3 Major Challenges Facing the Hemp Industry in 2021
Hemp, marijuana’s less known but still very “industrious” cousin is slowly emerging as one of the most important cash crops of the 21st century. While it is typically not potent enough for recreational consumption like marijuana, it is a useful cash crop that can be processed into a fiber that can be used to make various useful products. In fact, the global hemp industry is projected to reach $5.33 billion this year. However, the hemp industry is not without its problems. What are the 3 major challenges facing the hemp industry in 2021?
As with any product with tremendous potential, there are many challenges standing in the way of hemp becoming one of the leading raw materials for industrial fibers in the modern economy. Investors either currently holding or intending to buy some hemp stocks should pay close attention to the following challenges, as they will have a significant impact on the direction of hemp stocks in 2021. The 3 major challenges facing the hemp industry in 2021 are:
1. Plummeting Prices as Supply Increases
Due to the various applications of industrial hemp, there are several companies developing new products produced from hemp and new ways to grow the plant to maximize their efficiency. As a result, the hemp plant is in more demand than ever before and it is being produced in quantities never seen before.
This increase in supply, while demand stays limited to only the industrialized countries means that it is a buyer’s market. Cannabidiol (CBD), the primary cannabinoid in hemp and what buyers are interested in has experienced severe price drops in recent years. Market prices diminished from USD $3 (per % of CBD per pound) to less than $1 in under two years. Additional price drops are expected as more commercial growers come online internationally – making this one of the major challenges facing the hemp industry in 2021.
2. Regulatory Compliance
Industrial hemp is highly regulated – especially in the United States. Since it is legally considered as cannabis, hemp suffers many of the problems that marijuana faces in its battle for legal status. The THC content in hemp is highly regulated. This is because a high concentration of THC would make it recreational, and that is prohibited in the US on a federal level.
However, while the buyers of hemp are more interested in the CBD than the THC in the hemp, the higher the THC, the higher the level of CBD in the plant. And with a 0.3% THC limit, many farmers don’t feel like they are being given a chance to compete in the CBD industry with other nations producing at higher levels of THC. Furthermore, many of the growers find this target much more difficult to hit with the non-flowering plants they opt for. This limit, therefore, leads to a ton of waste and loss since the plants that are over the 0.3% THC limit are destroyed, and those far below will go unsold because the buyers want a higher CBD concentration, and therefore a higher THC limit. As you can see, regulation is certainly one of the major problems facing the hemp industry in 2021.
3. Access to Financing
Because hemp is classified as part of the cannabis family, it suffers the same problems with trying to access financing that recreational marijuana also faces. Cannabis companies cannot access bank services as readily and freely as the other industries can. Cannabis is still illegal on the federal level, and that makes it hard for the banks to work with them, or even provide liquidity and financing for the cannabis industry. Hemp is suffering from the same problem.
However, there is hope on the horizon on this issue. The SAFE Banking Act is due to be debated and voted on in the Houses of Congress anytime now. It will allow banks to conduct business with the cannabis industry as freely as they do with other industries. The SAFE Banking Act is still a bit of a long shot though since the Houses of Congress are split between the Democrats and the Republicans.
3 Major Challenges Facing the Hemp Industry in 2021
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