Should you be Investing in Hemp Farming?

Thomas L
Should you be Investing in Hemp Farming?

Hemp is woven into the history of human civilisation itself. One of earliest articles of cloth found was made of hemp, dating back to 8000BC. The world’s first sheet of paper was made from hemp. The oldest documented texts–Buddhist writings from 300 AD–are immortalised on a mixture of bark and mostly hemp rags.

The plant became invaluable for many societies. Particularly, the UK’s. One of the crop's chief uses was for making ropes and sails for ships that were three times as strong as cotton and hardier against saltwater. Britain, being a major naval power in the 1500s, relied heavily on hemp. Landowners had to dedicate a quarter of an acre to growing the crop, or get fined.

Today, hemp is navigating entirely different seas. The explosive growth of the CBD industry and the legalisation of cannabis in many nations have thrust the plant into the spotlight once again. The hemp market is one of the fastest growing in the world, estimated to be worth around £3.8 billion globally and on track to tripling that value by 2027.

The Green Rush: A Booming CBD Market

The rapid growth has attracted many eager entrepreneurs to the scene, from big pharmaceutical brands to artisans handcrafting from home. Search for CBD and you’ll be bombarded by a dizzying array of products, from teas to vape juice.

Forecasts are green going into the next decade. Global CBD is expected to grow at a rate of 21.8 percent until 2028. The domestic market is already on a steady path to lucrative growth, with sales of CBD products already surpassing those of Vitamin C.

A Diverse Spectrum of Uses

Hemp distinguishes itself for its multifunctionality. Chop off any part of the crop, and you’re bound to find a market for it.

The woody core of the stalks, called the hurd or shives, is getting attention in construction for creating “Hempcrete”, a fire-resistant building material that’s more eco-friendly than concrete. In the field of biofuels, cellulosic ethanol from hemp could be used as an alternative feedstock to corn-based ethanol. Seeds can be powdered, made into milk, used as a gluten-free substitute for flour, or sprinkled atop your oatmeal to give it a little crunch.

However, CBD by far is the largest driving factor behind hemp’s popularity. Increasingly relaxed regulations and the shift in public opinion on cannabis-derived products have enabled more testing and research into the compound’s medicinal value.

Results are promising. Epidiolex, the first CBD-based prescription medicine, has proven more effective in treating medication-resistant forms of childhood epilepsy. A growing body of evidence is showing that it can also be a viable alternative for treating anxiety, sleep disorders, and chronic pain.

There’s also a large niche to be found outside human consumption–pet care. Around 3 to 5 percent of sales by 2025 will be for pet CBD products. In the UK, selling CBD for animal use is currently not allowed without a marketing license. However, vets can still prescribe CBD for humans under some circumstances.

High Return on Investment

Brexit has created serious bottlenecks for the agricultural sector. While no tariffs are to be added to agricultural products, new trade laws and processes have slowed export for many. No cattle, sheep, or goats have gone out to EU markets since the beginning of the year, according to the National Farmers’ Union and the National Pig Association.

Farmers also face massive cuts in subsidies from the EU, prompting many landowners to look for alternative ways to generate income. Hemp cultivation may prove lucrative for those who can secure the necessary permits.

In terms of yield, growers can harvest approximately 7.5 tonnes of hemp fibre per hectare at a value of £160 per tonne. Seeds can be sold at around £500 per tonne. In the US, some hemp farmers are saying that a bad hemp harvest can even outvalue tobacco.

Cultivating New Roles and Jobs

The industry is set to create jobs along the entirety of the supply chain. “Job creation is going to happen in every economic bracket,” says Erica McBride Stark, executive director of the US-based National Hemp Association.

Labourers and school leavers can find roles that pay upwards of £15,000 per year. There will also be a growing need for professionals in specialist roles, from research and development scientists to compliance officers and lawyers well-versed in the minefield that is hemp and cannabis legislation.

The Fine Print: Things to Consider

The excitement around CBD and the market’s rapid growth paints a very optimistic future for hemp. But while the demand has spiked to an all-time high, there are still considerable barriers that the industry has to overcome to reach its full potential.

One of them is production. Millions of Britons have tried CBD, with many more expressing interest. However, hemp farming has yet to scale to meet demand. Out of 170,000 acres of land allocated to growing crops in the UK, only 800 is used for cultivating hemp. Hemp also needs specialised machines for processing–regular harvesters won’t be able to handle the plant’s tough fibres.

Growers are also constrained by current legislation. Farmers need to secure the requisite licenses to grow hemp for industrial uses. Meanwhile, those who want to grow hemp for CBD will find themselves in a baffling bind: while the sale and trade of CBD is legal, the extraction of the compound is not. The leaves and flowers still classify as “controlled substances” under UK law, and therefore must be destroyed upon harvest. Businesses looking into selling CBD will have to import raw materials from outside the country.

Managing Risks

Rooted by a seemingly endless number of uses, the hemp market is one that’s not going to fizzle anytime soon. Even with its rapid growth, much of the industry is still in early stages, like supply chain, cultivation, and research and development. Opportunity abounds for those who know where to look.

Investors who are interested in hemp yet are unsure about how domestic regulations will affect future production can look into ancillary businesses, or those that do not directly deal with the crop. These can include accounting, consulting, and security firms who offer a diverse portfolio of services that includes, but is not limited to, hemp production.

Investment in the science of hemp is another relatively safer route. Even after thousands of years, there is still much left to be discovered about the plant. CBD and THC are only two of hundreds of cannabinoids that can be extracted from it. Researchers are finding new compounds with possible curative properties, such as CBG. We also know fairly little about how these cannabinoids interact with one another. Testing and clinical trials will be pivotal in the coming years for advancing legislation.

Due diligence into the businesses or facilities you’re investing into will be crucial. Several factors affect the legality of hemp and CBD, and companies who are less than exacting when it comes to compliance may find their products getting pulled off shelves. With hundreds of eager competitors, that can mean quickly getting overshadowed and losing market share.

Hemp farming has the potential to create a thriving, lasting ecosystem. However, the market is not quite evergreen–yet. Going into hemp now is a good idea, but interested investors and potential business owners will need to truly acquaint themselves with the ins and outs of the industry, as well as closely watch developments in this rapidly changing space.

Older Post Newer Post