Biomass
$0.75
-29%
Broad Spectrum Distillate
$3,700.00
+6%
CBD Isolate
$1,125.00
-2%
CBG Isolate
$7,500.00
-6%
Water Soluble CBD Isolate
$2,100.00
+35%
Water Soluble CBD Broad Spectrum
$2,700.00
+13%
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12. May 2020
Market Analysis Market Data Market Watch News Reports & Analysis

April 2020 – CBD Market Analysis & Price Benchmarks

Key Market Activity

  • Data for the past 2-months suggests that we may have seen a bottoming of the biomass price, following a depreciation of just over 80% for the year, from April 2019 to April 2020.
  • Seed sale volumes were high in April as growers prepare for 2020 crops.
  • The 2020 growing season could well be one of the most significant for the hemp industry.
  • Despite some stabilisation of prices between February and March, April saw further price depreciations across some refined and extracted product classes.
  • Our Cannyx Markets CBD Isolate Benchmark remained virtually unchanged, during the period
  • The level of price depreciation for our Cannyx Markets CBD Isolate Benchmark has reduced month-on-month since the start of 2020 and the relative stabilisation of prices in April suggest that we may see a prolonged period of prices settling at, or around, the current assessed price.
  • Cannyx Markets CBD Distillate Benchmark saw some price erosion during April, although again the level of depreciation was a month-on month reduction.
  • Our CBG Isolate Benchmark fell again in April, with further price depreciations weighing heavy on this raw material class.
  • Across the full cannabinoid market vertical liquidity has been substantially reduced since the end of March.
  • Understanding the shape and nature of the market cycle that has been brought about by COVID-19 will be critical to commercial success across the cannabinoid market.
  • Also in this analysis, regulatory announcements made during April, market sector updates, and recently announced production innovations.

Biomass

Biomass prices remained low during May, with an assessed price of $0.66 ($/%CBD/pound). Sellers are still reporting relatively substantial stocks of biomass left over from the 2019 growing season and with volumes of transactions significantly down during April, observed contracts transacted between a low of $0.50 and a high of $0.90.

A lack of buyers means that selling product remains difficult at this time, and reports that refined/extracted product stocks also remain high, means that many processors are not currently looking for significant volumes of biomass.

The assessed price remained relatively unmoved month-on-month although low sales volumes increases the difficulty associated with accurately assessing prices. However, as the Cannyx Markets Benchmark is the only one in the marketplace that is based upon sales transactions for both North America and Europe, it is less likely to be impacted by regional changes.

The data for the past 2-months suggests that we may have seen a bottoming of the biomass price, following a depreciation of just over 80% for the year, from April 2019 to April 2020. Global markets have seen significant over-supply of biomass since the middle of last year, and until recently farmers and wholesalers had been holding back supply, in the hope of seeing the month-on-month downward price trends reduce.

Across the full cannabinoid market vertical, liquidity has been substantially reduced since the end of March, as a result of businesses looking to protect commercial interests and prepare for the financial impact of the COVID-19 outbreak.

As we go into May total transaction volumes remain depressed.

2020 Growing Season

The 2020 growing season could well be one of the most significant for the hemp industry and as a result for the whole cannabinoid industry.

Although 2019 saw a huge increase in hemp growers globally, the ‘green rush’ that caused this spike has progressively reduced during 2019 and early 2020. Prices have collapsed during the past year across all categories of raw materials and despite a burgeoning consumer market, for CBD products in particular, over-supply coupled with increased refinery operations have been a principle cause of the rapid price depreciations.

As a result of this some farmers are scaling back their cultivation capacity for 2020, and in the United States regions with mature hemp growing programs have already reported that applications to grow have slowed relative to 2019. Price depreciation; uncertainty surrounding the impact of COVID-19; along with increasing regulatory scrutiny, are all likely to be key considerations for farmers going into the 2020 season.

