Economic shutdown could impact CBD, hemp supply chains

Economic shutdown could impact CBD, hemp supply chains

The spread of the novel coronavirus pandemic has massively affected the lives of nearly everyone in America.

While some within the cannabis industry have managed to continue operations normally, small cannabis businesses like other small businesses have sometimes struggled, especially if they aimed to keep on their normal roster of employees.

Now, new indications seem to show that supply chains for staples like meat and other groceries may be compromised amid the anti-coronavirus economic shutdown as processors and producers are ruled non-essential.

Hemp may be victim to a similar problem, according to reporting in Forbes. [1]

At CannaSafe, a prominent hemp and cannabis product testing company based in California, major work slowdowns have resulted from sick call-ins at their labs.

“If workers don’t feel comfortable, we’ve updated our policy to support extended sick leave. But there’s more pressure on the remaining people,” said CannaSafe CEO Aaron Riley. [1]

Social distancing restrictions at other areas of the production of hemp and CBD have caused some amount of production slow downs.

Additionally, hemp agriculture company Front Range Biosciences has seen delays because of these production changes. Front Range also moved to donate masks it would typically use for hemp production to medical workers, reducing efficiency and output. [1]

According to Forbes, the recent economic shutdowns and pandemic fears have coincided with a drastic fall in mergers and acquisitions within the cannabis market.

Scott Greiper of Viridian Capital Partners told Forbes that while 94 such transactions happened in the first quarter of 2019, just 19 occurred in the same period of 2020. [2]

For small sized cannabis businesses, Marc Adesso of Waller Lansden Dortch & Davis told Forbes, the slow down could be deadly.

"If a company comes out the other side of this, it's an incredible sign of strength," Adesso said. "But the amount of work would be needed to go over the books to understand how they survived - and due diligence is already a unique challenge in this space - will be mind-boggling. I can't see putting cash into anybody before the end of the year if you aren't already involved.” [2]

In the most recent federal relief bill signed late last week, hemp businesses were added to the list of potential beneficiaries of the Small Business Administration Paycheck Protection Program loans. [2] [3]

That bill was signed Friday and appropriated $484 billion of relief for the economic consequences of the coronavirus shutdown. [3]