Overview of the global hemp market: CBD to fiber

Hemp has captured the imaginations of entrepreneurs for a few years now, and while the United States is experiencing a CBD craze, it’s easy to forget there’s a whole world of hemp out there. And, depending on the country, not all of it is grown to extract cannabidiol (CBD).

Once a world leader in hemp, Romania is trying to regain its former position, Germany is returning to its roots as a major hemp producer, and China has already achieved its former dominance after lifting its prohibition of the plant in 2010. Ecuador is the newest player on the scene, having recently legalized hemp, while hundreds of millions of dollars have been invested in Colombia, where there’s plentiful land and weather that allows year-round planting of hemp for CBD. Lithuania, meanwhile, is a country punching above its weight class, producing as much as or more hemp than some bigger countries.

Follow us on a quick spin around the globe and see countries that have become hemp powerhouses, the places that are experiencing a resurgence and which nations are taking their first steps toward becoming industry leaders.

 


China

2019 population: 1.4 billion
2019 GDP: $14.3 trillion
2020 Projected GDP (% change): +1%
Source: World Bank and International Monetary Fund

Thousands of years before hemp-derived CBD became a hot commodity, China was planting hemp for fiber and seed production.

Like much of the world, China eventually banned hemp. But it didn’t take long for the country to resume its place in the hemp industry once the prohibition was lifted in 2010.

Today, China is believed to be the world’s top hemp producer.

The “industry has exploded and is set to grow even further,” noted a report about China released in February by the U.S. Department of Agriculture’s Foreign Agricultural Service.

According to the FAS report, China produces more than half the world’s hemp supply. Chinese hemp-fiber sales were estimated at $1.2 billion in 2018, although the government does not release official cultivation, production or sales data.

“Multiple media outlets also report that China accounts for 11% of the $800 million global CBD market behind Europe and the United States,” the FAS report said.

 

China’s Hemp Crop

According to industry estimates, China planted 164,819 acres of hemp in 2019, and more than half of it was for fiber. No other country plants as much hemp for fiber as China, which accounts for about half the world’s hemp fiber supply, according to the FAS. (See chart “Distribution of China’s Hemp Crop in 2017.”)

Hemp is planted across the country, but most of it grows in the far northeast and far southwest. In the near term, hemp production is expected to increase because two provinces recently legalized CBD production—Yunnan and Heilongjiang—and a third province, Jilin, is expected to do so soon.

China considers CBD an extract from hemp leaves and flower that can be used in cosmetics, but the government hasn’t approved CBD for food or medicine. China defines hemp similarly to the United States, meaning the plant must not have THC content greater than 0.3%.

Although China has potential appeal to investors, the market is still tightly controlled by the government, and the regulations can be complex.

“Regulations and processes for importation are unclear, and no clear process exists for applying for an import license,” the FAS report said, adding, “regulatory information is nonexistent or difficult to obtain.”

China doesn’t import much hemp now, but the potential is there, provided regulatory barriers are addressed, according to the FAS.

“This potential is several years away. … Importation of CBD is banned, and only a negligible amount of fiber was imported in 2018,” the FAS said. “Nonetheless, the industry envisions this changing rapidly as the national government recently approved CBD for cosmetic use. Industry sources indicate that the majority of China’s CBD production is exported to the United States. In 2018, China imported only a small amount of hemp fiber ($53,540), mainly from South Korea and Belgium.”

But despite regulatory roadblocks and the tightly controlled market, China is a force to be reckoned with in the hemp world.

“The world market for hemp products remains relatively small, and China—as the world’s largest hemp fiber and seed producer—has had and likely will continue to have major influence on market prices and … (profits) in other countries,” according to the 2018 Congressional Research Service report, “Hemp as an Agricultural Commodity.”

 


Romania

2019 population: 19.4 million
2019 GDP: $250.1 billion
2020 Projected GDP (% change): –5.0%
Source: World Bank and International Monetary Fund

Once Europe’s largest hemp producer, Romania is experiencing a resurgence after years of decline. The circumstances that led to Romania’s fall from the top of Europe’s hemp producers—lower demand, strict government regulations and old processing facilities—have all flipped: International demand has grown, new processing facilities are being built, and there’s more government support for the industry.