During April seed sales remained high with transaction volumes of all seed categories outweighing other raw material classes. This is to be expected at this time of the year, as farmers prepare to sow this season’s crops. Prices across all seed types were slightly down in April, as a result of an abundance of sellers.

With biomass prices weighing heavily on farmers, new initiatives are starting to show how the market is evolving to help mitigate some of this uncertainty.

Farmers are looking for more certainty when it comes to crop yield and as such many have switched to sourcing competitively priced seeds validated through genetic, germination and stability testing. By ensuring quality at the seed stage, farmers can more accurately predict output yields and prevent damaged or unusable crops that fall short of regulatory requirements on cannabinoid content.

In some instances farmers are collaborating on an even greater scale. Vertical integration between farming and manufacturing partners is resulting in seed-to-sale CBD partnerships where manufacturers with experience in hemp genetics work with farming partners to provide buyback programmes, which guarantee future delivery prices for farmers.

North American seed-to-sale CBD manufacturer EcoGen announced their buyback program in April. During this important planting season EcoGen will aid hemp farmers by providing competitively priced feminized seeds and following harvest, EcoGen will arrange to purchase back from farmers any unsold hemp biomass grown from the seeds bought from EcoGen that meet the company’s standards and arrange for shipping back to the facility for processing.

EcoGen Labs views the buyback program as establishing a more formalised working partnership with the farmers who’d likely be purchasing genetics from the group anyway. Farmers still make the day-to-day operational decisions on how the crop is grown. EcoGen offers its support on the genetics side of things, deploying its team of hemp geneticists to help farmers select the perfect strains for geography, growing style, and end formulation goals.

This type of arrangement is beneficial for all parties, as it helps farmers ensure that they are growing a crop that will have a guaranteed return, upon harvest and for the manufacturer, they can easily audit the entire seed-to-sale process, as well as strategically source the necessary biomass to run refinery and extraction operations in the future, at fixed prices.

This type of arrangement is likely to become a standard operating practice across more of the industry, in future seasons.

Refined Products

Despite some stabilisation of prices between February and March, April saw further price depreciation across some refined and extracted product classes.

Our Cannyx Markets CBD Isolate Benchmark remained virtually unchanged, during the period, with an assessed price of $1,342/kilo for March, with prices trending between a low of $866/kilo and a high of $2,000/kilo. Observed transaction volumes dropped significantly through April.

CBD Isolate prices have fallen 85% in the year from April 2019 to April 2020, a drop primarily driven by new production capacity and improved processing techniques that has led to an abundance of supply. New CBD formulations have also contributed to the overall price reductions, as manufacturers are increasingly being given new compound options.

The level of price depreciation has reduced month-on-month since the start of 2020 and the relative stabilisation in April suggests that we may see a prolonged period of prices settling at, or around, the current assessed price.

The Cannyx Markets CBD Distillate Benchmark saw some price erosion during April, although again the level of depreciation was a month-on month reduction, suggesting we may also be approaching the bottom of the price curve for this raw material class. The assessed price fell by 13% in April, down from a drop of 15% in March. The CBD Distillate Benchmark is now at a 12-month low of $3,678/kilo, with trading fluctuating between a low of $2,760/kilo and a high of $4,940/kilo.

Our CBD Water Soluble Isolate Benchmark and CBD Water Soluble Broad Spectrum Benchmark both remained level in terms of the assessed prices for April, at $1,484/kilo and $2,390/kilo respectively. Both these product classes have seen relative stability in price since the start of 2020.

Prices for refined forms are likely to remain steady during May as transaction volumes continue to be significantly lower than pre-COVID-19 levels. Some refiners have suggested that they still have substantial stocks of refined products available.

A number of major refiners have switched some of their capacity to producing hand sanitizers and as a result there may well be less refined product in the market place. This coupled with a natural reduction in supply availability ahead of the 2020 harvests is likely to help stabilise prices in the short term. Similarly, demand curves are likely to start to tick upwards as countries relax lockdown provisions which could help to push prices back-up across some categories.

