Texas farmers may have missed the hemp boom.
Spot prices for hemp, a non-psychoactive cousin of marijuana that has a variety of consumer and industrial uses, have dropped more than 80% since last summer, dragged down by a nationwide supply glut.
The trend has removed some of the luster from what has been a widely hyped crop — just as Texas is poised to begin the process of issuing permits to the state’s inaugural growers. The Texas Department of Agriculture has said it expects to start accepting online applications for hemp licenses on March 16.
“Most of the smart farmers, they are going to be growing two to three acres or nothing” this year because of the prices declines, said Kyle Bingham, a farmer in Brownfield southwest of Lubbock who serves as vice president of the Texas Hemp Growers Association.
“Four months ago, you might have seen people who were ready to plant thousands of acres, but I think a lot of that has dropped out,” Bingham said. ”It’s all just (research and development) at this point.“
Such comments mark a departure from the prevailing exuberance that surrounded hemp when Texas lawmakers legalized it last June. Would-be Texas growers flocked to hemp-related conferences and informational meetings in the ensuing months, lured by accounts of astronomical prices for the crop reaped by farmers in states already allowing it to be grown.
When the first Texas hemp farmers finally get permits, however, they’ll be entering a market with a nearly 18-month supply glut, according to some estimates. About 230,000 acres of hemp were planted nationwide last year, according to Vote Hemp, an advocacy group, triple the amount in 2018.
“There was massive speculative overproduction in 2019,” said Eric Steenstra, president of Vote Hemp. “Even though the market is growing and expanding, it wasn’t growing that much.”
Amid the glut, hemp prices have tanked. PanXchange, which provides commodity price quotes, pegged benchmark Colorado hemp at 72 cents per pound in February for each percentage point of cannabidiol, or CBD, it contains — down 75% from $2.88 in the same month a year ago and more than 80% from $4.25 in July.
CBD has a multitude of perceived health benefits, and strong consumer interest in it has been responsible for the bulk of hemp excitement — and sales — in the agriculture sector. Hemp fiber has significant potential industrial uses as well, but the United States so far lacks sufficient processing facilities for non-CBD hemp to generate much demand.
That means most newly minted Texas hemp farmers will be targeting CBD markets this year despite the steep slide in prices.
They’ll face a tall order to achieve profitability, however. Texas A&M AgriLife Extension Service calculates the break-even point for benchmark hemp at $1.56 per pound for each percentage point of CBD it contains — more than double recent levels.
The market for hemp “definitely looks less favorable now than it looked three months ago,” said Calvin Trostle, a professor and agronomist at Texas A&M AgriLife, although he noted that actual break-even points for farmers will vary according to their individual circumstances.
“The issue is that a lot of the (hemp) demand for 2020 has already been produced. It’s the 2019 crop, sitting in warehouses, that hasn’t been processed yet,” Trostle said.
’Enthusiasm is still there’
Still, the depressed market won’t necessarily curb what could be a rush for Texas hemp licenses when the state’s agriculture department starts taking applications. That’s because many prospective hemp farmers are likely to apply regardless but hold off on seeking permits to produce as much as they initially contemplated during the first growing season.
“We will still have a large amount of people apply — maybe they plant half what they were going to plant (this year), or maybe they plant 20%,” Texas Agriculture Commissioner Sid Miller said in a recent interview.
But “the enthusiasm is still there” for hemp as a long-term Texas crop, Miller said. “Some of the excitement has waned (because of the recent price declines), but for the most part it is all still there.”
Since the state Legislature legalized hemp last summer, the Texas Department of Agriculture has worked to develop rules and testing requirements for the highly regulated crop, and to get a green light from the federal government. The 2018 U.S. farm bill set the stage for hemp to be legalized nationwide, although about three dozen states — but not Texas — already allowed it because they’d previously opted to participate in a federal hemp pilot program.
“Our whole goal has been to get (the Texas permitting process) up and running for this planting season, and it looks like we are going to make it,” Miller said.
’A great rotation crop’
While that’s too late for the state’s initial hemp farmers to reap what had been much higher prices just a few months ago, many observers agree with Miller that the crop holds substantial promise for Texas in coming years regardless.
Consumer demand for CBD — in everything from lotions to protein shakes — is increasing rapidly, according to Vote Hemp’s Steenstra, meaning prices for hemp grown to produce it are likely to stabilize as the current supply glut is worked off. In addition, agricultural conditions in Texas are considered well suited for non-CBD hemp, a market that might never be flashy but could become significant as processing facilities for fiber and other hemp components are put in place.
“If we can find a good drought-tolerant (hemp variety) that we are able to rotate with the cotton, peanuts and other crops, I think hemp within 10 to 15 years could be one of the most grown crops on the (Texas) High Plains,” said Bingham, the Brownfield farmer. “I think it could be a great complement and a great rotation crop.”
As for missing out on the recent sky-high prices, Bingham said veteran Texas farmers he has spoken to aren’t overly dismayed as the state kicks off its first hemp growing season. The anecdotes of hemp fortunes made in other states always seemed “too good to be true” to many, he said.
“Now that we found out it is too good to be true, it honestly doesn’t surprise us,” he said. “The whole time, it felt like we were chasing unicorns.”