The assessed price for our Biomass Price Benchmark remained flat for the 4th consecutive month in July, holding steady at $1.30/%CBD /pound (or $2.85/%CBD/kilo). Transactions took place between a low of $0.90/%CBD/pound and a high of $3/%CBD/pound.
Total transaction volume remained relatively steady during the observed period, however according to industry sources many producers still hold significant stocks of biomass in storage, and with prices remaining flat they will be hoping to reduce their exposure as we go into the 2020 harvest window.
With supply still outweighing demand it is likely that we will see prices remain flat during August or even potentially decline fractionally over the month. With so many options available to buyers there is the opportunity to further erode prices, while still obtaining relatively high quality product.
Our predicted Biomass Price Benchmark price for August is $1.30/%CBD /pound (or $2.85/%CBD/kilo).
According to data from the US Department of Agriculture US farmers have significantly reduced the total planted acreage of hemp for 2020. August should provide a clearer picture of the overall number of licences issued in the US, along with a more detailed picture of planted acreage, however a combination of industry surveys and indications from our direct sources suggests that many farmers have reduced their overall acreage in 2020, as a direct result of the massive oversupply issue that weighed heavy on the 2019 harvest.
According to figures collated by Hemp Benchmarks 2020 outdoor licensed acreage is off by over 30% from over 580,000 acres last year, while indoor and greenhouse square footage registered for hemp cultivation is down by roughly 64% year-over-year, suggesting that existing farmers are taking a more conservative approach towards this year’s crop.
The drop in biomass production would follow four consecutive years of US farmers more than doubling their hemp acreage annually.
Already some early harvesting has begun in the US southern states and as we go into August and September we will be able to present more accurate harvest data.
Harvest yields across Europe are predicted to remain relatively stable and at a similar level to 2019. However, with global prices crashing throughout the year reports suggest that European farmers are looking to diversify the end use, for biomass, in order to help mitigate some of their risk.
While CBD remains the most attractive end-use, vertical integration is becoming increasingly important for farmers looking to lock in potential yields from this sector. Farmers need to forge alliances with refiners, extractors and producers in order to help guarantee that their crops don’t go unsold.
According to a survey by the Jacobsen some 25% of US hemp producers also extract cannabinoids, which allows them to mitigate some of the exposure to fluctuations in the wholesale raw biomass market. During 2020, it is likely that this figure will rise.
Unfortunately, with oversupply also an issue across many of the refined cannabinoid product classes producers will still need to ensure that they develop ties with end users or access markets like Cannyx Markets in order to ensure that they can participate in a liquid commodities trading environment.
According to The Jacobsen’s crop survey, released in June, and early reporting feedback, the vast majority of 2020 crops are again earmarked for cannabinoid production. A recent survey of US farmers suggests that 79.4% of planted hemp will be destined for CBD refinement and 14.5% for CBG processing. By comparison only 2.5% has been allocated for fibre and 3.6% for grain.
The price stability that we have seen in recent months was predominantly maintained across refined raw material classes during July.
Last month saw a surprise increase in the assessed price of our CBD Isolate Price Benchmark, with assessed prices appreciating some 16% to $1,350/kilo. As we discussed in our June market update, this was driven by an increase in transactions taking place at the higher end of the price spread.
Much of these gains were negated during July as the assessed price fell by 15% to $1,150/kilo, with a low of $900/kilo and a high of $1,400/kilo. Transaction volumes remained relatively strong during the month. This represents the fourth consecutive month of relatively stable prices for our CBD Isolate Price Benchmark.
Given current market conditions, and the impending 2020 biomass harvest many refiners are looking to reduce their current available stocks, and as such we are seeing some discounting on raw material prices.
The period of sustained price stability suggests that we may have hit a current equilibrium price for CBD isolate and as such we don’t expect to see much change in the assessed price as we look forward into August.
Our predicted CBD Isolate Price Benchmark price for August is $1,200/kilo.
Across our other refined material price benchmarks this picture of stability has also been observed.
The Cannyx Markets CBD Distillate Benchmark fell slightly during July to an assessed price of $3,500/kilo. This was down 7% on June’s assessed price of $3,750, with trading fluctuating between a low of $3,000/kilo and a high of $4,000/kilo. The price spread between the observed low and high prices reduced during the period. In June we had observed some transactions taking place at a high of $4,700/kilo whereas the ceiling price for July was down to $4,000/kilo.
