With the recent announcement by Amazon deciding to actively and publicly lend their support for the federal legalization of Cannabis in America, it would appear that the goal of complete plant legalization at a national level is closer than ever.
As I’ve been sharing for the last 5 years here at Cannabis Animus, that objective is ultimately what matters. The struggle has always been between government propagandists, bureaucrats, and politicos who want to effectively 'own' and therefore control the future of the entire plant.
This would include control and authority over any/and all substances derived from any part of the Cannabis plant genus (and hybrids) instead of private citizens, farmers, scientists, entrepreneurs, and investors.
Is Now the Right Time to Invest in Hemp?
In business and financial circles having one of, if not the biggest company in the world to back Cannabis legalization has not only added some much needed heavy-weight support to the cause, it has perhaps most importantly sent a signal that there are vast amounts of money to be made in the industry after all. And companies like Amazon are savvy enough to jump on the investor’s train early as expected.
And while this appears to be good news for Cannabis legalization theater, what, if any, impact does it have on the Hemp market for those of us who actually live and breathe it every day?
Is now the ideal time to invest in Hemp?
Legalized Hemp - The Good and Bad
Following the Agriculture Improvement Act of 2018, (more commonly known as The 2018 Farm Bill), many Hemp experts predicted a massive influx in interest, investment, and growth for the “Hemp” markets and emerging industry as a whole. If the investors ever knew what these “experts” were really doing, the “hemp market” would never have even gotten off the ground.
Although initial interest in the industry did indeed seem to skyrocket recently (as did the number of licenses issued to prospective growers), 2021 has seen a surprising shortfall in the number of licenses issued. In fact, for some states, the figure is less than half the figures of 2020 which indicates no growth in licensees for 2021.
Whether these concerning statistics are related to an industry desperately trying to recover from the economic outfall of the pandemic, or whether after 7 years of legal growers struggling against bureaucracy, an overly demanding marketplace and inefficient federal bureaucracy are to blame.
Hard to say exactly, but it is obvious that not ALL of the necessary players have yet been confident to take their rightful seats at the table. But the music is about to stop.
Expanding Demand For Hemp
With all of the incredible uses for which Cannabis and “hemp” have been utilized for millennia, the list is still growing. From paper products to modern biodegradable plastics, plant and animal feed, and of course textiles, and literally tons of cosmetics, etc. There appear to be 2 current and distinct problems facing Hemp growers today (i.e. National Raw Agra Material Processing & Distribution).
The first problem is that the initial growers and farmers who understood the consumer and the market at large are getting squeezed out by more powerful interests. As expected, many of the new wave of profit-seekers who decided to jump straight into the market appears to have far overestimated demand for the product. As such, there is now a surplus of Hemp saturating the market.
What a great problem to have you might be thinking. And, how can you possibly grow too much of your product?
Well, unfortunately, in many cases, these new and emerging industry leaders and profit-seekers just don’t know how to manage surpluses, much less forecast demand accurately during another “novel” SARS virus.
Advocacy group Vote Hemp recently noted that the 2019 US Hemp Grower License Report stated that licensed domestic Hemp acreage had quadrupled to 510,000-plus acres, over the previous year 2018 figures… which is obviously inaccurate at first blush.
This influx of farmers and growers wanting to start growing Hemp was expected and should be recognized.
However, it appears the new sector's supply chain was just too immature to be able to effectively cope with all the new information.
Much of the hemp surplus carried over into 2020 and the lack of experienced, efficient 2021 buyers at the processing level were exacerbated the detrimental effects of the pandemic scare which is still compounding the many other problems for this critically important, future industry.
Only a few, big, vertical players banked anything in 2020 from a good old-fashioned productivity and profit standpoint. Past performers like Canopy Growth Corp (CGC) have given up the limelight to rising stars like GrowGeneration Corp (GRWG). The landscape changes quickly, and OPE (other people's money) is lost more often than it is made.
While some of the Hemp farmers who started growing Hemp in 2018 and 2019 left the industry due to their disappointment with "the situation".
Those lacking the experience or expertise in larger-scale cultivation and logistics of hemp, be that on the equipment side of things, techniques, or knowing the intricacies of such fundamental things as using the best soil for Cannabis, were quickly replaced by new and more experienced Hemp farmers hired to oversee and manage a booming and profitable CBD market where an apparently insatiable demand was reflected in a sustained eagerness to invest.
