Opinion: Hope is not a strategy, so stop tolling



Opinion: Hope is not a strategy, so stop tolling

Hemp Industry Daily

(Editor’s note: This story is part of a recurring series of commentaries from professionals connected to the hemp industry. Julie Lerner is CEO of PanXchange, a commodity trading platform and benchmark price provider.)

Basing the multibillion-dollar, pie-in-the-sky forecasts for the U.S. addressable market for CBD on retail shelf prices disturbs me.

It’s as illogical as quoting the U.S. wheat market in terms of bags of flour at the supermarket. Estimating the market this way grossly distorts the market fundamentals, especially considering that with regard to cannabinoids, a little bit of hemp goes a very long way.

As the CEO of a pricing and trading platform that is highly visible across the industry, I was terrified to put our estimates out last year because it was dramatically more bearish than the general market consensus.

This year is no different. We look at supply and demand using three different methodologies, and we still lack hard data concerning sales and processing stats. But the supply chain needs forecasts to aid it in making prudent decisions for the year ahead.

Let’s start with the positive: CBD consumer packaged goods is a profitable market sector, though today, it’s far more of a high-margin, low-volume specialty market.

Still, over time, we anticipate that while some products will continue to command high premiums, the mass market will move to a much higher volume at lower consumer prices.

Even this publication, which estimated the 2020 hemp-derived CBD market at $1.9 billion, just predicted that the market would reach $6.9 billion by 2025.

Yet 2021 is a different story.

We came into the 2020 crop year with an abundance of supply from the 2019 crop year. In 2019, the farmers took the hit, with biomass prices falling 84% over six months from their high in July 2019. Since then, inventory has been building across the entire supply chain, in large part because growers chose to enter into tolling agreements.