Ask Our Experts: Lessons for Fiber from CBD
Q: Will the fiber industry mimic the CBD industry in terms of rapid growth and massive oversupply?
By Trevor Yahn-Grode, Data Analyst, New Frontier Data
A: That is an unlikely fate for fiber, for three reasons: First, due to the economics of transporting hemp fiber, a decortication facility can only afford to source biomass from within roughly a 75-mile radius. Unless they have utterly avoided due diligence, no farmer will cultivate fiber hemp without there being a capable processing facility nearby.
Second, is profit density: Unlike with CBD, industrial applications utilizing hemp fiber require truly massive amounts of material. Whereas a single CBD-processing facility can turn an acre of cannabinoid hemp into enough CBD to make tens of thousands of tinctures or other products, the average decortication facility needs thousands of acres of fiber hemp to generate enough material for the manufacturing of products. Fiber farmers do not mind the disparity in profit density, since they enjoy more security and less volatility for their crops, which in turn help eliminate the risks of reaching oversupply.
The third reason is hemp fiber’s versatility. While CBD can essentially only be used for human or animal consumption, hemp fiber has thousands of different uses, including as a substitute for existing commodity products like wood chips or animal litter. Even were the price of hemp fiber to crash, other profitable uses for the leftover could be found.
Over the long run, CBD is more likely to resemble niche crops like tobacco or avocado. Hemp fiber, conversely, is much more likely to resemble cotton or soy, requiring hundreds of thousands – if not millions – of acres to meet demand. New Frontier Data anticipates a few years of fast growth as decortication facilities come online, before slower, incremental growth settles in from there on in.