Is Hemp a Good Investment?
Industry experts and experienced Hemp farmers now believe the surplus represents an opportunity to diversify away from just supplying Hemp solely for CBD products. Pivoting instead to focus on human & animal feed, automotive, construction materials, and holistic medicines is also proving to gain momentum and investment.
With things beginning to start getting back to normal after the pandemic, growers are hopeful for a resurgence in high demand for Hemp, Hemp foods, and CBD products.
Some forecasts are predicting that by 2030 the licensed domestic Hemp acreage will be in the region of 9-10 million acres.
Hemp Investment Concerns
There are still concerns about the relative immaturity of the Hemp industry and worries that its fragile logistics and supply lines may represent considerable roadblocks to achieving these goals. Some call for significant regulatory and legislative support from both state and federal governments.
Many potential manufacturers who could otherwise put the fibers to good use are reluctant to change their processes and products for a new product that may face bottlenecks logistically and hamper their businesses' ability to cater to customer demand.
Another problem that Hemp manufacturers may face is actually a combination of two important issues; a lack of consistency and support at a state level in terms of legislation and investment, and then also a demand from an oversaturated part of the market (namely CBD oil).
The first of these issues; the lack of state-to-state consistency in terms of actual logistical implementation of growing Hemp was, unfortunately, something the industry was always going to have to deal with.
Legal cannabis also faces the uphill battle of having to contend with different state legislatures enacting policy around growing, which can (and has) caused many new legal businesses to be restrained by red tape and stopped from achieving their full potential.
Additionally, the lack of investment in the Hemp industry by state legislatures varies widely and doesn’t appear to have the groundswell of support that many campaigners who championed the 2018 Farm Bill expected to see.
On the other hand, whilst demand for CBD and Hemp oil continues to grow many Hemp businesses continue to be frustrated that the product is not being fully utilized by industries where Hemp is a natural fit. This is in part due to the lack of government support, funding and therefore a lack of emphasis on innovation.
Should I Invest in a Hemp Farm?
At this point you are probably wondering if everything in the Hemp industry seems so gloomy, why should you consider investing?
And you are more than likely also wondering what on earth cannabis legalization and Amazon’s recent support have to do with anything?
Well, the answer to that is it is precisely because of these recent struggles that Hemp investment could be so potentially lucrative.
The old adage, (simple as it may seem) of “buy low, sell high” is pertinent because the industry is no longer in start-up mode. Quality assets, resources, and intellectual property is often undervalued.
This is now the beginning of the industry's growth stage and therefore an ideal time to invest without being a first-mover.
As signaled by Amazon’s support of Cannabis legalization, this when "Big Business" is now extremely interested in the success of the Cannabis industry as a whole. Many financial experts believe that this level of support and investment is signaling the imminent legalization of Cannabis at the federal level.
If federal legalization does occur, then a combined legal industry of both Cannabis and Hemp is likely to work in tandem to achieve its goals including waste reduction, better forecasting, and industry diversification.
Many Hemp growers have had to make the horrible decision to destroy crops that are too high in THC to ensure production remains legal, but of course in a world where cannabis too was legal on a federal level, not only wouldn’t these crops be wasted but they would supply a business with another legitimate form of revenue.
Hemp Industry Growth
The size of the global industrial Hemp market is expected to grow to over $36 billion USD by 2026, a recent report by Facts & Factors suggests, that’s a compound annual growth rate of around 34%.
Whilst there are obviously already some massively wealthy investors and backers in both the Hemp and Cannabis industries, Amazon’s public support indicates to many a significant increase in investment will soon be on the cards, as well as the opportunity to utilize already well-established supply chains (Amazon Prime) to get the product to customers, once federal legalization comes to pass.
Of course Amazon already stocks and sells thousands of Hemp and CBD-related products and while many of these products are marketed as herbal CBD supplements, one imagines that their Hemp product range will increase massively if they do invest in the industries and if legalization can be achieved.
That being the case, investing money in the Hemp industry now, whilst there is still so much room for growth is seen by many industry experts to be a very savvy move.
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TweetSharePinShare0 SharesWith the recent announcement by Amazon deciding to actively and publicly lend their support for the federal legalization of Cannabis in America, it would appear that the goal of complete plant legalization at a national level is closer than ever. As I’ve been sharing for the last 5 years here at Cannabis Animus, that […]
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