Minor Cannabinoid Pricing

Our CBG Isolate Benchmark fell again in April, with further price depreciations weighing heavy on this raw material class. The assessed price in April was $7,540/kilo with a low of $6,483/kilo and a high of $9,000/kilo.

CBG Isolate continues to follow the wider year-on-year price reductions across all cannabinoid raw and refined material classes. This product is slightly behind the curve in terms of market development, meaning that the price drops we have seen, particularly since the start of 2020, track with the wider industry progression. The number of CBG refiners and wholesale sources has increased since Q3 of 2019 and with consumer demand for this product still in relative infancy; over-supply continues to depress prices.

April did see some positive moves for the CBG market. As we discuss below, the use of CBG as an ingredient in hand sanitizer, is proving to be a lucrative pivot for a number of manufacturers, as a result of the COVID-19 outbreak. Although other industries are also switching to hand sanitizer production, the increased demand is making this a positive step for manufacturers and it offers a long-term future for CBG as a key ingredient in a mainstream product.

This is good news for the CBG supply chain and will help increase market demand which should help stabilise prices in the future.

Continuing impact of COVID-19

Understanding the shape and nature of the market cycle that has been brought about by COVID-19 will be critical to commercial success across the cannabinoid industry. Already we are seeing many organisations adapt their operations to meet the current situation, but now is the time that businesses need to critically assess strategies, based upon future scenarios.

The International Monetary Fund (IMF), has predicted that many global regions will officially fall into recession at the end of this quarter. Unemployment has hit record highs in the United States, the UK, and many countries in Europe, and as a direct result of the virus many countries are seeing significant proportions of their workforce out of work. Even with countries now beginning to open up, and particular encourage a return to economic activity, current data suggests that global economies will be feeling the impact of the outbreak potentially for years to come.

There are two principle factors which will ultimately differentiate how long the impact of COVID-19 may have on economies and as a result the type of recession that that the cannabinoid industry may be facing:

  1. Whether the recession causes a permanent loss in the level of output
  2. Whether the growth rate of output returns when the crisis is over

As we see economic activity begin to slowly return, there are still huge industries that will remain affected for many months, if not years, including, travel, hospitality, sports, conferences, etc. Looking forward this means increased unemployment, reduced market liquidity and a reduction in consumer spending.

To date, the cannabinoid industry has performed well despite the pandemic. Retail sales have risen and consumer demand has remained high. However, as government backed furlough schemes come to an end and we potentially see large sectors of the workforce made redundant, we may start to see a reduction in consumer demand, as people have less disposable income.

Controlled proactive adaptation is therefore the most positive step that the industry can take at this time. By proactively implementing measures to mitigate and control the influence of the changing social and economic landscape, determined by COVID-19 measures, businesses can strategically plan the ways that they will meet:

  • New consumer behaviour (e.g. online sales and brand engagement),
  • Socially distanced production and logistics requirements,
  • Less-fragmented supply chains, with an emphasis on sourcing local raw material, in order to mitigate the long-term impact of import/export fluctuations in continuity.

Hand Sanitizer Sector Offers CBD Manufacturers Opportunity for Product Diversification

One of the early impacts of the global COVID-19 pandemic, experienced worldwide, was a rapid and critical shortage of hand sanitizer. As cases of the virus spread, in late February and early March, sanitizing products were one of the first to sell out at many retailers, and the supply chain continues to experience major problems globally. This shortage has resulted in a number of CBD companies rapidly pivoting, in order to take advantage of their existing manufacturing facilities, supply chains and the natural anti-bacterial properties of cannabinoids, to produce hand sanitizers.

As global lock-downs continue and uncertainty around how long social distancing measures will be required the hand sanitizer sector is offering CBD manufacturers an attractive route towards product diversification.

Global Cannabinoids is one company that has been quick to capitalise on the change in regulation in the US, and the results have been meteoric.

