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2018 Hemp Harvest – Biomass Pricing Trends

With harvest upon us, farmers and processors are working together to establish a fair market price for hemp biomass.  This is challenging because as an industry, we need to better understand the relationship between supply and demand. The biggest question, is there enough biomass to supply the hemp processors at full capacity this year?  The answer will impact current and future pricing of biomass, but this is a complicated subject due to the lack of traceability in the Hemp industry. Our industry lacks baseline data such as total biomass produced and total sales of CBD products to end consumers.  In addition, the 2018 farm bill will have a tremendous impact on demand. The answer to supply and demand in 2018/2019 is evolving as market speculation drives the price of the first biomass sales, we look into three important questions, and analyze the factors driving the market.

What is the current spot price for hemp biomass?
How will hemp biomass prices move in the next 3 months?
Did USA farmers produce enough hemp biomass to fulfill demand?

What is the current spot price for hemp biomass?

Currently the spot price for finished, dried biomass lots intended for extraction is between $3.50 – $4.75 / % / lb depending on volume and quality.  This price is being influenced by a few factors.  The first factor is that early flowering varieties of hemp are harvested.  This eases the pressures on processors who need to procure biomass supply.  However, the processors should be competing over this early material, and with prices in the $3.50 / $4.50 range, this indicates they have an alternative source of CBD or that the buying market is not overly competitive.  To me, this is an early warning sign that demand from processors will not keep up with the supply of hemp.

The price of biomass is also being driven by farmers who are avoiding future pricing uncertainty.  Farmers have a fear that there will be more biomass than can be sold in 2018 / 2019. If this is the case, prices will plummet because not all farmers will be able to sell their crop and competition to monetize crops will be intense.  Because of this fear, securing a contract early in the season insulates a farm from pricing volatility in hemp biomass. We suggest farmers consider pre-selling a portion of their crop to hedge against price fluctuation and create guaranteed revenue.

If you have 2017 material, SELL IT NOW.  I asked our Washington Cannabis team about the relationship between extraction material from 2017 versus the new 2018 crop and here is what they said.  Expect to take a 50%-65% haircut on prices. “A couple weeks ago it would have been about .50 vs .25/g for 2018 untested to 2017 untested. Right now we’re probably looking at .45/g vs .15/g for the same..” -Tyler Lamont

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