The marijuana industry's recent oversupply problems have been well documented, and now, it seems that the hemp segment of the market is experiencing similar challenges.
A report published Monday by BNN Bloomberg details a sharp plunge in prices for hemp in the second half of 2019. According to data compiled by PanXchange (a commodities exchange that specializes in the plant), in December, the midpoint spot price per percentage point of cannabidiol (CBD) content per pound for Kentucky hemp was $0.95. As recently as July, that figure was $4.35.
One key reason for that price decline is oversupply; hemp growers are producing well more than what is demanded by the still-limited market for hemp and the goods made from it. By PanXchange's calculations, extrapolating from data provided by Charlotte's Web Holdings' (CWBHF 10.64%) recent results, around 20,000 acres of hemp cultivation would satisfy current demand. Yet nearly six times as much was harvested last year.
PanXchange estimates that the number of acres in hemp cultivation will grow. Numerous active farmers are planning to increase their yields, and farmers growing hemp for the first time will add to the total.
Hemp is a variant of the cannabis plant that contains relatively little THC (the substance that gets marijuana users high), but is typically rich in CBD, and is therefore ideal for making products that have the latter substance as their key ingredient. The U.S. Farm Bill signed into law in late 2018 legalized the production and sale of hemp and CBD products.
Though it gets lumped into the cannabis stocks category, Charlotte's Web is the leading manufacturer of hemp-based products. On Monday, when the stock market broadly saw big losses -- with the S&P 500 index down 1.57% and the Dow off 1.9% -- the price of Charlotte's Web shares fell by 3%.