Making Heads and Tails from an Upended 2021 U.S. Hemp Harvest
By Eric Singular, Director, Hemp Business Journal
This autumn marks the seventh season for an industrial hemp harvest since passage of the 2014 Farm Bill. While producers in some states could legitimately be considered veterans of hemp production (albeit through much trial and error), the learning curve remains steep for producers at large throughout states like South Dakota, which is ushering in its first year of legal hemp production. As cultivators strive to gather their crops from the field, a few vital trends bear noting by stakeholders and policymakers alike.
The first indicator about the state of U.S. hemp production is overall acreage. It is estimated that approximately 200,000 hemp acres were licensed in 2021. However, a year after seeing nearly an 85% reduction from licensed acres to planted acres in 2020, it seems likely that only a fraction of those licensed acres will actually yield any harvested crop.
Based on the available data, New Frontier Data projects that approximately 23,400 acres of hemp will be harvested in 2021. Yet, the number of hemp production licenses issued by state agriculture departments also fell, from nearly 20,000 in 2020 to under 10,000 in 2021.
The significant variability in recent years between licensed, planted, and harvested U.S. hemp has been compounded by bureaucratic inaction and red tape. The Department of Agriculture (USDA) and its subagencies – e.g., the National Agricultural Statistics Service (NASS), Agricultural Marketing Service (AMS), and Farm Service Agency (FSA) – have not collected common survey or U.S. Census data from hemp producers. Rather, the statistics for estimating acreage have been collected in a patchwork fashion, relying inconsistently on state agriculture departments and planting reports.
After having requested permission from the White House to survey about 20,000 American hemp farmers, the NASS announced in August that it would proceed with a large-scale survey to gain insight to the hemp market that has formed since the crop was federally legalized under the 2018 Farm Bill. Due out on October 18, the inaugural Hemp Acreage and Production Survey will be sent to more than 20,000 U.S. licensed producers to gather information across all production verticals: i.e., hemp flower, hemp grain for human consumption, fiber hemp, seed hemp grown in open fields, hemp for transplant production, and hemp for seed production grown under protection.
The collected data will shape the benchmark for hemp acreage and production, and better inform regulatory agencies about their program-support responsibilities related to domestic hemp production. It should likewise provide key market insights to producers, state governments, processors, and other industry stakeholders.
Though the Association of American Feed Control Officials (AAFCO) recently dealt a blow to a promising opening of the animal feed market to hemp grain and its byproducts for the foreseeable future, the market for hemp grain for human consumption will remain a key sector to watch in the coming months. Preliminary reports indicate that supply is short for grain users, due to a confluence of factors including inadequate acres under contract, plus low yields and crop failure resulting from Western states’ continued historic drought.
Noting Health Canada’s hemp production data since 2018, this year saw the lowest hemp acreage planted in the aggregation of available data. A shortage of hemp grain produced in 2021 will trigger rising prices for conventional and organic grain in the months ahead, along with likely overproduction in 2022.
Last month, the National Association of State Departments of Agriculture (NASDA) urged the USDA to bifurcate hemp’s classification. While cannabinoid production would likely remain under USDA’s Specialty Crop Block Grant Program, hemp production for grain and fiber could be designated as an agronomic commodity. That could be significant both for future industrial hemp research and development and its commercialization, as it would open new channels for grant funding and subsidy considerations.
U.S. producers specifically grew more hemp crops for fiber in 2021 than in any other year since the passage of the 2014 Farm Bill. Nevertheless, they remained vexed by the chicken-and-egg dilemma continually confronting the U.S. fiber supply chain: Large acreage is necessary to convince investors to provide capital to build regional processing facilities, yet established processing infrastructure is necessary to warrant large-scale hemp fiber production under contract.
This year, producers walked before they ran, growing small plots comparing the performance and yield of multiple hemp fiber varieties to advance agronomic understanding – e.g., optimal planting dates, genetics, harvesting, and retting techniques – and to supply a feedstock for advancing the material science of separating hurd. While such developments present new opportunities to local farmers within practical proximity (i.e., a 100-mile radius) of the regional processors, the markets for hemp-based fiber products are likely to develop piecemeal as both the capacity and quality of the supply chain slowly ramp up.
In the next six to eight months, a handful of regional fiber processors should be ready to run material, and will need some feedstock of retted and baled stalks prior to 2022 harvest. However, within 12 months, those facilities will be fully operational; in order to justify the large capital needed to build them, they will need to be running at full capacity (i.e., generating tons of biomass an hour).
New Frontier Data expects that regional fiber processors in 2022 will be contracting large acres of fiber hemp production to produce the feedstock necessary to run facilities at full capacity throughout autumn 2022 to autumn 2023. Paired with more acres under contract for grain production in 2022, such demand may very well result in substantial increases of planted and harvested hemp acres in the U.S. next year. Yet, that does not necessarily mean more licensees; rather (given the high cost of transportation), New Frontier Data expects for more acres to be licensed by fewer producers.
The first wave of hemp-fiber products will be hurd-based, wood alternatives which require low processing requirements (e.g., animal bedding and absorbents). As production techniques and processing advance, both the quality and breadth of material grades will improve. The second wave will feature products requiring superior scale or quality to produce (e.g., construction materials, particleboard, cellulose insulation, flooring, fiberglass substitutes, or nonwoven insulation).
While the Biden administration originally raised hopes for regulatory clarity, in recent months it seems that optimism about the federal legalization of cannabinoids has soured. In July, the Food and Drug Administration (FDA) rejected New Dietary Ingredient (NDI) notifications submitted by Charlotte’s Web and Irwin Naturals. In the absence of any timeline or update from FDA as to when the industry can reliably anticipate a regulatory framework for CBD, the move cast looming doubt about the future for the entire cannabinoid sector as the agency expressed concern over the scientific evidence submitted to substantiate CBD as a legitimate dietary ingredient.
Meanwhile, the price for CBD biomass is at an all-time low, and while 2021 acreage data might be construed to mean that U.S. hemp production could soon become obsolete, the estimates for 80%-90% of acreage planted in the U.S. since 2018 had been singularly dedicated for CBD. Instead, the 2021 decline of hemp acreage was indicative of the industry’s trying to balance supply with premature market demand. Today, tons of biomass sit decomposing on American farms from coast to coast. As the market matures, it will become easier to determine how many acres of CBD hemp production are necessary to avoid oversupply and compliance issues that have thus far plagued farmers. Supply-chain optimization and technological advancements will ultimately make it so that less biomass is necessary to supply the market with high-quality cannabinoid ingredients.
In the interim, delta-8 THC had been a saving grace for CBD producers and extractors, but its promise proved short-lived. In September, coinciding with federal guidance from the FDA and the Centers for Disease Control and Prevention (CDC), the price of delta-8 THC declined for the third-consecutive month, slipping below $1,000 per kilogram in a 9% decrease from August.