Romania’s hempseed imports reached $2.6 million during the first eight months of 2019, compared with $1.7 million during the same period in 2018, according to the USDA’s Foreign Agriculture Service. The agency said Romania is among the top five European Union member states cultivating hemp—mainly for fiber, oil, seed or grain. Legally, the plant’s THC level cannot exceed 0.2%.

Although Romania doesn’t have the same number of processing facilities it once did—28 in the country’s hemp heyday—there are several in operation that handle a wide range of products, including hempseeds for humans and animals, CBD for cosmetics and edibles, protein powder for shakes and smoothies, and nutritional bars.

Consumer demand is expected to grow as a variety of hemp products come on the market, the FAS said. Hemp is used as a key ingredient in many foods, such as breakfast cereals, protein shakes and protein bars, which are sold online and in retail chains. CBD products also are found in pharmacies and health stores.

Hempseeds are Romania’s most traded product, and the United States was Romania’s top export market for hempseeds in 2019.

 


 Colombia

2019 population: 50.3 million
2019 GDP: $323.8 billion
2020 Projected GDP (% change): –2.4%
Source: World Bank and International Monetary Fund

Over the past few years, hundreds of millions of dollars from investors have poured into this South American country straddling the equator. The money has gone to build infrastructure for vertically integrated, pharma-oriented extracts, said Manuel Baselga, co-founder and board member of Savanna Ventures, a venture capital firm in Bogota that invests in cannabis companies internationally.

“Most of those companies are also targeting wellness, cosmetics, nutraceuticals and other less-regulated products,” Baselga said.

Colombia is one of many parts of the world where the word cannabis is used for both marijuana and hemp. When Colombia legalized cannabis for medical use in 2016, the plant was separated into two categories: psychoactive cannabis, which includes anything with more than 1% THC, and non-psychoactive cannabis, which falls below that threshold.

Hemp was an afterthought in the 2016 legislation, so although it was included in cannabis legalization, there wasn’t an independent regulatory space for industrial-hemp uses. Baselga expects the hemp-specific regulations to come online soon and be similar to the U.S. Farm Bill or European hemp laws.

Currently, there are about 50 Colombian hemp farms in operation, and companies there have regulatory hurdles to clear before they begin exporting—starting with registering their cultivars and strains with the National Agronomic Agency. After that, cultivators must obtain processing and exporting licenses.

Baselga said CBD-rich cannabis extracts are starting to be exported, but industrial products such as fiber and grain will take longer. Investment in fiber and grain has been minimal so far, he said.

Colombia’s tropical weather and plentiful land make it ideal for low-cost greenhouse cultivation year-round, allowing growers to generate up to three or four crops annually, Baselga said.

“I think for CBD we’re certainly going to be a main player,” he said.

One of Colombia’s advantages—its weather—is also one of its main challenges. That’s because the most common cultivars for industrial hemp don’t perform well with year-round tropical weather. But Baselga said many companies are working on seed genetics to find the right cultivar for the equatorial climate.

 


Ecuador

2019 population: 14.7 million
2019 GDP: $107.4 billion
2020 Projected GDP (% change): –6.3%
Source: World Bank and International Monetary Fund

Ecuador is one of the more recent countries to legalize the sowing, cultivation and harvesting of hemp, as long as the plant doesn’t have more than 1% THC and is used with authorization for medical, scientific and research purposes. It also can be used for industrial purposes, such as fiber for textiles.

Ecuador is still very much a hemp industry taking its first steps. Legislation passed in 2019 formally took effect this June. Still, there isn’t a regulatory framework officially in place. The government has 120 days from June 21 to formalize those, and it’s possible they’ll be ready sometime in October.

Baselga of Savanna Ventures said one advantage Ecuador shares with Colombia is its weather, which allows for year-round, low-cost greenhouse production.

“It really is just a very basic cost-benefit scenario,” Baselga said. “It’s impossible that any U.S. grower or European grower will be able to come even close to production costs in … Ecuador and Colombia.”

