Join Mandi Kerr and Beau Whitney, Chief Economics of Whitney Economics on Thursday morning’s episode of Moving ^HEMP Forward.
Beau Whitney is the founder and Chief Economist at Whitney Economics, a global leader in cannabis and hemp business consulting, data, and economic research. Whitney Economics is based in Portland, Oregon. Beau has provided policy recommendations at the state, national and international levels and is considered an authority on cannabis economics and the supply chain.
For this morning, we’ll talk about:
1. Impact of regulatory murkiness
2. Update on supply chain
3. The critical role of product manufacturing
Patrick Atagi introduced himself and said:
We both work with Whitney economics, but he also serves as our chief economist.
How do you get involved?
We have a trial membership available if you just want to check us out before becoming a member, so feel free to visit us and do so.
What does that mean?
I was talking with my staff when Elia joined, then one of those steps was signing up to be on one of our committees. We have an international market and trade committee. We have a government affairs committee. And then we have a standards committee that’s talking about bringing, certification and standardization and consistency to the industry. And we’re having an AOC and ASTM at our meeting. Next week, on Monday, and Tuesday. Mandi Lynn Kerr looks very much looking forward to seeing you in person. And our conversations there and the Global Hemp Association and how the National Industrial Hemp Council can work hand in hand with the GHA. So that’s step one of the first steps is for you to get what you put into it. And I’d highly recommend folks signing up for committees.
How do you do that?
Patrick Atagi You can either contact me with the first initial key last name at Tagi. And how do you remember the Atagi? It’s like an Atari video game, but with a G instead of an R atagiindustrial.com.
Amazon and the retro games are pretty, pretty popular are G Johnson, Grace Johnson and heavy industries.com. That’s a little bit easier to remember. But sign up. And our committees, the government affairs are growing and the marks and trade, we just launched that. And so when you post folks that we have a market access program, funding from the US Department of Agriculture to do promotion, and that’s an exciting thing happening here. And we’ll follow up after for those who can’t join the meeting. But we’re launching our magazine, we have a preview magazine, where that will look like a lot more copies out there. we’re having some great videos and international work that we’re doing. But also say, for those, who might just be hearing about this,, you can register on site, we’re at the Omni in Washington DC by the National Zoo., we welcome back those in Pennsylvania, Virginia, North Carolina, Delaware, those, West Virginia, who are local, feel free to come by register, you can use our code if you’re not a member, invited attendees and IEC 2021. But no, we have a vast, Spectrum Bo will be speaking there, you’ll get to meet him in person. And, I think that’d be really good for those interested in just the cool side of the information and data. I know both are presenting today. But, he’s also presenting information at our meeting and he’s continually available. And I’ll put in a plug for Whitney economics, visit his website. He’s got a lot of data and materials available. Just Just amazing. We’re glad to be partnering with Moe and him serving as a face for the NIC. Like I said, we’ve academia, we have science regulatory, ASTM AOCs presenting along with food safety net services, it’s a who’s who of Government Affairs people in Washington DC Mandi Lynn Kerr we were talking prior to the call about that., you’ll get to meet a lot of those folks., we’re really impressed with that side of the equation. Just, it’s just outstanding,, going to industrial.com to see the speakers. again, if you’re not able to be there will be communications afterwards to let folks know what happened and I mark off the information distributed, but extremely excited, it’s really coming together. And I can’t say any more, the buzz is just great. And DC, and beyond. So, with that, Mandy, I’ll leave you to it with a bow. Like I said, of your speakers, Bose, obviously, in the top 1%. That’s right. He’s amazing. I can’t say enough. And he’s an Oregonian, like me. So that’s even better.
He said: I’m Beau Whitney. I’m the Founder and Chief Economist at Whitney Economics, Portland based research data and consulting firm. And we’ve been looking into the cannabis industry, adult use of medicine at first for about eight years now. And then we started diving into him. Based upon an invitation, I had to speak at NoCo in 2017. And so I started researching the economics of industrial hemp. And I was completely blown away, I had no idea. And the more that I dug into this, the more I realized how little data there was. Yeah. And as a result of that, for example, I was speaking at the Southern Hemp Expo and at that time, it was in Tennessee. And a lot of speculation was bantered about, or as a result of the passage of the 2018 Farm Bill, and they’re saying the narrative at the time was, hey, there’s all of this supply coming online, it’s going to overwhelm the processing capacity and and there’s going to be too much supply and, and there’s going to be all this impact on the farmers and and so at that time, I said, as anybody asked the farmers about what’s going on, and there was silence, there was silence in the room. And so I was like, well, all ask them.
