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    Home » Blog » The Rise and Fall of Hemp: A Supply and Demand Story
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    The Rise and Fall of Hemp: A Supply and Demand Story

    adminBy adminMarch 18, 2023No Comments3 Mins Read1 Views
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    The Rise and Fall of Hemp: A Supply and Demand Story
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    It was just over four years ago when then-president Donald Trump opened the floodgates of U.S. hemp production with passage of the 2018 Farm Bill. In fairness, Barack Obama got the ball rolling four years earlier when he signed a bill that established pilot programs for growing hemp in this country. At any rate, the hemp market suddenly exploded in 2019.

    Today’s market is completely different. Some look at the legal hemp market as a story of a meteoric rise followed by an amazing crash. As a freelance writer who has been covering both economics and legal cannabis for more than a decade, I see it as more of a supply and demand story.

    A Misunderstanding of the Market

    I recently ran across a piece discussing the very same topic covered in this post. Much of what the article had to say was factually true. But a lot of what it implied was not. In fact, the piece demonstrates what is seen in so many similar articles – a clear misunderstanding of the market.

    The first thing to note is that there is a difference between hemp and CBD. Hemp is a plant. It is a type of cannabis plant. CBD is a cannabinoid extracted from hemp plants. Why does this matter? Because articles claiming that the CBD market has collapsed are flat out wrong. The hemp market has hit rough times for sure, but the CBD market is as robust as ever.

    According to statistics compiled in early 2023:

    • 79% of the respondents in a recent survey have used, or have considered using, CBD to treat arthritis pain.
    • The hemp-derived CBD market is expected to grow in excess of 41% by 2025.
    • The CBD food and beverage market is expected to reach nearly $5.9 billion by 2024.

    There is no way the CBD market has crashed. People are still using CBD in large volumes. So when people talk about a market crash, what they are talking about is hemp.

    As a side note, it is also important to distinguish between CBD and THC. According to the medical providers at Utahmarijuana.org, both CBD and THC are used medically. But THC is heavily regulated by the states. It remains illegal under federal law. CBD is fully legal and largely unregulated nationwide.

    Supply Outstripped Demand

    It is true that the hemp market crashed a couple of years ago. What happened? By legalizing hemp production nationwide, the federal government encouraged just about everyone with some disposable income to start growing. Growers began popping up all over the country with the expectation that the plant would make them wealthy. At its peak, the industry supported some 500,000 acres of production capacity. That was way too much.

    The market was flooded with hemp biomass shortly after passage of the 2018 Farm Bill. The result was predictable. Supply outstripped demand by a significant margin, causing the price on hemp biomass to plummet. Both plant material and extracted CBD became dirt cheap. A lot of businesses went under after investing a ton of money to get started and not generating enough revenues to cover what they borrowed.

    Hemp’s crash was not the result of a lack of government regulation. It wasn’t the result of the introduction of delta-8 or other alternative cannabinoids. It was a simple market correction made necessary by too large a supply. We need to learn a lesson from this and not attempt to regulate in hopes of forcing market success. Leave the market alone. It is capable of taking care of itself just fine.

    CBD and THC
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