Farmers that are producing hemp this year may start to feel the pressure. The US can only reasonably consume roughly 22 million pounds of CBD Hemp in a year and we are currently producing roughly 180M pounds, resulting in what will be a massive price crash.
How we got here is simply and the timeline is as follows
- sudden legalization
- price spike due to increase in demand and limited supply
- farms raise capital and universally increase production based on inflated prices
- farming seasonality means no farmer knows how much another farmer is producing
- harvest occurs, prices crash
- farms go out of business
While price crashes should only happen for about 18 months, we saw price crashes that lasted nearly 3 years in Oregon and Washington when the cannabis market was exploding.
What happens in this downward spiral, many farms go out of business or are bought out by a purchaser who makes the same mistakes the farm did by not securing downstream demand or growing under contract.
As a farm, to handle this fall out, begin securing purchase contracts today. Even with the prices currently high, if you can afford to undercut the market, you can lock up demand now ahead of the price crash that will then drop below the price of production.
The same is true for extraction companies and a brand that sells to consumers, establishing purchase contracts to ensure quality supply will help ensure you have the right volume of products to meet demand during the highs and lows of the market.
NorCal GCX has become the leading online marketplace exchange for cannabis and hemp products, connecting verified buyers with verified sellers. This is inclusive of farmers, extraction labs, buyers and sellers. We vet and verify all parties within our platform which is powered by Podio, eliminating agents, brokers and the middleman.
Now is the time to start securing contracts; engage with our verified members today by becoming a verified member yourself, cal 415-475-9180 to get started.
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