Hemp Production Outpaces Infrastructure

The euphoria from the prospects of U.S. hemp has turned to caution.

In the first year of widespread commercial cultivation, hemp planting quadrupled as growers sought a profitable alternative to crops ensnared in trade disputes.

While Congress approved hemp cultivation, the FDA has not yet cleared CBD for use in food and drinks, and the murky regulatory environment has limited expansion in the processing sector.

Delta Separations, a California-based manufacturer with booming sales of extraction machines used to make CBD, estimated that as much as $7.5 billion in hemp may rot on farms.

CEO Roger Cockroft said there hasn’t been the ability to install the infrastructure to support the fledgling crop, which has created a situation in which “farmers are scrambling.”

Banks also are reluctant to lend to businesses that may appear to be linked to marijuana, curbing prospects for processing expansion, Cockroft said.

“The market has developed and matured and expanded at such a rapid rate that the federal government is playing catch up,” said Beau Whitney, an economist at Whitney Economics.

A survey by Whitney Economics in July found that 65 percent of hemp farmers failed to find a crop buyer. Since then, many have obtained contracts from companies that may face a cash crunch.

Blake Butler, the executive director of the North Carolina Industrial Hemp Association, said too many farmers made a shift amid prospects for greater profit.

The CBD craze spurred reports that “you can make money overnight, and that is not the case,” Butler said. He anticipates the industry will balance out over time.

Source: Bloomberg