The Hemp Market Crash: What Caused It and What's Next?

The hemp market in Colorado was booming until it suddenly crashed. Many producers went bankrupt, leaving many to wonder what caused the crash. According to one expert, there were several factors that led to the collapse of the hemp market, including inexperienced farmers who expected to make quick profits, a steep learning curve, high supply that drove prices down, and insufficient processing infrastructure. Today, there are too many CBD products and companies on the market that use too little hemp.

This has caused an oversupply of hemp in places such as Colorado, Kentucky and the Ohio Valley, resulting in hemp prices per pound plummeting. The reluctance of the Food and Drug Administration (FDA) to approve CBD products has also been a factor in the market crash. The main cause of the fall seems to be simple economics. Oversupply and lack of federal regulations have caused problems for the industry.

As a result, many states have banned psychoactive cannabinoids derived from hemp, but this has done little to slow down transactions in both the retail and mass markets. THC derived from hemp has been marketed on the market at much cheaper prices than if it is obtained from marijuana. This has caused several CBD companies to file for bankruptcy, including GenCanna, a hemp processing plant in Winchester, Kentucky. Sales of THC derived from hemp and similar products appear to be poised to grow continuously and will be relevant to any new state or federal regulations that emerge.

Hemp-derived THC has been allowed to infiltrate the market as long as it is below the legal threshold per serving. Consumers receive mixed messages about the legality of hemp products, while unscrupulous companies promote CBD as a potential treatment for all diseases exposed to the sun, including coronavirus. We suspect that combined regulations will be contemplated in the future at the state and federal levels, and hemp cannabinoid companies would do well to prepare to take advantage of any opportunities that arise. Under federal law, industrial hemp cannot contain more than 0.3% THC, the compound in cannabis that causes people to get high. Thousands of conventional farmers, marijuana growers and novice businessmen also rushed to plant hemp that year, eager to cash in on a recently legal crop. Tom Pires, a farmer from Kings County who also manages a cotton grinder in Riverdale, has been working with a hemp supplier on experiments that grow hemp for fiber. However, to get farmers interested in growing hemp fiber, Pires said he is looking for contracts and buyers who are willing to pay some upfront costs.

The growth of indoor or greenhouse spaces authorized for hemp production shows that the CBD market is leaning towards flowers, as farmers looking for this product tend to grow their plants indoors. The crash of the hemp market in Colorado was sudden and unexpected. Many factors contributed to its downfall, including inexperienced farmers who expected quick profits, high supply driving prices down, insufficient processing infrastructure and lack of federal regulations. The oversupply of hemp has caused prices per pound to plummet and several CBD companies have filed for bankruptcy. Sales of THC derived from hemp are expected to continue growing as new state and federal regulations emerge. Hemp-derived THC is allowed on the market as long as it is below the legal threshold per serving.

To get farmers interested in growing hemp fiber again, contracts and buyers who are willing to pay upfront costs are needed. The future of the hemp market is uncertain but with proper regulations and contracts in place it could be revived once again.

Lloyd Pintello
Lloyd Pintello

Incurable pizza nerd. Coffee lover. Wannabe web enthusiast. General music lover. Infuriatingly humble sushi evangelist.