Kentucky Hemp Industry In “Holding Pattern” After Recent Turbulence

Jun 8, 2020

Credit Liam Niemeyer / Ohio Valley Resource

  Kentucky agriculture leaders and economists say the state’s turbulent hemp industry is still trying to find stability this year after uncertain federal regulation and overproduction led to a tanked market for the crop and subsequent bankruptcies.

Kentucky Department of Agriculture data released in late May shows there are 960 licensed hemp growers this year. That number is a slight decrease from 978 in 2019, and a stark contrast compared to the change from 2018 to 2019, when the number of hemp growers more than quadrupled from 270. 

 

University of Kentucky Assistant Professor Tyler Mark specializes in hemp economics. He said because of the large influx of hemp growers last year in multiple states, too much hemp was produced, causing the price of hemp biomass to tank. Past KDA data shows 92% of Kentucky hemp grown in 2019 was for CBD oil, a popular chemical compound with alleged medicinal benefits

 

The overproduction of hemp biomass for CBD and subsequent price crash led to some hemp companies to file for bankruptcy and some hemp farmers to lose hundreds of thousands of dollars on unpaid contracts for their hemp.

 

“Acreages in other states are going to pick up as well, so this oversupply issue we had in 2019 could persist and probably will persist into 2020,” Mark said. “Early on this year I was talking with producers, ‘We need to think about how we’re going to produce this stuff for less than a dollar a [CBD percentage] point.’”

 

Mark said the price of hemp biomass for CBD remains low and could remain low through this year. One hundred fifty seven hemp licensed growers this year aren’t planning on growing hemp this year, instead storing hemp grown last year to sell this year. 

“I think to some degree we’re still in a holding pattern,” Mark said. “You got a lot of regulatory uncertainty out there. I don’t see prices making a big rise up to where we saw them in early 2019.”

 

He said many states including Kentucky are still regulating hemp under state pilot programs allowed through the 2014 Farm Bill, while other states are regulating hemp through the 2018 Farm Bill that legalized the cultivation of hemp, with states submitting regulatory plans to the U.S. Department of Agriculture. How CBD will be regulated by the U.S. Food and Drug Administration also remains a question with significant financial implications for the hemp industry.

 

“The FDA’s inaction is the biggest with the CBD industry in the United States,” said Kentucky Agriculture Commissioner Ryan Quarles. “If the FDA would simply act, it would be encouraging for Kentucky’s hemp processors and producers. We never thought a half a decade would pass without them issuing a regulatory framework.” 

Quarles is in favor of the FDA regulating CBD as a nutritional supplement that could be added into food products,  which he thinks would give a boost in demand for hemp farmers. Another regulatory option the FDA could choose is regulating CBD as a pharmaceutical with stricter regulations, given the compound’s alleged medicinal effects that scientific studies are exploring.

 

Quarles said he hopes this year, more hemp farmers decide to move their crop away from CBD into other uses of hemp.

 

“We’ve always encouraged our growers and producers to look beyond just one specific product, and so we would like to see more exploration of the fiber and grain side of hemp,” Quarles said.