Fluctuations Across U.S. Hemp Acreage: Insights and Predictions
By Eric Singular, Director, Hemp Business Journal
Since seeds were first planted following passage of the 2014 Farm Bill which opened the gates for a U.S. hemp market, the production landscape has shifted dramatically among state markets. In the past few years, early adopters Colorado and Oregon have seen acreage declines of 83% and 89%, respectively. Conversely, states which established their programs later have meanwhile ramped up dramatically; Illinois and South Dakota have seen increases of 137% and 148% apiece.
While far less hemp is being grown nationwide this year, significant increases in acreage have been seen in states where fiber- and grain-processing infrastructure has been developed. South Dakota was among the last states to promulgate rules for hemp production. While Colorado and Kentucky were growing hemp as early as 2014, South Dakota was among the latest states to establish rules for hemp production, seeing its first crop last year.
In some ways, coming late to the party had its advantages: South Dakota farmers sat out the CBD hype, and dodged the harsh lessons learned by Montana growers who still find themselves sitting on unsold CBD biomass years after the fact. Instead, South Dakota has welcomed the development of multiple fiber processors that offered contracts for up to 8,000 acres worth of production this year.
Though they only secured 57% of that – 4,582 acres – it nevertheless registers as a success story for the value chain to see contracts fulfilled, farmers paid, and processed material entering the market.
Outside of South Dakota, a slower, yet more successful approach is found in Kansas, which nearly doubled from 542 acres in 2021 to 1,062 in 2022. The acreage has grown in tandem with the state’s processing capacity being driven by South Bend Industrial Hemp, based in Great Bend. Similarly, Missouri clocked in with 811 acres in 2020, and has expanded that by nearly 2.5x to 2,000 acres over the last two years, spurred by the establishment of processor Midwest Natural Fiber. In New York, too, the Empire State expanded more than 4.6x, from 926 acres planted last year to a reported 4,283 acres this year, according to the New York State Department of Agriculture and Markets.
Going forward, New Frontier Data expects to see hemp acreage continue rising incrementally in 2023 as the states’ processors will need to secure more contracts with growers for increased material as they scale operations and capacity throughout the next 12 months.
For some states, the correlation between the CBD crash and acreage decline could not be more obvious. Oregon, California, and Colorado’s acreage represented early production hubs for cannabinoid-rich biomass. In 2020, there were 10,000 acres planted in California, 27,092 in Colorado, and 20,000 in Oregon. A year later, those totals had dropped, by nearly 73% to 2,740 acres, by 63% to 10,146, and by 59% to 8,276, respectively.
While the California Department of Food and Agriculture reported that licensed acreage had bounced back to 5,819 acres this summer, Oregon and Colorado saw further declines. The Colorado Department of Agriculture reported 4,727 licensed acres for hemp production in 2022, its lowest since 2016. The Oregon Department of Agriculture Oregon reported 2,201 acres this season, about 1/9 of those planted two years earlier.
Slow development of state hemp markets and limited establishment of commercial applications have certainly converged as driving forces spurring acreage decline, or perhaps more accurately, the balancing of production to meet immediate demand. Even more, the Russian invasion of Ukraine spurring skyrocketing agricultural commodity prices drove many U.S. farmers last spring to reallocate hemp acres for staple crops like corn, wheat, and soy.
While experts contemplate global food shortages over the coming years because of Russia’s military strategy in Europe, the decline in U.S. hemp production signals that a significant undersupply of hemp grain and cannabinoids may be on the horizon. According to CanxChange’s Q2 2022 Benchmark Report, the European hemp grain supply is exhausted. As of the report’s June publication date, an estimated 25 tons remained. While Canada’s reserves are not as low, the country – which is the global leader in hemp grain production – faced similar issues getting acres contracted this year.
Large hemp grain-producing states like North Dakota, Montana, and Minnesota, are respectively reporting only 2,007, 3,000, and 2,005 total acres this year. Those are split between cannabinoid, grain, fiber, and seed production, but whatever grain is produced will not be enough to satiate the North American market. Consequently, the realities of a small harvest will hit home this fall.
New Frontier Data predicts that hemp acreage in 2023 will double in the northern tier states striving to overcorrect for a grain shortage. Subsequently, prices for contracting conventional and organic hemp grain will surge in 2023, and be driven still higher by increased fertilizer prices.
On the cannabinoid side, there are rumblings of an impending biomass shortage which could cause prices to rise sharply over the coming year. Furthermore, a shortage would likely pressure acreage in Colorado and Oregon to swing upwards in 2023, particularly if growers regain confidence that they can fetch higher prices for cannabinoids which have suffered sustained beatings since 2019.
For comprehensive hemp acreage data, and updates among state licensing programs, check out the newly updated Hemp Data dashboard in Equio, New Frontier Data’s cannabis business intelligence platform.