Early projections for the 2020 hemp growing season suggest that overall planted acreage in the United States could increase slightly to an estimated total of 160,000 acres, up 8% on the total reported acreage of 146,000 in 2019.
With the US representing one of the largest hemp growing regions, these numbers will be of interest to all participants across the hemp and CBD supply chain.
The figures, which have been collated from a number of industry surveys, suggest that while the number of growing licence applications in established US hemp states like Montana and Colorado have reduced year-on-year, applications in new states have been positive. While early reports are based primarily on qualitative surveying and anecdotal evidence the result of this mixed picture suggests that we will see a slight rise in the overall US planted acreage through 2020.
The outlook for the 2020 harvest will ultimately depend upon the extent to which growers utilise their permitted acreage. In 2019, farmers were granted permissions to grow hemp on over 500,000 acres of land however the final harvest yield was considerably less. Estimates from reporting agency The Jacobsen suggest that the actual planted acreage in 2019 was less than 200,000 acres and that the eventual harvested crop was probably around 100,000 acres.
If 2020 harvests follow a similar trajectory then we can expect to see a final harvested acreage of around 108,000, which would be up slightly on last year, but by no means close to the increase observed between 2018 and 2019.
The official figures for 2019 come from the US Farm Service Agency (FSA) and don’t take into account unreported acreage.
During 2020, reporting to the FSA has become compulsory so that this year’s final figures (due to be published in October) should represent a much more accurate picture of harvested crops. In addition to reports of acreage, growers this year will also be required to identify the intended use of the reported hemp acreage. The categories are as follows:
By developing a clearer picture of the intended use of crops the FSA hopes to allow hemp growers to manage stocks and forecast potential yields in a more effective manner. It will also provide the industry with much needed data on supply levels. The USDA is working with farmers to help actively manage hemp crops and mitigate risks, which should introduce additional levels of stability for hemp farmers, as the industry continues to grow and mature.
In the US the majority of hemp grown is managed organically and the amount of certified organic acreage looks set to grow during 2020. A move towards sustainable hemp farming and organic downstream production practices is filtering through the complete hemp and refinery supply chain and as a result more and more farmers are looking to produce organically-certified crops.
2020 looks set to see organic acreage increase by 7%, with total organic acreage representing 60% of the total planted area.
The cost associated with producing organic hemp is considerably higher than conventional crops, with certified seed costs and land compliance factors increasing the cost of production, however for farmers looking to supply the CBD industry it is a necessary step given the growth in consumer demand for certified organic products.
As biomass prices have fallen over the past 12 months, industrial hemp applications are becoming an increasingly important part of the potential use mix, and for this sector conventional (non-organic) crops are more suited. The reduced production costs help ensure that end harvested product prices are lower, also making them more attractive for use in industrial applications.
In surveys, many growers have voiced a cautious approach to this year’s season. Although many have maintained licence application levels, the approach to actual planting could mean fewer permitted acres are utilised. As the CBD market continues to expand, and the impact of COVID-19 has led to beneficial results for many within the sector, farmers will be hoping that the renewed consumer interest will translate into crop sale contracts.
Some growers have reported that they still hold between 40-50% of 2019 crops which will likely now go to waste, and as a result a cautious approach this year is prudent.
Growers will be buoyed by growth in CBD consumer markets over recent months, along with a growing interest in minor-cannabinoids like CBG and new commercial applications like anti-bacterial hand sanitizers, both of which are allowing farmers to diversify crop development.
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. The 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 fiber and 3.6% for grain.
This suggests that despite the growing interest in industrial hemp applications, farmers are still concentrating efforts on supplying the cannabinoid market. This is not without risks given the massive over-supply experienced globally during 2019. From biomass to refined products a supply-demand imbalance has caused prices to drop throughout the first half of 2020, and indications are that even now biomass stocks remain high. Many producers have indicated that remaining biomass stocks will likely go to waste.
As industrial uses increase this spoilage will ultimately reduce and the demand for fiber could be significant. Farmers are well placed to adapt to these demands, given cultivation techniques mimic those of other crops, however, until there is sufficient demand growers are going to continue to concentrate on cannabinoid end uses.
Based on the projections sourced above, we are now in a position to make early projections for potential 2020 US harvest yields.
According industry reports the average yield per acre for crops grown for CBD processing stands at 1,500 lbs/acre, with yields varying between 1000 lbs/acre in new growing regions to 3000 lbs/acres in more established and better managed locales. This means that if we see a total harvested 2020 crop of 108,000, 80% of this is likely allocated towards CBD production, resulting in a total potential yield of 129,600,000 lbs of total biomass suitable for CBD extraction for 2020.
For CBG the average yield stands at approximately 1000 lbs/acre, meaning that at the estimated 14.5% of total harvested acreage, we could see a potential yield of 15,660,000 lbs of total biomass suitable for CBG extraction.
For fiber and grain the expected yield averages 1250 lbs/acre, meaning that at an estimated 6.1% of total harvested acreage, we could see a potential yield of 8,235,000 lbs of total biomass suitable for fiber and grain use.
We will update these harvest projections as the season continues.
Author: Matthew Driver, Senior Consultant