Double-Digit Growth In This Boring(?!) Industry
Sure, no one ever wrote a rock anthem to hemp. The Beatles didn’t weave coded allusions to hemp in their songs. But if the hemp industry’s double-digit growth trajectory is “boring,” then sign me up.
Marijuana and psychedelics such as magic mushrooms and LSD get all the glory. Don’t give short shrift, though, to hemp. Marijuana’s often-ignored cousin is less glamorous but it’s nonetheless a major investment theme.
According to the research firm Research and Markets, the global industrial hemp market is projected to grow from USD 4.6 billion in 2019 to USD 26.6 billion by 2025, posting a compound annual growth rate of 34%.
To be sure, the hemp industry experienced a setback this week, but tailwinds for long-term growth remain in place.
In a notice scheduled for publication in the Federal Register on August 14, the U.S. Department of Agriculture (USDA) explained its rationale for denying hemp growers access to federal COVID-19 relief.
The USDA said it was only providing benefits under the Coronavirus Food Assistance Program (CFAP) for producers of commodities that experienced a 5% price decline between January and April. USDA’s analysis concluded that hemp did not meet that threshold.
The notice states: “While the national price did decrease during the first quarter of 2020, it was only a 1 percent decrease, which did not meet the 5 percent or greater decrease in price for CFAP eligibility. The national price is represented by the average of 5 regional published hemp biomass benchmark midpoints. USDA has determined hemp is not eligible for CFAP due to not meeting the 5 percent or greater price decline, nationally.”
Hemp goes mainstream…
Hemp industry leaders had lobbied for COVID-19 relief and the USDA’s decision was a disappointment. Then again, the decision is testimony to the hemp industry’s resilience, even during the coronavirus-induced recession. There’s still plenty for hemp advocates to cheer.
Growing industrial hemp became illegal in the 1970s when the federal government strengthened the criminal code on marijuana and related products. Hemp got caught up in the “war on drugs,” but it contains very little of the psychoactive component tetrahydrocannabinol (THC) found in marijuana that makes people high. For decades, hemp has gotten a bum rap.
But these days, hemp is legal (thanks to the 2018 Farm Bill) and corporate America is incorporating the plant within a wide variety of consumer products.
Hemp is the strongest natural fiber in the world and boasts up to 50,000 uses, many of them in the industrial sector. Hemp also conveys a multitude of food, beverage, health, and personal care applications (see graphic).
Both marijuana and hemp are sources of cannabidiol (CBD), the cannabis-derived compound that consumers increasingly use for relief from muscle and joint pain, anxiety, depression, insomnia, and a host of other psychological and physical ailments.
If you’re looking to target a promising sub-sector of the cannabis and hemp industries, consider companies involved with producing and marketing CBD. The compound is becoming a familiar household item.
Unlike its cousin THC, CBD doesn’t give users a buzz. CBD also happens to be one of the biggest investment opportunities you can find. According to investment research group Kryptoszene, U.S. sales of CBD products are on track to reach $23.7 billion in 2023, a whopping 374% increase from 2019.
CBD is migrating into a variety of consumer product categories including food and beverages, pharmaceuticals, health, wellness, and beauty aids. Consumer and health services giants are jumping aboard the CBD bandwagon, to either develop their own products or purchase smaller CBD companies. Demand for CBD is fueling demand for hemp.
The hemp industry is generating thousands of jobs and garnering ever-more political clout. Case in point: U.S. Sen. Charles Schumer (D-NY) last week asked USDA to delay issuing final hemp rules under the 2018 Farm Bill until 2022, to delay costs associated with the new U.S. Domestic Hemp Production Program.
If implementation of the new rules is postponed, hemp growers and producers could continue to operate under the pilot program of the 2014 Farm Bill. That would let them avoid enormous compliance costs associated with the new rules.
Cannabis companies are eyeing hemp-related firms for acquisition, as the cannabis industry continues to consolidate. The economic and political trends are clearly in favor of hemp and marijuana, especially the latter. The global movement toward marijuana legalization is unstoppable.
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Questions about profitable opportunities in marijuana and hemp? You can reach me at: email@example.com
John Persinos is the editor-in-chief of Marijuana Investing Daily.