Hemp: Big Risks, Big Rewards for Agriculture

Fiber, grain/seed and cannabidiol demand is growing, as processing capacity is strained

Since the 2018 Farm Bill removed hemp from the Controlled Substances Act, the agriculture industry has been inundated with interest in and information about industrial hemp. Some of the information has indicated a large financial upside for the broadening industry. Producers responded, as hemp acreage in the U.S. tripled from 2017 to 2018. However, CoBank’s Knowledge Exchange division warns that false, outdated, biased or even contradictory information can make it difficult to navigate in this industry.

In its latest report, CoBank’s Knowledge Exchange division provides a foundation for understanding some of the key nuances of this growing market and highlights key risks and opportunities. Nine risks or uncertainties that face the hemp industry are identified and assessed on a low to high risk scale for each of hemp’s three crops and markets: fiber, grain/seed and CBD production.

“It is important when talking about the risks and opportunities of hemp to recognize that we are not talking about just one type of crop, and that opportunities and risks should be evaluated case by case,” said Crystal Carpenter, specialty crops analyst with CoBank’s Knowledge Exchange division.

“Overall, CBD production has the highest level of risk across the board due to a range of factors,” said Carpenter. “From seed quality, labor costs and availability, THC limit risks and long-term acceptance by the Food and Drug Administration, the industry could face significant headwinds.”

While some risks are inherent to a new industry, risks for the hemp industry are compounded by legal and regulatory hurdles, according to the report. The USDA is expected to release hemp regulations and guidance soon. The timing and outcome of future FDA regulation will be critical to the long-term demand for CBD.

Carpenter’s full risk table, video synopsis and report are available on CoBank.com.

About CoBank

CoBank is a $139 billion cooperative bank serving vital industries across rural America. The bank provides commercial loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 70,000 farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.