And so I put together a survey in 2019, and sent it out to over 10,000 farmers, and directly and said, Hey, what’s going on? Tell me about your story. Tell me about your experience. Do you have a buyer? What are you seeing? What’s your intention? And what I realized at that time is that 65% of the farmers that are in the industry didn’t have a buyer. So here they were planning this crop, and not knowing who they were going to sell it to. And so and now, that kind of opened my eyes and so I started expanding my surveys, not only to the cultivation industry, but then to the processing industry. And so now I’ve been talking with product manufacturers. And so what I’ve been trying to do, as a firm, is I’ve been trying to map the value chain, starting from propagation and cultivation, and then from processing, and then product manufacturing. And there’s been a lot of analysis done on the retail side of things. So I’ll just leave that to everybody else. And so because I wanted to do a lot of the important work in terms of mapping out the value chain, so I dug into that I’ve been doing that for a number of years now taking one sector, each season or each quarter or each year, and taking a look at it and doing a deep dive and some of the observations I have are a little bit counter narrative relative to others. Other conversations, but then, but I think that they’re important nonetheless. And when I first started publishing my data on the survey results, I was in Portland, Oregon. There was an NIT conference. And I ran into Patrick. And he said, wow, you’re not even on the agenda. But your data is so important. Can you just speak extemporaneously about your findings, even pre publication? I said, Absolutely. And so I jumped up on stage. I mean, there was, at that time, Senator Wyden Senator Merkley, the one of the heads of the USDA and the FDA. And then there’s me. And so I really appreciated Patrick’s willingness to put me up on stage and give me that forum in that voice. And, that was really the beginning of my relationship with NIH See, was just like, so there’s been good collaboration with Nic and me, and then I’m just delighted to be the chief economist there. But another aspect of this is that I couldn’t do what I do without the support and participation of the farmers and the business operators and the investors in the space. And so I’ve been given a tremendous opportunity to have access to a lot of folks. And sometimes I’m amazed at the access that I have. But I’m really appreciative of that, and their willingness to share the stories and experiences about what’s going on in the industry. So yeah, so it’s been an amazing ride over the last four years or so, specific to the industrial hemp space.
Why isn’t hemp being processed as much?
Mandi Lynn Kerr asked Beau Whitney and said: It’s pretty exciting. Okay, so of course, I want to dive into some of these numbers. When we talk about what is the opportunity, and people say all the time, if hemp is so great, why don’t we have it available? why? Why isn’t it being processed? Like, we all want it to be right within our industry. And we’re screaming and beaten on the tables. But so talk to me a little bit about what those numbers look like? And what is that opportunity within the industry?
Beau Whitney replied and said, I started looking at the capacity, a lot of discussion is around the demand by the consumer. But I wanted to look at how much demand the industry can supply, and sort of kind of turned it around a little bit. And based upon the surveys from 2020 and 2019, I realized that there was all of this biomass inventory building up, especially for CBD. Fiber and gram were different from CBD. There was just this massive amount. It was like a tsunami of inventory that came online. And when I surveyed the processors, they weren’t running their machines. And I was like, Well, if you have all this supply, then why aren’t you running your machines 24/7. And the reason for that I started poking at this. The reason for that is that there weren’t product manufacturers placing orders into the processors. And so not a whole lot of that process material was making it into the product manufacturing sector, which in turn was not making it into the retail sector. And so although when I did talk to the retailers, they were like, Yeah, our demand is going through the roof, 500% 700% year over year growth, year after year after year. And so the demand was there, the products just weren’t getting through. And so I started looking at that, and realized that there was this often overlooked sector called product manufacturing. People talk about cultivation or propagation about processing and retail. But people really aren’t talking about product manufacturing and product manufacturing, in my opinion, is the key to all of this, once you get big manufacturers online, then a lot of this, in my opinion, a lot of this inventory will be consumed, it’ll be processed and put into finished goods form. But until that point reaches, there’s going to be this dearth of, or this massive amount of excess supply in the system. And so based upon surveys from last year, there was only 42% capacity utilization. So that means, essentially, processors were running their machines,, 42% of the time, right? That’s like, that’s not even, that’s two shifts five days a week. Right? So it’s not very much.
Shift to industrial manufacturing
Mandi Lynn Kerr asked a question and said: So when we speak about processing, right, what does the shift look like as we’re really moving into the industrial manufacturing of it? bio composites or biofuels? What does that look like?, as most of this has been CBD focused?
