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Turning Back the ‘Diol: CBD Hemp Prices Crash; History Repeats Itself?

Updated: Aug 13, 2023

Editor’s Note: Today’s post comes from contributing editor Nick Johnson, a historian and editor based in Fort Collins, Colorado. His book Grass Roots: A History of Cannabis in the American West (2017) is a history of cannabis agriculture that explores the environmental and social dynamics of the nation’s most controversial crop. He also blogs (and occasionally podcasts!) about all things cannabis on his website, Hempirical Evidence.

CBDProducts

A sampling of the “rapidly expanding market of CBD-enhanced products.” Image courtesy of Jeoy Pena via Wikimedia.

The booming market in Cannabidiol (CBD) products has gone bust. The boom was touched off by the federal re-legalization of hemp in the 2018 farm bill, which led many farmers, investors, and entrepreneurs to stake their hopes on a new crop supplying a rapidly expanding market of CBD-enhanced products—from gummies to lotion to lip balm. The benefits and risks of such products are still being substantiated by science, but consumers gobbled them up, anyway, looking for relief from ailments ranging from arthritis to insomnia.

Now, there are simply too many CBD products and companies on the market, using far too little hemp. Places like Colorado, Kentucky, and the Ohio Valley report an oversupply of hemp, and per-pound hemp prices have plummeted. The Food and Drug Administration’s (FDA) reluctance to approve CBD products has irked some in the industry, but the driving factor for the bust appears to be simple economics.

Akin to WWII Program

This is not the first time Americans have produced too much hemp for their own good. In 1942, the federal government suspended its cannabis prohibition to create a domestic hemp industry to supply cordage for the US military during World War II. After years of being told that the crop was a dangerous and addictive drug, American farmers were suddenly encouraged to grow thousands of acres of hemp. In a flash, the government built 42 hemp processing facilities across the Midwest, providing hundreds of jobs and invigorating depressed rural areas.

Hemp for Victory

Title screen of 1942’s Hemp for Victory film produced by the federal government. Image courtesy of Wikimedia.

The “Hemp for Victory” program was a resounding success—too successful, in fact. By 1943, Americans had produced an oversupply of hemp cordage, and the federal program had to be drastically cut back. When cheaper sources of foreign fibers opened back up thanks to Allied success during the war, the government put cannabis back on the blacklist and left a new crop of hemp farmers out in the cold. Farmers were irate; hemp was extremely profitable during the war, and many had hoped that production would continue to fill postwar domestic needs.

Congressional hearings on the matter confirmed that any domestic hemp industry would be undercut by the lower prices of overseas fiber plants, including jute, sisal, and manila hemp (a non-cannabis variety). Without government support—and with active harassment by agents enforcing the Marijuana Tax Act—the postwar hemp industry crumbled. Many of the processing facilities were dismantled and sold for surplus parts, and cannabis again became a rogue crop across the Heartland, targeted as the infamous “marijuana” for decades to come.

A Different Outlook Today?

Today’s CBD hemp farmers find themselves in a similar situation as the hemp-for-cordage farmers of the 1940s. Encouraged to grow hemp by a federal act—in this case the 2018 farm bill—they now have produced far too much hemp for one specific purpose and are reliant on federal assistance in several areas, including banking and FDA regulation to remain profitable.

While hemp farmers are to some extent dependent on the whims and will of Congress—just like they were in the 1940s—there is reason to believe that, despite these early pains, today’s hemp industry will only grow. The CBD boom demonstrated that cannabis has a diverse portfolio of uses beyond the familiar dichotomy of recreational drugs or fiber. While CBD may not now be as profitable as many expected, it represents only one part—the female flowers—of the hemp plant. There is a growing awareness, supported by an emerging body of research, about the entire plant’s value as a cover crop and soil restorer, not to mention its utility in industry and construction.

Developing other parts of the hemp industry, however, may take time. As one recent analysis explained, “as long as cheaper, more abundant… product substitutes exist, the market potential for hemp is, at best, speculative.” So, we see another similarity to the 1940s hemp industry, which was also undercut by cheaper imported fibers. No need to ponder conspiracies crashing the hemp market; regular old economics has done the job twice now.

Whether or not the CBD market recovers, perhaps its legacy will be opening the door for the mainstreaming of hemp’s myriad other uses. Now that it has been firmly established around one type of product, today’s hemp industry should continue to grow and diversify over time—even if it must shed many of its initial crop of farmers and investors.

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