The company set up Global Sanitizers, in March, a newly formed company based on the existing ethanol supply chain, manufacturing, logistics, and distribution prowess of Global Cannabinoids, which is a leading producer, manufacturer, and distributor of hemp derived cannabinoids in the USA. So far the company has seen a huge demand for the new products.

In a statement, the company revealed that it secured over $15million dollars worth of hand sanitizer orders in the past week alone, as the operation positions itself as a leading bulk and wholesale supplier of hand sanitizers in the USA, clearly demonstrating the potential market opportunity.

Global Cannabinoids has shifted its vast supply chain of ethanol used in the extraction of hemp, toward the production of hand sanitizers to meet the growing demand for these ethanol alcohol based products. In order to accomplish this, the company has secured the delivery of hundreds of thousands of gallons of 40-B and 3-C denatured ethanol, approved by the FDA for topical use.

Interim price stability

The hemp and CBD markets are beginning to show early signs of maturity, as regulatory governance and demand for quality and safety increases across all regions.

When a market becomes more regulated, then the supply chain naturally becomes more organised and predictable. With the introduction, and more importantly, enforcement of novel food requirements across Europe and North America, these major markets are going to see a more regulated cannabinoid industry going forward.

This regulation places more stringent requirements on current market participants, but equally acts a significant barrier to entry for new players. New processors will need to invest heavily in order to meet the necessary requirements of novel food regulation, and as other parts of the industry, like skin care, demand more accountable and sustainable sources of refined product, then it will become increasingly difficult for new market entrants.

In fact, following, the impact of COVID-19, we are already starting to see more consolidation and cooperation between major market processors and smaller refiners that could in the interim reduce competition.

When it comes to prices of raw materials, the impact of having an increasingly organised and regulated supply chain means we will likely see price stabilisation continue, through the next couple of years. The2020 harvest season will be a good indicator for where supply-demand curves fall, and it may be that we see a another harvest where supply outweighs demand, meaning biomass prices will likely stay relatively low for 2020-2021.

However, on the refined and extracted product side, regulatory changes will mean that manufacturers and retailers of cannabinoid products will be required to demand higher quality, auditable products from their suppliers. With consumer demand remaining high, this will place greater demand on those processors who can adequately certify their products and as this number of ‘approved’ processors is likely to remain limited, in the interim, then we may actually see some appreciation in price towards the end of the next 12 months.

Regulatory Updates

European Commission Validates First CBD Novel Food Application

CBDepot has become the first producer to have a CBD novel food application declared “valid” by the European Commission, marking a key milestone for the entire European CBD industry.

According to a release made by Czech Republic based CBDepot, the European Food Safety Authority (EFSA) finished the suitability check of the company’s application for authorisation of its pure synthesized form of Cannabidiol as a novel food ingredient, on March 23rd. This substance is structurally identical to the pure CBD derived from the plants of species Cannabis sativa L.

Following this, the European Commission informed the company on March 31st, that they had given a mandate to the EFSA to perform a Risk Assessment on CBDepot’e Dossier NF 2019/1371.

This means that CBDepot is currently the only company in the world to hold a ‘valid’ novel food application.

Novel foods are those which have not been widely consumed by people in the UK or EU before May 1997. This means that the foods don’t have a ‘history of consumption’. Underpinning the rules, in the European Union, are the conditions that any prospective foods must be safe for consumers and properly labelled, so as not to mislead consumers.

All novel food application must be declared ‘valid’ by the European Commission (EC) in order for them to then undergo a risk assessment by the EFSA. This involves a process of review and consultation involving the EC, the EFSA, and the producer and can take up to nine months. Once the necessary data has been reviewed then the application is passed back to the EC, who will have a further seven months to review it. Following this there is then a three month period for adoption.

As of March the EC had received 45 novel food authorization applications for products containing CBD, according to Hemp Industry Daily. Authorisation is a critical and necessary step for all producers going forward and it is positive to see that the EC is moving forward with the process.