Beau Whitney replied and said: So early on after the passage of the 2014 Farm Bill, there was a lot of interest in grains and fibers. And so a lot of the capacity, a lot of the acres that were planted were dedicated to fiber and grain. But then as CBD became in vogue, and people realized that there wasn’t a whole lot of processing capacity for CBD, then everybody in prices were going through the roof, then everybody started focusing in on that, now that that opportunity has become overwhelmed by supply, and there’s not enough products available to consume all that inventory. Processors and cultivators are shifting over into the grain and the fiber space. And so now, you’re starting to see a decline in the percentage of acres associated with CBD, and an increase in the percentage of acres associated with fiber and grain. And that’s a good sign, because that shows one that the cultivators and processors are nimble. And that’s characteristic of pretty much everybody in the cannabis space, right, regardless of if it’s adult use.
And it also shows that people are gravitating to where the opportunities are. And the opportunities in my opinion, are so overwhelmingly in the area of fiber and grain processing and manufacturing, that it makes the CBD pale by comparison. And so there’s a shift occurring, but the shift is occurring at kind of a snail’s pace right now. Because one, it takes a while to convert over from a CBD processing facility to a fiber processing facility. There’s different technologies, different machinery and the like. It’s expensive at times to convert over. But then also, the market needs to build the demand, you’re starting to get the supply capabilities. But the demand is still kind of in question at this point for fiber and grain. And the reason I say that, is that, right now, there’s a tremendous amount of regulatory uncertainty in the space. And so people are like, what’s legal, what’s not, what’s the rules to the game, don’t know, I’m scared, I’m going to invest someplace else. And so a lot of the product manufacturing opportunities aren’t aren’t fully mature yet, which would drive more capacity requirements and like, on the side of fiber and grain. And so until the regulatory murkiness is resolved until there’s greater clarity coming from the federal regulators, there’s going to be this kind of uncertainty to the point where it’s suppressing the growth of the industry. Does that make sense?
Big Opportunities in the Industrial Products
Mandi Lynn Kerr asked Beau Whitney.
So earlier, you mentioned manufacturing, right? And the manufacturing piece that wasn’t discussed or hadn’t been discussed a lot in the CBD side. On industrial products, where do you see a big opportunity? And what numbers I guess support that, as far as when I say big opportunity, I look at things like the textile space, biofuels, construction, or even the energy sector in general construction, building materials and so forth.
Beau Whitney said, you’re nailing all of the industries that I would like to state. But in addition to those, I would say, in addition to textiles, which is starting to to achieve cost parity, right now, relative to cotton, or are there opportunities for cotton hemp blends? There’s textile manufacturers and suppliers that are starting to look closely at hemp textiles. But there’s also opportunities in the areas of construction with Hempcrete, with flooring and siding with building materials. There’s also an oh and by the way, I’ve looked at the hemp flooring and I wanted to redo our main floor in our house with hemp wood, right? Yeah, it’s really more durable, better quality. It’s not as porous. I mean, it lasts longer and the scratch resists. So there’s really, it’s not only an issue of being a replacement product, but there’s a quality aspect to it. so there’s a lot of viability in the construction space. In addition to that, plastics are really relatively unknown when it comes to the industrial hemp application. Right. So plastics, you could replace plastic bags, you could plastic bottles, and the like. It just takes money to increase the capacity. And it requires some policy changes. In order to do that. Now, some states are proposing legislation to ban plastic bags, or to insist upon sustainable products and the like. And that’s a good first step, but there’s a long way to go. So there’s not only a regulatory element, but also a legislative element, in addition to increasing the capacity within the manufacturing space. In addition, you’ve got plastics, right, but then you’ve got automotive. And right now, BMW and Mercedes and, and other car manufacturers are using hemp in their construction of their vehicles. What Whitney economics is forecasting is that, as there’s a move more towards green technologies and sustainable products, the automobile industry will utilize him in a much more substantial way than what we’re realizing right now. It reduces the cost, it reduces the weight. And as there’s a transition over to electric vehicles, which require batteries, then you want to reduce the weight of your vehicle to extend your battery life. Another aspect is that actually, you can make batteries out of industrial hemp. And so they hold a stronger charge, they take less time. Yeah, and take less time to charge back up. And so there’s technology that already exists, that’s just waiting to be deployed. And it takes a little bit of effort to get inserted into the product specifications. And so, compliance and all that stuff is regulatory. But once you’re there, then it can really catch hold and take off at an exponential rate. So those are just a few of many, I haven’t even mentioned hemp for animal feed hemp for human consumption and alike.
