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July 22, 2020   /   Andrew Sheaffer

The Farm Bill of 2018 was a revolutionary stepping-stone to long-term sustainability for the industrial hemp industry.  It was the most expansive bill of its kind, creating a wide variety of new hemp business opportunities for entrepreneurs.  Growers can now transfer products across state lines and there are no restrictions on the transport, sale, or possession of hemp products, as long as they comply with THC concentration regulations (no more than 0.3% on dry weight basis).

Increasing consumer awareness of the benefits of hemp and an increased push to legalize hemp around the world has led to a broader application of hemp across several industries, such as textiles, food and beverage, construction, furniture, pharmaceuticals, and paper; and pandemic or not, the need to find environmentally friendly materials outweighs concerns of a recession.

According to a recent study, the industry is only expected to grow with a compound annual growth rate of 34%, totaling an estimated $26.6 billion by the year 2025.

Here are nine trends driving growth of the hemp market.

1. Increased Demand for Health Benefits Without the Intoxication

Nearly 2/3 of U.S. residents live in a state where marijuana products are legal for commercial or recreational use, but an increasingly health-conscious nation is driving demand for products that deliver the benefits of cannabinoids without the intoxicating effects of THC. Cannabis growers are working to meet demand by producing strains with little-to-no THC, so users can enjoy the myriad of positive health benefits, without the intoxication.  This is driving previously resistant consumers to the industrial hemp and cannabis market.

2. Evolving Modes of Consumption

Increased interest in the health applications of cannabinoids has led to many different modes of consumption. Pharmaceutical companies, for example, are producing lotions, oils, and creams to address pain from inflammation.  Other personal care applications include makeup, lip balms, and nourishing hair oils.  Different modes of hemp consumption allow entrepreneurs interested in hemp business opportunities unprecedented freedom to create a wide range of hemp and CBD products, even under different brands.

3. Cashless Payment Options Are Becoming More Prevalent

Legalization of hemp and CBD is legal under federal law.  However, some big banks will not process dispensary payments because recreational products still remain illegal under federal laws.  Cannabis also carries an old stigma of being an industry that is high risk, so some payment processors charge higher fees and require ID verification, intimidating or inconveniencing customers.  Cashless payment solutions allow consumers and entrepreneurs more flexibility.

4. More Products Being Offered to Pets

Americans love their pets – in fact, we spent more than $95 billion on them in 2019.  The hemp and CBD market continues to focus more heavily on pet care, with offerings such as hemp chew toys, CBD-infused dog bones, and more. Some companies even sell CBD products to quell anxiety from fireworks and thunderstorms.

5. Regenerative Agriculture Practices Are Growing in Popularity

Sustainability has long been the watchword for farmers, and regenerative agriculture in hemp farming has two primary benefits.  Firstly, it increases biodiversity, improves watersheds, enriches the soil, and promotes the health of the ecosystem as a whole. For example, four acres of trees produce the same amount of cellulose fiber as just one acre of hemp. In addition, hemp takes just 100 days to grow to a stage where its fibers can be used versus a minimum of 50-100 years for a tree to reach a similar stage.  Secondly, it responds to an evolving consumer demand for increased transparency in farming practices.  Entrepreneurs who respond to the needs of the consumer by promoting sustainable farming practices can use such principles in their marketing in addition to promoting a healthy ecosystem.

6. Small Farmers Are Shifting to Industrial Hemp Farming

Small farmers continue to face an uphill battle with trade wars, severe weather associated with climate change, tanking commodity prices related to globalization, political polarization, and new technologies that make general farming practices obsolete.  The evolving nature of agriculture has led to a crisis among U.S. farmers, with 87% of respondents to a recent survey expressing worry that they will lose their farms. Small farmers are most affected, and with the land and infrastructure already in place, many are turning to hemp cultivation in an effort to save their businesses.

7. Insurance & Banking Possibilities Are Increasing

As the hemp industry expands, so does the possibility for insurance coverage, reducing the risk to investors. The USDA announced two new risk management programs for hemp farmers this year, the first step in widely available multi-peril coverage for all hemp farmers.  Additionally, Federal financial regulators released guidance in late 2019 for banks and credit unions interested in working with the hemp industry. This signals that even more conservative and risk averse entities are embracing hemp and the revenue it can generate, especially with the emergence of new regulatory technology companies like VeriLeaf that support financial institutions’ compliance programs when dealing with hemp-related businesses.

8. Hemp Genetics Are Eliminating Inefficient Supply Chains

With Federal regulations requiring an end product concentration of less than 0.3% THC, more producers are concentrating on the development of superior hemp genetics. Processing infrastructure and underdeveloped supply chains are inadequate to meet the evolving demand of the consumers, so growers are starting at the source.  By cultivating strands that naturally meet the requirements set forth by the Farm Bill, farmers can effectively cut out the middle processes and ensure a high-quality hemp product makes it to the consumer faster.

9. Consumer Demand Continues to Turn the Policy Tide

For much of its lifespan, hemp and CBD has been a partisan issue. However, as the passage of the 2018 Farm Bill has shown, consumer demand for CBD and hemp products is increasingly making the industry bipartisan.  As an important safety net for farmers and a struggling agricultural industry, commercialization of hemp has been an important source of revenue.  The 2020 election will be an important one for the hemp industry as both parties attempt to capture votes with promises of FDA involvement, superior products from enhanced regulation, and more. Approximately 1/7 Americans say they use CBD products regularly, with the most common uses for pain, anxiety, and insomnia, respectively.  This widespread adoption of hemp derived products, especially over such a short time frame, should signal to entrepreneurs that both market and policy are ready for growth.

Hemp is one of the quickest growing industries in the United States.  Thanks to its wide potential for application, it provides hemp business opportunities for aspiring entrepreneurs looking to get in on the ground floor.  Be on the lookout for investment opportunities that promote sustainable business practices, display an interest in hemp genetics and purity, and require farming experience to take advantage of crisis coverage.


About West Town Bank & Trust

At West Town Bank & Trust, our most important goal is to understand what’s important to you, what’s getting in your way, and what you hope to achieve, so we can help you get there. Since 1922, we’ve been creating long-lasting relationships with our customers based on old-fashioned values and future-thinking ideas.  Whether solutions come from surprisingly innovative tools or trusted products you’re familiar with, our single-focused purpose is your financial well-being.

Some banks aren’t willing to bank hemp-related businesses. At West Town Bank & Trust, we don’t just bank hemp, we embrace it.  We are a hemp friendly bank and have done a tremendous amount of diligence concerning hemp rules and regulations and have written a compliance program to make sure our clients operate within compliance.  If you’re in a hemp-related business and need a bank that understands your needs and your industry, we’re ready to help you bank hemp safely.