During April, Mile High Labs, the world’s leading producer of hemp derived cannabinoids, also announced that the company had submitted a novel food application to the European Food Safety Authority (EFSA) and the UK Food Standards Agency (FSA) for its CBD isolate ingredient and CBD isolate-based finished products.

UK’s FSA Confirms 31 March 2021 Deadline for CBD Companies

The UK’s Food Standards Agency (FSA) confirmed, in April, that they intend to stick to their deadline of the 31st of March 2021 for CBD companies to have a validated Novel Foods application.

In a virtual meeting with the Association for the Cannabinoid Industry (The ACI), the FSA quashed any speculation that they would extend the deadline for all UK businesses, as a result of the COVID-19 outbreak.

UK’s ACI Launches New CBD Safety Certification Initiative

The UK’s Association for the Cannabinoid Industry (The ACI) has outlined new plans for The ACI Safety Certification programme. Launched a full year before the FSA’s new safety regulations come into force, which excludes all CBD food products from sale in the UK without a validated Novel Foods application dossier.

The ACI Certification is a key part of The ACI’s vision for a sustainable future for the UK CBD sector and further emboldens The ACI’s mission to nurture an industry that puts public safety first.

The ACI Certification will bring a level of trust to the industry that until now has been lacking. Over the last 12 months the UK CBD industry has been rocked by a series of scandals relating to what CBD products on the shelves actually contain.

The highly anticipated ACI Certification will be composed of three tiers, each representing the necessary steps to gaining full Novel Foods Authorisation from the appropriate regulatory bodies.

  • Tier 1 – Certified. An ACI member has proven to comply with The ACI’s 7 pillar charter. This means that they have passed an audit, from The ACI, verifying they have a quality management system in place that ensures they operate to best manufacturing standards. Expect companies to start displaying this mark on their products by the end of the summer 2020.
  • Tier 2 – Validated. To gain The ACI Validation a company must have their Novel Foods application validated by the FSA (Food Standards Agency) and/or EFSA (European Food Safety Authority). The ACI will support its members throughout this process to ensure they submit appropriate scientific dossiers to receive validation. This is a legal requirement to keep products on the market in the UK after 31st March 2021. The first companies should gain this level by the end of 2020.
  • Tier 3 – Authorised. This Certification will be granted when a company has had their Novel Foods application authorised by the FSA and/or EFSA. The ACI will support its members throughout this process. This will be subject to annual review.

To facilitate this new drive for safety and quality The ACI is establishing a new Regulatory and Compliance Unit, under the leadership of Dr Parveen Bhatarah, to support its members with both The ACI accreditation and Novel Foods dossier development.

Mexico Considers Reforms to Generate Tax Revenue

The Mexican Senate is banking on marijuana and hemp production legalisation to generate tax revenue and compensate for the economic damage caused by the coronavirus pandemic.

Under the proposed reforms farmers would be free to cultivate both marijuana and industrial hemp.

Key Announcements in April

Despite the uncertainty that COVID-19 continues to have on global industries, the wider cannabinoid sector performed relatively well through April.

A number of new research studies were announced that further demonstrate the potential medical impact of cannabinoid-derived compounds. Elsewhere the global demand for hand sanitizer, as a result of the COVID-19 outbreak, has provided CBD manufacturers with an attractive route to mainstream products. Also, a number of companies completed investment rounds or announced plans for acquisitions and mergers.

Medical & Research

Neuraxpharm Becomes First European Pharmaceutical Company to Market Medical Cannabis Products

Neuraxpharm has become the first European pharmaceutical company to include medical cannabis products in its portfolio.

A leading European specialty pharmaceutical company focused on the treatment of central nervous system disorders (CNS), Neuraxpharm has partnered with Panaxia Labs Israel, Israel’s largest medical cannabis manufacturer, in a business collaboration for the manufacture, commercialisation and distribution of advanced medical cannabis products in Germany, Europe’s largest and fastest-growing medical cannabis market. The agreement is expected to cover more markets in the future.