Mandi Lynn Kerr commented and said: There’s been very little talk about sugar or protein. I mean, we talked about the protein compared to the hemp part, but what’s actually been extracted and used for treatment in the medical industries, right on the protein, or the sugar side?
Beau Whitney said: Yeah, in fact, I’ve looked at protein content, grams per acre of hemp, relative to all these other and not only that, but then the omegas in there too. And there’s so much more protein content and omegas on a per acre basis for hemp then soy corn, even alfalfa for that matter, and peas. Alright, so let’s just look at impossible burgers, right? So you got impossible burgers, they use peas as the main source of protein. And so just think if you could substitute hemp for P to increase your protein, your input costs are lower, it makes better economic sense from a manufacturing perspective to include hemp rather than using your peas as a source or protein. Or you could do a combination, right? So there’s all these opportunities and a lot of these stories about the potential of hemp that are not being conveyed to the general public, not being conveyed with the exception of groups, like Nic because they have tremendous reach on Capitol Hill. Right. So you have conversations occurring via NIHC on the regulatory side and legislative side, but there needs to be more education on the benefits of hemp throughout this entire chain, consumers, regulators, legislators.
Optimistic Outlooks Fiber grain and or CBD
Mandi Lynn Kerr said: That’s definitely our effort, right? And that’s why we’re hosting so many of these is just exactly that to help get the information out and help connect people. So thank you again for joining. And thank you everybody else for listening in. I have to give a shout out. So a few people are listening.
Ryan got a great question: Wondering about optimistic outlooks that you’ve seen both in regards to fiber grain and or CBD.
Beau Whitney, I gave a speech recently about hemp and other cannabis opportunities in Europe. And I was speaking in Berlin, and I talked to this gentleman, and he goes, You gave him a rather sobering update on what’s going on. He goes, there’s so many cheerleaders out there, but you were just really realistic. He goes for an American, you’re not so bad. And I thought that was like, Okay. So what I’m trying to convey is that he appreciated the realistic, and yet, even conservative estimates that I was putting out there. And, and I think that resonated not only with the Germans in the audience at that particular conference, but it resonated with others that need a realistic baseline about what’s going on in the industry. And so, when I put together the forecast for fiber and grant, I look at these opportunities, textiles and construction and automotive, and then I look at what reasonably could occur in the short run. And then I look at market share conversions, how much market share can one take from cotton manufacturing or cotton production or, or what market share could be included in the automobile industry and the like, and then I generally cut that in half, and then make my projections on those numbers. And, what I’m trying to do is to build in conservatism, because even with those conservative numbers, the number of acres required is enormous. And so it doesn’t take very much conversion and in textiles and construction and animal feed to really blow up the number of acres required. I mean, by 2030, I’m projecting a demand for almost 10 million acres of hemp for cultivation, 10 million acres, just think, I mean, last year, there was roughly 500,000. This year, there’s 235,000 acres, so a decrease of almost 55%, year over year and number of acres. But that’s because people are excited, they’re not able to see the opportunities, they’re not able to cover their costs. So they’re exciting. And it’s unfortunate because they’re exiting out of the cultivation side at a time that the hemp industry is poised for significant growth. And so but when you run out of cash run out of cash, and lay some of that on to the hands of the cultivators for not doing their due diligence about knowing where to sell this to and what the value chain looks like. But then I also lay some of the responsibility of that decline on the regulator’s themselves for not providing a supportive environment, and instead providing a controlling environment. So it’s unfortunate, but for those that have remained steadfast and have vision, and have the means to do this, I think the opportunities for hemp in the cultivation and the processing, product manufacturing. There’s a lot to that and there’s a lot of potential.
Hemp Planting in 2022 and Expected Bottleneck
Mandi Lynn Kerr asked a question: I have a really good question concerning 2022, so here it is. Any predictions regarding hemp or visitors to the planned hemp growing in 2022? And after that, a further inquiry on the bottleneck anticipated bottlenecks for 2022 on the fiber green was expressly posed.