Given the stability we have seen in this raw material class over the last four months we predict that prices for August will likely remain at a similar level.
Our predicted Cannyx Markets CBD Distillate Benchmark price for August is $3,550/kilo.
Our CBD Water Soluble Isolate Benchmark increased by 15% in July to an assessed price of $1,550/kilo, up from $1,350/kilo in June. Observed transactions occurred between a low of $1,300/kilo and a high of $1,800.
This reverses the price depreciation we observed during June and indicates a swing back to the relatively stable price we had seen for CBD Water Soluble Isolate since the start of the year.
Our predicted CBD Water Soluble Isolate Benchmark price for August is $1,400/kilo.
Our CBD Water Soluble Broad Spectrum Benchmark also increased some 6% during July to an assessed price of $2,500/kilo, up from £2,350/kilo in June. Prices for CBD Water Soluble Broad Spectrum continue to remain relatively steady and have seen little movement in price since the start of the year. Any fluctuations we have observed so far this year came in May and June during the height of Global lockdown restrictions.
Our predicted CBD Water Soluble Broad Spectrum Benchmark price for August is $2,400/kilo.
For the second month in a row our CBG Isolate Benchmark rose during July, to $8,600/kilo. This represents an increase of 8% and builds upon the already observed 8% increase in prices we saw in June.
Despite the recent fall in raw material prices for CBG Isolate, many growers are viewing this minor-cannabinoid as a potential to increase the value of their 2020 harvest. A recent survey of US farmers suggests that 14.5% of planted hemp, in 2020, will be destined for CBG refinement.
CBG prices currently reflect the immaturity within the supply chain. We have observed ebbs and flows in terms of availability of the refined product which has helped to push prices back up from their previous falls. Demand for CBG has also increased during the period with many end users, from consumer product manufacturers to biotech pharmaceutical companies, looking to experiment with potential uses and product diversification.
Our predicted CBG Isolate Benchmark price for August is $8,600/kilo.
With over 70% of US growers earmarking crops for cannabinoid refinement it is looking likely that the oversupply situation we have experienced during 2019 and 2020 could continue into the foreseeable future. However, a reduction in planted acreage will reduce refined product output for 2020.
Reports from various sources suggest that there will be a smaller proportion of raw material processed in 2020, compared with 2019, with approximately 80% likely allocated to CBD and minor cannabinoid refinement with the remainder harvested for grain and fiber.
If the harvest does prove to be significantly lower than predicted then this will mean less raw material availability across all product classes and as a result the stabilisation we have seen in prices will continue for the foreseeable future. We could even begin to see an uptick in prices for some products.
As with biomass, vertical integration through-out the supply chain is now becoming evermore essential in order for companies to successfully navigate the refinery segment.
During 2019, and 2020, we have seen a race to the bottom in terms of prices for refined products, and although this has in part has been driven by improvements in technology, refining techniques and capacity, there has also been a flood of lower quality products that have negatively eroded prices. This has led to massive over-supply and an extremely difficult landscape for manufactures and end users to navigate in order to source quality ingredients.
Quality of raw ingredients is becoming an increasingly important factor for the industry as a whole. As consumer knowledge permeates, there is a growing demand on retailers, manufacturers and refiners to ensure that they are able to offer assurances when it comes to quality and provenance of ingredients, providing accountability and traceable audits throughout the complete supply chain. This in turn is driving consolidation among established refiners and small producer/refiners in order to be able to implement and guarantee true seed-to-sale validation.
As this transition towards improved quality and traceable ingredients continues, poorer quality ingredients will be forced from the marketplace and in time prices are likely to evolve to reflect that process.
According to a report by Brightfield group CBD sales are now forecast to be significantly lower than previous estimates amid fallout from pandemic-related store closures, unemployment and inaction by the FDA on food-related products, according to a recent report from cannabis data firm Brightfield Group.
The U.S. CBD market is now projected to reach $4.7 billion in sales in 2020, up 14% from 2019; that’s down from a prior forecast of about $8 billion issued last year. Brightfield also significantly reduced its outlook for 2023 to $12.4 billion from about $20 billion previously.
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