Read the full article…

Medical Marijuana Acquires Oncology Research and Development Company Sapphire Biotech

AXIM® Biotechnologies, Inc. (OTCQB: AXIM) the investment company of Medical Marijuana, Inc. (OTC: MJNA) has completed the acquisition of leading oncology research and development company Sapphire Biotech, Inc.

Founded in 2014, AXIM is a world leader in the research and development of plant and laboratory-derived cannabinoid and oncological therapeutics. AXIM’s proprietary research intends to find new ways to diagnose and treat cancer as well as other conditions, such as the intense side effects of chemotherapy, through innovative pharmaceutical delivery systems, cannabinoid-based active pharmaceutical ingredients, and novel therapeutics.

Currently, Sapphire Biotech, Inc.’s diagnostic tool is being used to study the company’s enzyme biomarker to detect pancreatic cancer earlier than circulating tumor cells.

Read the full article…

Study Confirms Protective Role of Pharmaceutical Cannabidiol Formulation in Heart Failure

Cardiol Therapeutics Inc. (TSX: CRDL) (OTCQX: CRTPF) has announced that the results of a study that has assessed the role of the company’s pharmaceutical cannabidiol (CBD) as a protective treatment for heart failure have been accepted for presentation at the American College of Cardiology’s (ACC) 69th Annual Scientific Session & Expo together with the World Congress of Cardiology.

Cardiol Therapeutics is focused on producing pharmaceutical cannabidiol (CBD) products and developing innovative therapies for heart diseases, including acute myocarditis and other causes of heart failure. The Company’s lead product, CardiolRx™, is formulated to be the most consistent cannabidiol formulation on the market.

Read the full article…

Consumer

Alphagreen Plans for Growth with New Senior Board Appointments

Alphagreen, Europe’s largest consumer marketplace for certified cannabis (CBD, cannabidiol) products, has announced three new senior board members as part of the company’s overall growth strategy, following the recent £500k equity fund raise.

The appointments include Niel Marotta and Markus Hoffmann as board advisors and Dr Patricio Stocker as Chairman. They will work directly with co-founder and CEO Alexej Pikovsky providing strategic counsel to scale the business globally.

Read the full article…

Molson Coors and HEXO Corp Expand Partnership with Joint Venture in Colorado

Molson Coors Beverage Company and HEXO Corp have formed a joint venture to explore opportunities for non-alcohol hemp-derived CBD beverages in Colorado.

Established in Colorado, the joint venture (“Truss CBD USA”) will be majority owned by Molson Coors and will operate as a standalone entity with its own board of directors, management team, resources and go-to-market strategy.

Read the full article…

Production

Auxly Acquires Exclusive Global Rights to Ahiflower Oil for use in Cannabis Products

UK-based Natures Crops International has entered into an exclusive global licensing agreement with Auxly Cannabis Group Inc. (TSX.V – XLY) of Canada for Ahiflower® oil, all of which will be grown under contract by a group of leading UK farmers.

Under the agreement, Auxly will purchase the exclusive global rights to Ahiflower oil for use in cannabis products to be developed by Auxly. This multi-year deal will provide Auxly with a proprietary ingredient for use in the development of next generation cannabis health products. Natures Crops specialises in growing and processing plant-derived specialty oils and produces Ahiflower® oil, the most complete and balanced plant source of essential omega fatty acids.

Read the full article…

Sativa Announces Possible Acquisition by StillCanna

Sativa Group PLC (NEX:SATI) has announced that it has signed a letter of intent that could lead to the CBD wellness and medicinal cannabis specialist being acquired by OTC, CSE and Frankfurt-quoted StillCanna Inc.

Sativa describes the would-be buyer as a leader in cannabinoid extraction and agriculture, focusing on the large-scale manufacturing of CBD in Europe. It has built two high volume extraction facilities and is Europe’s largest producer of CBD distillate and isolate. StillCanna has also developed a unique closed-loop ethanol extraction system that allows the non-psychoactive elements of cannabis to be extracted at a lower cost than traditional methods.

Read the full article…

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