Beau Whitney replied and said: So there’s been a decline of hemp processing capacity year over year, it increased last year by over 100%. And now this year has declined. And that’s because the processing side hasn’t achieved its potential either. There haven’t been any orders being placed on the product manufacturing side. A lot of that decline is related to CBD. And so right now on fiber and grain, there’s still a need for processing capacity. So in terms of bottlenecks, I still see the strong need for increased fighter and processing capacity, or of February and grain processing capacity. And so that’s where the bottleneck will occur now when I completed an assessment of all of the states and their hemp programs. And so we’ve looked when we could get the data we’ve looked at, you know, what percentage is fiber? What percentage is green? What percentage is CBD, and you’re starting to see the shift over to the fiber and green side and a decline in CBD acres licensed. Now, last year 70%, maybe in terms of CBD capacity, actually, it was 82%. That’s shifted way down. It’s sub 60. And by 2030, I’m forecasting that CBD acre demand will be 2.5 to 3% of the total acres demanded and so, that shows how fast and ascension there will be on fiber and grain. and as a result, there will be corresponding demand for processing capacity for decortication, degumming, all of that, that goes into the refinement and value added processes associated with fiber and green.
Improve demand for builders
Mandi Lynn Kerr asked and said: Absolutely. Okay. So I hear a lot of times people talk about the number of facilities needed, you know, the number of facilities that are available, can you understand that this is going to play a big role? Or I guess the amount of tons processed plays a big role in probably the number of processing facilities? But, you know, when we’re putting into perspective a nationwide or even North America, what are we looking at as far as the need of facilities?
Beau Whitney replied and said: What I’ve looked at is, I’ve looked at the number of licenses out there for processing, I’ve looked at the amount of tonnage associated with acres license versus what’s actually available from a license perspective. And but I haven’t, what I haven’t done is I haven’t looked at what my 2030 demand is, and then what that looks like in terms of capacity. So, I don’t have the straightforward answer to your question. But right now, the amount of supply in the system based upon that 230 plus 1000 acres of supply, it doesn’t really support the number of processors in the space right now. So I look for further stress in the processing industry, because there’s just not enough supply, fresh supply coming in, a lot of the supply is going to come in the form of stuff that’s been in the warehouse, either from 2019, or 2020. And whether or not that’s good, unable to be processed, still to be seen.
Mandi Lynn Kerr said: There was a question here, kind of along the same lines of what I just asked, as far as number of processing facilities needed, but also addressing the ASTM and ICC results next year to improve demand for builders, can you speak a little bit to the need there, and what the lack of those standards have done to the industry, they’ve prevented the growth?
Anytime that you have a nascent industry, it takes a while for the standards to catch up. But standards are going to be the key to the evolution of the industry, right, because if you can get hemp accepted as a building material, then people are more willing to build with it. If you allow it to be used as an alternative source for automobile parts for plastics and the like, then there’ll be greater opportunities to include those in cars and other things. So the development of standards, while it’s still nascent, is really, really critical, important, critically important to the maturity of the market. And so I know that NIHC is working in this regard to help establish these standards, or help it at least influence the development of the standards. And they’re really, really critical. And so, in terms of construction, in particular, there are some tests occurring right now, some developments on you know, whether or not it holds up when compared to traditional concrete and the like, for example, on hempcrete. And so in that regard, it’s holding up well, if not better, it’s just more a matter of having those having those test results, validated, confirm and then adopted in the standard so And now one other thing about standards is there’s not only ASTM and the like, which are critically important, but also good manufacturing practices and good agricultural practices. And I think, as the market evolves, and as the myopic American industry opens up its eyes to see that there’s all this stuff going on globally, that there’s going to need to be these international standards adopted, so that people can understand and engage in international trade. And in addition to that, those that set themselves up now to drive towards higher standards, the good manufacturing process, good cultural process, and like, they will differentiate themselves, and that’ll serve as a barrier to entry for other actors. And so by setting yourself up now, you’re actually able to differentiate later. And then you’re, you’ll be more competitive, not only in the US market, but in the global market as well.
Mandi Lynn Kerr said: These are types of topics that come up all the time, and especially on the GMP, you know, and the certifications that are needed. Do you have or does your organization have specific or referred, I guess, companies to work with for GMP certifications?
Beau Whitney said: I do have a pretty extensive database. And I can make referrals if I haven’t necessarily gone there to create a directory or anything. But I certainly can help point people in the right direction. And so in my reach not only is of course, not only the US, but globally as well. So yeah, there’s some folks I can.
FDA focused on CBD as a drug
Mandi Lynn Kerr asked a question and said. So real quick, with the FDA focused on CBD is a drug only from hemp. What is reduction as enforcement, as enforcement is enhanced?
