It’s difficult to predict where the hemp industry will go over the next five years and how it will develop as it is only been just over 22 months since the farm bill of 2018 was passed legalizing hemp for transport across state lines. This opened up an entire new industry for CBD and other hemp related products. What we do know, is that hemp is an extraordinary plant and the industry, although nascent, will have a profound impact in both the US and abroad.
What we learned in the first two years of the legalized hemp industry is now that everyone rushed into cultivation, farming may not be most profitable component. The primary lesson learned for most people is that when you partner with Mother Nature, she always wins. Furthermore, unlike corn, soy, and other US agricultural products, the plant needs to go through a transformational process to make it usable for downstream products. Thought of as the center waist of the hourglass or the chokepoint in the industry, the plant needs to be processed and/or extracted to be usable for anything other than smokable flower.
While much of the industry is focused on CBD and other phyto cannabinoid products (the bottom of the hourglass), our vision at Santa Fe Farms is much broader and includes not only cultivation, and processing, but industrial hemp for building, plastics, paper, and other manufactured goods as well as our own CBD products. But we are also finding that carbon-based derivatives obtained through pyrolysis will drive further business in ways we are just beginning to understand and that could have significant impact on both renewable energy and environmental sustainability.
We also believe there is significant opportunity for technology. Because this is a nascent industry, the visibility of the supply chain is almost nonexistent. Studying the data is almost impossible but as technology comes online, we will soon see efficiencies in cultivation, harvesting, processing, and innovation. We have always thought there was a significant opportunity for software as it relates to the supply chain, and we have invested resources in creating software to track and trace seed to sale.
When we started at Santa Fe Farms almost two years ago, we only thought about cultivation, but we quickly realized that you had to put your markers down like a roulette wheel – to be profitable you had to allocate capitol to all parts of the business seed to sale. My short-term prediction is that prices will stabilize, eventually people will leave the industry and prices will go up as demand increases. What is even more interesting however is looking out onto a ten-year horizon. As we face a “hemp future”, there is a tremendous lack of visibility of regulation. No one knows what this will look like as it is not only a work in progress, but it will affect the entire industry. It’s also a place where we can come together as an industry to create policy change, social justice and educational platforms. We can drive regulation from within by creating products and SOPs that adhere to high quality standards that we create. In doing so, education will become increasingly important.