By Steven Gluckstern
Chair and CEO, Santa Fe Farms
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 legislation 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 both economically and environmentally 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 the most profitable sector. The primary lesson learned for most people is that when you partner with Mother Nature, she is fickle and almost 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 narrow center of the hourglass or “chokepoint” of 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 now focused on CBD and other phyto-cannabinoid products (the base of the hourglass), our vision at Santa Fe Farms is much broader and includes not only cultivation, and processing, but industrial hemp for building materials, plastics, paper, and other manufactured goods as well as our own phyto-cannabinoid products. Additionally, we are discovering 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 hemp supply chain is almost nonexistent. Studying the data is almost impossible but as advanced technologies such as blockchain become “mainstream”, we will soon see efficiencies in cultivation, harvesting, processing, and innovation. We have always thought there was significant opportunity for software as it relates to the hemp supply chain, and with experienced partners have begun investing significant resources to create an industry agnostic “Supply Chain as a Service” platform.
When we started at Santa Fe Farms, we initially thought only about cultivation, but quickly realized that one should make multiple bets to maximize profit one likely had to allocate capital to all parts of the business from seed genetics to retail sale. In the short-term, we believe that prices will stabilize, people will leave the industry (by choice and necessity) and that prices will rise as demand increases.
More interesting however is looking out ten years. As we face the “hemp future,” there is a tremendous lack of visibility of regulation. We can hopefully drive regulation from within by creating products and SOPs that adhere to high quality standards. No one knows what future regulation will look like as it is clearly, at best, a work in progress. However, it represents a place where we can come together as an industry to create policy change, social justice and educational platforms.