One advantage Ecuador has over Colombia is the ability to legally export flower and biomass. Colombian law requires biomass to be processed, and only its derivatives or transformed products such as oils can be exported.

“Eventually, farmers will be able to start growing very cost-efficient, quality flower and just export it. If they want to process it, they can do that, but it opens up a competitive advantage versus Colombia,” Baselga said. “We can have a situation where, in less than a year, Ecuador is exporting mass bulk, quality flower to whoever accepts it.”

The regulations in Ecuador also are expected to be more streamlined and easier to follow than Colombia’s—another possible appeal for investors.

When growing hemp for industrial uses, however, Ecuador faces the same challenge as Colombia: Hemp plants grown for fiber don’t perform well in equatorial climates, so Ecuador has to solve the riddle of plant genetics.

 


 Lithuania

2019 population: 2.8 million
2019 GDP: $54.2 billion
2020 Projected GDP (% change): –8.1%
Source: World Bank and International Monetary Fund

This tiny country roughly the size of West Virginia is already one of the larger hemp growers in the European Union, and production could ramp up with pending legislation that would allow farmers to create products using the whole plant.

Lithuania grew 22,689 acres of industrial hemp last year. That’s double what Germany produced—and Germany is considered a major player in the EU’s hemp industry.

Currently, farmers can grow EU-approved strains to produce hemp fiber and seeds, but they cannot process leaves or flower for anything other than research and development. The sale of biomass is permitted only internationally; the tops of hemp flower must be exported, and CBD products are illegal.

Those provisions are part of Lithuania’s first hemp law, which took effect in 2014. However, legislators are working to expand the plant’s use. Under a pending proposal, licensed hemp farmers would be allowed to use all parts of the plant for processing. Hemp-derived products that contain less than 0.2% THC would be legal to produce and sell, and they could also be imported and exported.

The proposal passed two votes in Parliament, but the bill stalled in April as lawmakers looked to ensure their regulations were compatible with EU law. The European Commission and EU-member states have three months to examine the bill and respond.

 


Hemp Acreage in Germany

Germany

2019 population: 83.1 million
2019 GDP: $3.8 trillion
2020 Projected GDP (% change): –7.8%
Source: World Bank and International Monetary Fund

After a 14-year ban, Germany legalized hemp cultivation in 1996, and demand for products derived from the plant has been increasing in recent years.

In 2019, the country grew 11,140 acres (4,508 hectares) of hemp, which was an increase of about 45% from 2018. (See “Licensed Hemp Acreage in Germany.”) In fact, both the number of establishments licensed to grow hemp and the amount of hemp grown have steadily risen since 2013. Only 86 establishments were growing hemp in 2013 and just 1,080 acres were cultivated that year, according to figures from the country’s Federal Office for Agriculture and Food. Now there are 575 establishments cultivating hemp.

Despite the rapid growth, Germany trails some of Europe’s more prolific hemp cultivators such as France and Lithuania, which in 2019 planted 35,944 acres and 22,550 acres, respectively.

But German retailers say they’re seeing demand for hemp-derived products such as cereals and cereal bars, hemp flours, oils and beverages, according to a report released in February by the USDA’s Foreign Agricultural Service.

One of Germany’s largest retailers reported having 100 different hemp-based products on shelves, according to media reports; another well-known drugstore had more than 40 such products. And according to the German Federal Institute for Risk Assessment, more than 200 hemp-derived products entered the German market between 2012 and 2017, about 150 of them food products.

CBD products also are popular, but as in many parts of the world, the legal environment is complex.

In 2019, the European Food Safety Authority included CBD in the Novel Foods Catalogue, meaning products require government approval before they’re marketed. But getting approval is a long, expensive process.

“Even though CBD products are currently available on the market, companies run a high risk of potential harm to their businesses due to different interpretations of the laws and regulations,” the FAS warned.

Still, there is a “clear upward trend in the German hemp market and increasing export opportunities for U.S. suppliers,” the FAS concluded in its February report. There was a caveat, however: “In view of the wide range of products, recent legal changes and the complex legal environment, we advise that U.S. exporters verify the full set of import requirements with the respective competent authorities.”

 

NEXT: Insights from a Former Cannabis Regulator

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