With such universal application it’s easy to see why hemp could make such an impact on existing industries, while also opening up opportunities for new industries that may take advantage of future applications of hemp.
Is hemp the 21st century cash crop that American farmers and industries have been waiting for? This article examines the current and forecasted economic conditions surrounding the hemp industry including existing and future applications, projected job and revenue growth, and what investments will be needed as the industry matures over time.
The hemp industry has gotten a lot of attention in the United States since the passage of the 2018 federal farm bill which officially took hemp off of the federal illegal substance list. In addition to being legal at the federal level, as of 2019 the only states that did not allow the cultivation of hemp for commercial, research, or pilot programs are Idaho, South Dakota, Mississippi, and the District of Columbia. While hemp is technically defined as a cannabis plant, the major difference between hemp and its marijuana counterpart is that hemp contains minimal amounts of THC, which is the compound in cannabis that gets users high (federal regulations stipulate that hemp it must contain less than 0.3 percent of THC) .
Affecting the Agricultural Landscape
Some economic analysts are calling hemp the most lucrative cash crop farmers have seen in decades and point to the benefits the crop could bring to struggling farmers in coming years. While farmers currently use hemp seeds in animal feed as they are rich in protein and unsaturated oils, many are now able to grow and benefit from producing the actual hemp plant itself. As the agricultural landscape of America continues to evolve creating challenges for farmers ranging from flagging industries like tobacco and dairy, climate change, and the ongoing Chinese tariff situation affecting U.S. soybean sales, hemp may be a new staple in farms across the country.
Utilized in tens of thousands of products globally, examples of hemp-based goods include automotive parts, furniture, textiles, food, beverages, beauty products, insulation materials, paper products, bio-fuel, and construction supplies. With such universal application it is easy to see why hemp could make such an impact on existing industries, while also opening up opportunities for new industries that may take advantage of future applications of hemp.
While hemp can be made into numerous products with various applications, cannabidiol, or CBD is projected to take the largest share of market value over time. CBD can be extracted from hemp as an oil and infused into food, used topically to treat pain, and/or be injected as medication. CBD is a natural compound found in cannabis plants and is said by some to reduce anxiety and depression, in addition to being a pain reliever and anti-inflamatory among other things. While many think of the CBD industry as being boutique in nature, even big industry players are contemplating its application in their products. For example, Oreo-maker Mondelez is contemplating adding CBD-infused snacks to its existing or future product lines, which include Chips Ahoy cookies, Cadbury chocolate, Nilla Wafers and Nutter Butter cookies.
Benefits of CBD - TBD
While many tout the benefits of CBD, the U.S Food and Drug Administration (FDA) is not so sure. In 2019, the FDA published a consumer update on its website (FDA.gov) that comments on some of the claims surrounding the benefits of CBD in an attempt to dispel the notion that it is risk-free. Although the FDA is currently gathering data from various studies in an attempt to learn more about the risks and benefits of CBD, as for now, "there are many unanswered questions about the science, safety, and quality of products containing CBD," the agency wrote.
According New Frontier Data (newfrontierdata.com), a leading analytics firm focused on the cannabis industry, global hemp retail sales totaled $3.7 billion in 2018 and are on track to grow to $5.7 billion in 2020. China led all countries in 2018 with almost $1.2 billion in hemp sales, followed by the U.S. at $1.0 billion, all of Europe at $980 million, and the combination of Central and South America at $220 million. However, by 2022 estimates forecast that U.S. hemp sales will have jumped to $2.6 billion, representing a compound annual growth rate of 27%. Of this $2.6 billion in hemp sales, half ($1.3 billion) are forecasted to be generated from hemp-derived cannabinol (CBD) products.
The hemp industry has the potential to create tens of thousands of jobs across multiple sectors as the industry continues to grow. Besides hiring workers in agriculture, processing, and manufacturing - the industry will need accountants, lawyers, compliance officers, government regulators, IT specialists, financial and insurance experts, transporters, researchers and lab technicians, marketers, and various retail employees. Some of these workers may be hired by existing hemp growing and production companies, food and beverage companies looking to utilize extracts like CBD, or other companies and institutions such as banks, transportation companies, farm equipment makers, and drugstore chains. Others will be employed by new companies that arise to benefit, either directly or indirectly, from hemp as the market continues to grow and mature. Overall, its likely that the hemp industry will penetrate a variety of different labor markets, and create jobs ranging from executives to laborers.
Using Job Postings Analytics from Economic Modeling Specialists International (EMSI), it may be surprising to some to see some of the more common trends related to job postings related to hemp, which are highlighted below:
Industry Growth Factors
Future growth of the hemp industry will depend on a number of factors including private research and development focused on refinement techniques and new applications of hemp products, coupled with new investments in farming equipment, harvesting methods, processing facilities, and other industry infrastructure. In addition, the FDA will need additional time and resources to research the benefits of CBD in labs and clinical trials where they can isolate the risks and benefits of hemp's highest potential application.
As markets grow and stigmas decline, the hemp industry has the potential to produce new jobs, anchor existing and create new industries, and be a catalyst for additional revenues for both private and public sector companies and institutions. Knowing this, it’s not hard to see why many are so excited about the hemp industry, and what impacts it will have on the U.S and global economies in the decades to come.