Beau Whitney replied and said: Well, what’s interesting about the FDA is that once they the narrative is once they classify a product as a drug, then they don’t have the flexibility to classify it as anything else. And I don’t actually think that that’s true, I think that the FDA is empowered to, to classify hemp in multiple categories, CBD and multiple categories, and not just a drug. But they’re just unwilling for some reason to do that. And so there’s opportunities as a food ingredient as a supplement, as well as a drug. But right now, they’re holding firm on that, and it might be due to the interim leadership. And they’re waiting for more permanent leadership to come on board. They may be deferring to Congress, I don’t know what the intention is. But right now, that lack of clarity is impacting the growth and development of these other industries within the CBD space. And that’s unfortunate. I did a recent analysis of regulatory uncertainty and its impact on CBD value. And as this biomass continues to accumulate, and greater excess inventory than simple economics, right, got to break out my sweater vest, economics 101 lesson here, but when there’s more supply than demand prices go down. And when there’s regulatory uncertainty, there’s not going to be a whole lot of demand. And so it just creates an environment where there’s either more supply, or fewer participants in the space. And when I did an analysis, using pricing that I got from panic change, I noticed that because of regulatory uncertainty and the lack of product manufacturing, the price, the value of the capacity in the processing industry have declined over a five month period by $9.9 billion. And so that’s the impact that a lot of this lack of clarity on the FDA side, for example, is having that’s the impact that it’s having on businesses. $9.9 billion is a lot of money that could otherwise have been I’m going towards product development, reducing costs in the retail channel, increasing productivity at the processing level above that 42% capacity that I mentioned. And then also getting more money into the hands of the farmers so that they can plant a diversity of crops, increased their production of fiber, increased production of grain. So the lack of the insistence upon the FDA to only designate CBD as a drug has had this profound influence and impact in a negative way on the rest of the industry. And that lack of regulatory clarity is not just impacting CBD, it’s impacting the rest of the industry on the fiber and grain side, because a lot of investors don’t understand the story of hemp right now. And as a result, they see one headline, this is illegal, and then all of a sudden, they think that fiber is illegal, or they think that grains are illegal. And so then as a result of that they don’t invest. And right now, the key to the maturity of the hemp industry is investment in that product manufacturing sector. And that’s being impacted by the lack of regulatory clarity. So there’s a lot to that question about enforcement. And, and the FDA and CBD, there’s, it’s a very, very complex issue, which has profound effects above and beyond what’s going on in the CBD space.
WTO technical barriers
Mandi Lynn Kerr said: So there’s lots of questions that have come in. And I want to address one because this comes up all the time in the construction and building space, specifically as no other organizations or companies have received certification, say in Europe and now are developing or building here. What does that look like, as they’ve let’s see, here’s a question from Glenn specifically, what about the WTO technical barriers to trade and other international mutual agreements with respect to accepting accreditations achieved in other countries?
Beau Whitney replied: That’s digging into a lot of detail right now. And there’s some aspects of that that I know quite well and others that I don’t and wouldn’t profess to be an expert on, but, but in some instances, the US respects the accreditation within certain industries. And they’ll allow opportunities, you know, to be imported, let’s say, on other issues, the US regulators insist that all of the product accreditation, all these processes, accreditation, and all this comes from us sourced suppliers, US source goods, and all this stuff. Animal feed is a perfect example of that, where there’s all of this evidence associated with the benefits of, of introducing hemp into the animal food chain, which would then in turn, enter into the human food chain. But the FDA is insisting that any study of any type of application for approval come from us suppliers using us hemp, using US manufacturing, using us herds. And so that insistence is impacting the acceptance of hemp as an animal feed. And then as a result, it’s when we’re in the middle of a hemp feed crash we are not happy, but animal feed crisis like we are right now. This is actually impacting folks, not just in the cultivation and processing side, but it’s hurting cattle, it’s hurting folks that are processing the meats especially and it’s driving up food prices. So there’s a lot of this is the difficulty when it comes to either accepting and the challenge is accepting international accreditation and not. But it’s really kind of a sector by sector thing. I know I didn’t address construction, and shifted over to animal feed, but it just demonstrates how complex an issue that that can be. And how sometimes insistence upon us accreditation does more harm than good.
Mandi Lynn Kerr said: Well, and I’d love to link you because these are the kinds of conversations that frequently occur, and a few of our members or people who are participating have the accreditations, so getting them over is again one of those hurdles that I just don’t understand.
