This year witnessed the continued decline in CBD's fortunes, leaving many insiders wondering where the industry goes from here.
Once the darling of the hemp industry, CBD is still experiencing a breathtaking economic fall, with supplies far exceeding demand for the hemp-derived oil seen by many as a transformative and healing ointment.
The truth is that since hemp was rescheduled as legal once again by the 2018 Farm Bill, the industry has been overtaken by "charlatans" and speculators more interested in exploiting the unique and still vastly misunderstood plant for quick monetary gains.
In their race to amass as much money from the "CBD craze" as possible, the financial sharks overwhelmed and bullied those more concerned with a longer-term view of how to maximize hemp's potential as an agricultural product capable of providing food, construction raw materials and a wide array of health and wellness offerings.
As a result, analysts and stock market influencers overhyped and vastly overpredicted the future growth of the CBD industry. This ill-advised and reckless behavior created a massive proliferation of CBD offerings, with products appearing everywhere, from cannabis dispensaries to gas stations all over the country.
By the end of 2019, the market was estimated to be worth about $4.5 billion practically overnight. With further explosive "growth" aided by the lockdowns of the 2020 COVID-19 pandemic, speculators predicted the market cap would exceed the astronomical amount of $22 billion by 2022.
Industry stakeholders buoyed by those heady and profitable early days doubled down, and thousands of new CBD-based businesses popped up all over the country. Farmers were also encouraged to switch to cultivating hemp with claims from shady middlemen in the sector promising $50,000/acre for the magical wonder crop that could be grown "anywhere."
The reality was much more brutal and devastating. It is not an easy crop to grow, and the technicalities associated with cultivating hemp can be rather expensive. Pests, inclement weather, plants that exceed THC limits (to be categorized as hemp, the delta-9 THC level must be less than 0.3%), harvesting costs, and specialized equipment and technology all took a substantial bite out of the economic windfall many farmers were expecting.
Nevertheless, despite all the challenges, farmers persevered and produced and produced and produced. In fact, they produced way more hemp than manufacturers and consumers required. But, unfortunately, the market was not headed toward that incredible $22 billion threshold. Instead, it stayed flat, only increasing to around $5 billion by the end of 2021.
This reality led to massive business failures and significant consolidation in the industry. During the pandemic peak period, roughly 5,000 CBD businesses were operating in the market. By the end of 2021, nearly 90% of those companies had closed their doors.
The precipitous decline in the fortunes of the CBD sector has also led to severe and deadly consequences as manufacturers scramble to find profitable outlets for pent-up CBD supplies. To relieve the pressure, many have turned to the controversial and almost entirely unregulated delta-8 THC strain produced by putting hemp-derived CBD through a synthetic process.
Delta-8 THC is one of nearly one hundred cannabinoid strains found in the marijuana plant. It is seen as a psychoactive alternative to the more well-known delta-9 THC and allegedly produces a milder "high." However, in the deadly case of a Virginia toddler this past year, delta-8 THC is now viewed as a killer. According to officials, the young boy died shortly after over-ingesting hemp-derived delta-8 THC gummies.
Although there is still some debate about exactly what caused the tragic death, the dark association with delta-8 and CBD continues the cascade of negative press and subsequent economic fallout within the industry.
For a plant and a product with such optimism and promise following the passage of the 2018 Farm Bill, hemp and CBD have demonstrated what can happen when short-term greed beats out a more patient and long-term view for control of a burgeoning market. History has shown that all successful and long-lasting industries have two unifying characteristics - a solid foundation and strong leadership.
However, it is not all gloom and doom for hemp and the much-maligned CBD. With the proliferation of hemp as a solid and eco-friendly construction material and food product, the glut of raw hemp will eventually have a home, even if it is not for CBD applications. Moreover, that type of diversification and balance is necessary to ensure hemp's future viability. Investing in the future sometimes requires patience and vision more than the all-out pursuit of profit.