Is the Hemp Fiber Market Looking to Be CBD 2.0?
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Posted On: 02/25/2021 12:17:01 PM
Is the Hemp Fiber Market Looking to Be CBD 2.0?
By Trevor Yahn-Grode, Data Analyst, New Frontier Data
While still early, 2021 is shaping up to be a pivotal year for the nascent hemp fiber industry. Investment in primary processing operations, combined with interest in the plant’s potential to help “decarbonize the economy” – i.e., overhaul the infrastructure of the American energy system toward carbon neutrality – has brought hemp’s industrial usefulness to the forefront of the public conversation. Despite the bullishness, fears about the oversupply present in the CBD industry have industry stakeholders asking whether the fiber segment will follow the same boom-and-bust cycle seen in the CBD industry?
The answer is almost certainly no: The period between 2017-2020 saw nearly a 2,000% increase in licensed hemp acreage, almost all of it dedicated to CBD production. The rapid increase in acreage was fueled largely by astronomically high biomass prices which essentially promised farmers years’ worth of profit for a single crop. Though such returns largely failed to materialize, they still constituted a driving factor in the explosion of CBD acreage. Fiber, while still potentially more profitable than traditional row crops like corn and soy, offers much more modest returns. Furthermore, the amount of fiber acreage needed to be grown to see a similar level of oversupply as occurred in CBD is orders of magnitudes higher than what is likely to be grown.
Simply put, while CBD customers think in terms of kilograms, fiber customers are thinking in terms of tons. In 2020, fiber represented but 3% of total hemp acreage, while cannabinoid applications made up 92%. The current size of the fiber segment seems even smaller when compared with other natural fiber crops (its direct competitors) like flax and cotton. The U.S. in 2020 saw production of more than 9 billion pounds of cotton, versus 28 million pounds of hemp fiber. In fact, in 2020 the entire processing capacity of the U.S. hemp fiber segment was just under 14 tons of material. Risk of any oversupply, then, is rather unlikely.
Nevertheless, the nascent industry is not immune from facing other, very real risks. Manufacturers – those companies which would actually take hemp fiber and turn it into end products – are the true gatekeepers to the industry. Product development efforts remain in their infancy, and are complicated by the conspicuous lack of standardization and specifications present among fiber processors. Furthermore, one-size-fits all regulations developed for CBD are placing extra burdens on would-be fiber farmers, who are skeptical that the hassle of expensive testing procedures (which many deem unnecessary for fiber farming) are worth the lower profit potential of a fiber crop. That, combined with the lack of processing capacity, puts the industry at risk of delayed development.
Despite the challenges, optimism abounds. The federal government’s commitment to decarbonization efforts represents significant potential for hemp fiber, whose ability to supplant fossil fuels as a source of renewable carbon makes it an ideal candidate for federal assistance. Regardless of whether that potential is realized, 2021 should indeed prove to be a crucial year for the future of industrial hemp.
Source: https://newfrontierdata.com
By Trevor Yahn-Grode, Data Analyst, New Frontier Data
While still early, 2021 is shaping up to be a pivotal year for the nascent hemp fiber industry. Investment in primary processing operations, combined with interest in the plant’s potential to help “decarbonize the economy” – i.e., overhaul the infrastructure of the American energy system toward carbon neutrality – has brought hemp’s industrial usefulness to the forefront of the public conversation. Despite the bullishness, fears about the oversupply present in the CBD industry have industry stakeholders asking whether the fiber segment will follow the same boom-and-bust cycle seen in the CBD industry?
The answer is almost certainly no: The period between 2017-2020 saw nearly a 2,000% increase in licensed hemp acreage, almost all of it dedicated to CBD production. The rapid increase in acreage was fueled largely by astronomically high biomass prices which essentially promised farmers years’ worth of profit for a single crop. Though such returns largely failed to materialize, they still constituted a driving factor in the explosion of CBD acreage. Fiber, while still potentially more profitable than traditional row crops like corn and soy, offers much more modest returns. Furthermore, the amount of fiber acreage needed to be grown to see a similar level of oversupply as occurred in CBD is orders of magnitudes higher than what is likely to be grown.
Simply put, while CBD customers think in terms of kilograms, fiber customers are thinking in terms of tons. In 2020, fiber represented but 3% of total hemp acreage, while cannabinoid applications made up 92%. The current size of the fiber segment seems even smaller when compared with other natural fiber crops (its direct competitors) like flax and cotton. The U.S. in 2020 saw production of more than 9 billion pounds of cotton, versus 28 million pounds of hemp fiber. In fact, in 2020 the entire processing capacity of the U.S. hemp fiber segment was just under 14 tons of material. Risk of any oversupply, then, is rather unlikely.
Nevertheless, the nascent industry is not immune from facing other, very real risks. Manufacturers – those companies which would actually take hemp fiber and turn it into end products – are the true gatekeepers to the industry. Product development efforts remain in their infancy, and are complicated by the conspicuous lack of standardization and specifications present among fiber processors. Furthermore, one-size-fits all regulations developed for CBD are placing extra burdens on would-be fiber farmers, who are skeptical that the hassle of expensive testing procedures (which many deem unnecessary for fiber farming) are worth the lower profit potential of a fiber crop. That, combined with the lack of processing capacity, puts the industry at risk of delayed development.
Despite the challenges, optimism abounds. The federal government’s commitment to decarbonization efforts represents significant potential for hemp fiber, whose ability to supplant fossil fuels as a source of renewable carbon makes it an ideal candidate for federal assistance. Regardless of whether that potential is realized, 2021 should indeed prove to be a crucial year for the future of industrial hemp.
Source: https://newfrontierdata.com
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