Beau Whitney said: You know one thing on the construction side, I’m working with a group out of Hawaii and they are able to target some development that doesn’t require the local standards in the US standards for construction because they’re on native lands or what have you. And so they’re actually able to demonstrate the, on the construction side, the true capabilities of hempcrete other building materials without having to jump through as many hoops. And so I think that by showing that there are examples that have positive results in the construction Arena in in places like Hawaii, then that can be translated into potential and positive results throughout the US construction industry.
Mandi Lynn Kerr asked a question: What about genetics? You know, this is a big topic that comes up also, as we look at the scalability of this industry, and how the majority of our seeds have been purchased from Europe or China outside of the United States. And understanding Europe is significantly smaller than we are and our demand is going to be much larger than there. So I’m curious from your perspective, where we’re at as far as genetics and any opinions.
Beau Whitney replied and said: Yeah, so there are three basic groups of genetics. As I understand it, there’s a European genetic set, there’s the Asian, predominantly Chinese genetic set, and then there’s a North America set. And, and the, because Europe has a long history in the industrial hemp space, their genetics appear to be more stable, and there’s less variability, and they’re more predictable. And so that’s why there’s so much demand, then the Chinese, they’re a little bit more variable, and so you’re not going to get as much consistent results. And then on the North American side, a lot of the hemp genetics have been achieved through breeding out the higher THC side. And so they’re more hybrid, if you will, in nature. And it’s going to take several generations of crops in order to really stabilize the US genetics in the North American genetic pool. And so that basically forces folks to default to the European ones. Now, what’s interesting about this, in my mind, is that you may be able to have good success with European genetics in certain parts of the country. But that doesn’t necessarily, especially parts of the country that are similar in nature, from soil content, and all this stuff, climate to Europe. But if you’re in an area that’s significantly different, with a shorter growing cycle, or with different, you know, cycles for the sun, or the different climates, then there’s going to be variability of results, even with the stable genetics coming out of Europe. And this is something that I think is often overlooked by cultivators, when they go out and they purchase their supply. Where do I think that the genetic industry is going? In the US, I think that ultimately, there will be a certified seed requirement. And that will make it easier for the USDA and other regulatory bodies to monitor and regulate the cultivation industry and the propagation industry. But it’s going to take a while for that, that side of the industry to mature. And, right now, it’s still kind of up in the air from my perspective. It’s going to take a while now. What’s also impacting this is the fact that there’s still all this regulatory murkiness, right, and the, the federal regulators are trying to control the industry, rather than nurture and grow it. And what I mean by control is they’re the federal regulators are having this difficulty trying to differentiate what’s marijuana versus what’s hemp. And so in this line of demarcation at point 3% THC, it’s really messing with the ability for federal regulators to regulate effectively. And so had they not had that line of demarcation, or had they not had the history on the higher THC side of prohibition and control. I don’t think that the industry would be experiencing this level of control, which in turn is a pet suppressing the growth and development of the industry. Right. And so, until there’s more nurturing policies associated with developing and growing the industry, it’s going to be problematic. Now, what’s interesting to me is that I went to Louisville, Kentucky, with NIHC, and we talked to a lot of state department of eggs, and heads of their Department of Ag program. And in my opinion, based upon my experiences there, there was a lot of development and a lot of support for industrial hemp growth. At the state level, it’s just not translating at the federal level. So you’ve got the state folks saying, Hey, this is great. This is a good opportunity. There’s opportunities for farmers for all this stuff. But they’re still even at the state level, they’re kind of handcuffed by the federal policies.
Mandi Lynn Kerr commented and said, Which prevents a lot of movement, I’m sure, right, because they’re just unsure about what that next step is.
Beau Whitney said: It creates confusion, right. And whenever there’s confusion, then people react a couple of different ways, they can either kind of freeze in place, they can take a more conservative approach and back off, or they can do like some and just go for it and ask for forgiveness rather than for permission.
What should the industry be focusing on?
Mandi Lynn Kerr asked and said: Okay, well, we’re coming right up on about an hour’s bow. Where do you have it? Or, you know, what, what really isn’t being discussed that maybe we should be focusing on as an industry?
