We are very much in a growth stage,” he noted, “and the need for capital as it relates to expansions for capacity to enter new markets and fulfill more and more demand, has been central to our planning and focus for the past few years.”
The recent downturn in the stock market, he added, has created two major changes for his industry; investors “have less tolerance for risk and less liquidity to invest.” Meanwhile the increase in interest rates by the Federal Reserve, in an effort to slow down inflation, “means that many funds and institutional investors are rebalancing their portfolio as the rates of return become longer with early stage companies.”
Then there is the war in Ukraine and its global impacts on grain and other commodity prices. The conflict, according to Rosen, is an “obvious and acute cinch of the belt in the supply of grain and clearly a man-made crisis, and yes, as a result of this short supply issue, grains and calories from all sources are being bid up, whether it’s a result of the shortage of availability, the lack of fertilizers and amendments required for expected outputs from crop production, or the inability to move crops to market, the lack of supply with demand steady is driving costs up.”
This growing food crisis, Rosen observed, “means that the hemp industry and any alternative protein crop needs to be competitive with whatever alternative a farmer has available to plant. Long past are the days of [corn for $3.50 per bushel]. If you want acres, prepare to bid up. Which for Victory means higher raw material costs, and in turn higher prices, which of course has the potential to make our products less competitive.” That being said, Rosen noted his business has a plan to make better use of all the hemp products they purchase from their farmers, as well as programs to achieve larger crop yields.
The industry, he said, is in a “sink or swim period,” as it copes with a variety of issues that hurt its ability to be competitive with other agricultural crops. “From excessive testing protocols as it relates to grain and fiber, or the incorrigible process that regulators have put in place to get hemp grain approved as animal feed to ‘protect’ the farm animals we consume products from, there are many opportunities to open up markets through legislative action,” he said. While industry advocacy groups have “taken up the fight” to assist hemp grain and fiber producers with “some of the more erroneous regulations,” Rosen is concerned about the hemp sector’s future.
“Many farmers faced with these headwinds are asking the question, ‘why even bother?’” Rosen noted. “But the farmers who are [multi-generational] value the opportunity to take on a small bit of risk in exchange for helping diversify their income stream and build a relationship with a buyer. Finding a niche in the market has historically proven to be valuable, and early adopters and efficient producers are fortunately the type who we find ourselves working with.”
Rosen said his company is working in 10-year cycles, “and 2022 is for us a year to maintain our leadership as innovators in the space by continuing to develop products and [processes] to increase market opportunities and profit potential.” That innovation, however, means more than just responding to customer demand.
“Given the near-term future,” he added, “when climate events grow more frequent and extreme, and pressure on the supply chain from manmade and environmental catastrophes become more complex, we hope to be in a position to present hemp as a strong solution that our global community will come to rely upon.”