Industry Trends Delivered Fresh from NoCo Hemp Expo

By Trevor Yahn-Grode, Data Analyst, New Frontier Data

In the seventh iteration of the annual event, the 2021 NoCo Hemp Expo represented the first in-person conference attended by most of its visitors in over a year. During the conference, the hemp industry’s intelligentsia shared their thoughts on the state of the industry, including what to watch for in 2021.

Among some key takeaways:

Oversupply Is Worse Than Thought

The glut of biomass in the market reached critical levels in 2020. All told, enough CBD could be extracted from the biomass harvested that year to allow 285 million consumers use 50 milligrams daily for another 365 days.

In 2020, Charlotte’s Web — the hemp industry’s most successful CBD brand – generated $95.2 million in revenue while contracting out approximately 1,000 acres. Were that ratio applied across the industry at large, it would require consumer spending of nearly $15 billion USD, or roughly 4x larger than New Frontier Data’s projection of $3.83 billion. Based on that, it may be reasonably assumed that the CBD biomass market is – at minimum – oversupplied by a factor of 4. The lessons for 2021 are clear: Processors must find ways to outcompete and outlast their competitors for market share in a segment that cannot support the number of businesses currently engaged in it, and farmers SHOULD NOT GROW any CBD unless they have already secured a sales contract ahead of time.

That noted, consumer demand is not diminishing. Rather, the amount of acreage and processing necessary to feed existing demand is significantly smaller than the current capacity of the market. CBD as a market segment will survive its shaking out, though many companies currently engaged in producing it will not.

Fiber and Grain Are the Future

In the aftermath of the COVID-19 pandemic and myriad disruptions in 2020, the collective focus of the hemp industry is quickly shifting from CBD, toward other opportunities.

In the fiber space, numerous primary processing operations are coming online in 2021, ostensibly solving the long-standing chicken-and-egg dilemma commonly interpreted as the primary market barrier for fiber to overcome. The next step for the fiber industry is securing end markets – i.e., identifying applications by which hemp fiber can achieve or approach price parity with its competitors.

Hemp grain has meanwhile become the second-largest segment of the industry after cannabinoid production, accounting for roughly 10% of total U.S. acreage. Fueled largely by increasing demand for plant-based proteins, the hemp grain segment is projected to grow at a compound annual growth rate (CAGR) of 16.5% over the next five years, to reach beyond $144 million USD by 2025.

Subsequently, New Frontier Data expects grain and fiber acreage to surpass cannabinoid acreage within the next two or three years.

Coming Regulations in 2021

Mixed Signals from the FDA

The FDA continues to inch toward development of clear rules to govern the CBD industry, but the resignation of Dr. Amy Abernathy has sparked unease among many industry stakeholders. Abernathy had been the leader of the regulatory agency’s CBD task force since early 2019, and was seen by many as a key industry ally. Despite the FDA’s promise to create legal pathways for CBD products, and a new U.S. presidential administration widely seen as pro-cannabis, the FDA has maintained a largely laissez-faire attitude towards regulating the industry. However, that attitude cannot persist indefinitely. Given the urgent need for clear regulations in the space, New Frontier Data expects to see significant regulatory action from the FDA before year’s end.

Delta-8 THC Will Be Regulated

Minor cannabinoids will also not escape regulation: Delta-8 THC, in particular, is drawing national attention since it is an intoxicating substance imbued with psychoactive effects similar to marijuana, but which due to legal loopholes can be sold more or less indiscriminately, even in states without legal marijuana laws. Delta-8 processors are not subject to the considerable financial barriers and taxes faced by marijuana producers, nor do vendors face the heavy regulations borne by dispensary operators. It is not a sustainable situation. New Frontier Data anticipates significant regulatory barriers to be erected against the manufacture and sale of Delta-8 THC within the next 6-8 months.

Hemp Grain in Animal Feed

Not all the coming regulatory changes will be barriers: As lawmakers begin to understand the many nuances of the hemp industry, more practical and practicable laws and regulations are taking shape.

One example is seen in the realm of animal feed. Currently, it is illegal to use hemp seed to feed animals destined for human consumption, though studies have shown that doing so can significantly improve the nutritional profile of meat. The disconnect is being addressed, thanks in part due to the USDA’s accepting input from farmers, and also to efforts by the Hemp Feed Coalition, led by Hunter Buffington, which last month submitted its first application to approve hempseed in chicken feed. The approval of hemp grain in animal feed would be a game-changer for the industry, as it would open an entirely new channel of hemp-fed meat products, and it would benefit farmers who view animal feed both as a dependable market and a hedge against uncertain demand for their grain elsewhere.