Beau Whitney replied and said: Well, I think one thing is that the key here is this product manufacturing sector, there needs to be a greater emphasis on developing and deploying products into the retail channels. And by developing the product manufacturing sector, it will provide greater and more stable funding and revenue into the processors who in turn will give that to the cultivators. And so that’s the real key there. But another thing that is in the narrative today is that there seems to be this, this cap on the CBD demand, right? And that, that it only takes, you know, 30, or 40,000 acres in the US of, CBD production, or CBD cultivation oriented cultivation, in order to support all of the demand for CBD. Now, I don’t believe that I think, personally, I think that there’s more demand out there than what we could supply, it’s just going to take the products getting into the hands of the consumer, in order to really prove that hypothesis out. So I generally run these counter narratives. But it’s data driven counter narratives. And so without the product manufacturing, deploying new products, we won’t truly understand what the demand is for CBD products. In addition to that, there’s also a lot of opportunities here on the fiber and grain side. And I think consumers are willing to pay a premium to see hemp based products in the, into the retail channels and into their other products, because of the aspects of sustainability, the aspect of climate, soil remediation, and like, so there’s a lot of benefits that are often overlooked associated with the cultivation and production of hemp products that are really resonating with consumers. And so there’s that pent up demand for fiber and grain as well. And it’s just it’s being unrealized, or it’s not getting out into the general public. And so that’s why I appreciate the Global Hemp Association for giving me the opportunity to tell the stories about these things and talk about the potential in a realistic and unbiased way. Right. And so I just look at the data and right but, but there’s all these opportunities out there and the story is just well, it’s getting out it’s not getting out fast enough, enough to drive folks into the market from an investment perspective and from a product manufacturing perspective.
Opinion on a co-op model and carbon
Mandi Lynn Kerr asked Beau Whitney and said: I’m excited to keep diving into this. I could go deeper and deeper to a lot of different subjects but I really want to ask before we get off. Two quick questions: your opinion on a CO-OP Model, as we want to keep,, the processing close to where it’s been grown, and also the carbon. How relevant is this carbon discussion when it comes to work? You’re doing?
Beau Whitney replied and said: Two great questions. This morning, I taught a class with the University of Nebraska. And I gave a kind of hemp 501. Right, it was a graduate class and undergraduate class. And one of the questions from the students was, you know, is there economies of scale? And then, what does that look like? And if not, you know, is it going to be small farmers going to be large farmers, you know, what’s going on? And I thought it was a great question and very insightful from the students there. In my opinion, there’s going to be large scale production of hemp using modern farming techniques, right, combine tractors. You know, I don’t know how many cultivators I talked to, that went from a 1000 square foot test plot to 100 acres, and they assume that they could harvest that 100 acres by hand, right, for example. So you have this, you have this lack of knowledge of, of commercial farming techniques by a lot of the folks that entered in hoping to get rich, you know, and, and cash out, you know, on the big CBD craze. But at the very same time that there’s going to be these opportunities for large scale commercial agriculture, and at 10 million acres by 2030. I think it’s going to require some of that. But at the same time, it doesn’t mean that small farmers are out of the picture that they’re going to be boxed out. I’ve been talking to a lot of economic development groups in various states and counties and cities that are looking very, very closely at this co-op model. And I think that there’s a lot of viability from an economic development perspective to set up a hemp campus, where you bring in your harvested goods, you try it, you store it, you process it, you put it into a product manufacturing mode, and then you bring it to market. And a lot of these coops are trying to be located near the farmers so that there’s not as much cost and carbon impact on the climate as a result of transporting the great distances. Right. So there’s a real solid model associated with cooperatives in the headspace. And I think that you’ll see regional hubs being deployed as the market matures. And it only makes good economic sense. And it helps out the small farmers to develop economies of scale that in order to compete against the large commercial operators, I think there’s a lot to that relative to carbon, you know, carbon in terms of industrial hemp, it’s like a hand in a glove, it fits very, very nicely. And I think that carbon credits and the and the economics of carbon relative to the hemp industry, will prove to be and have the potential of, of providing additional income above and beyond just what’s going on with the deployment of products on him. And so there’s a lot of opportunity there. And I think that is still in its nascent discussions, but it’s important discussions to have, and something that all hemp farmers and processors should look at very, very closely, the the carbon offsets and the credits and the revenue derived from that there’s tremendous potential the more and more we go into this, you know, closer to 2030 and beyond.
How to reach Beau
Mandil Lynn Kerr said: If anybody else has questions, or wants to get in touch with Beau, how do people reach out to you and your organization?
Beau Whitney replied: I have a website, email@example.com. And you can also contact me at firstname.lastname@example.org. And I try to be as responsive as possible, because, you know, there’s, it’s just important to do the right thing.