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The Economics of Hemp- Why Commodity Status is Critical for Market Growth

US Hemp Market
Kentucky Hemp Farmer examining biomass

If you've been around the hemp industry for a while, walked the floors of a hemp trade show, or listened to any hemp-related podcasts, chances are you've heard people say, "We can't let big business turn hemp into a commodity!" But is that really such a bad thing? Have you ever stopped to think about what it would mean if hemp became a commodity?

Hemp Market Growth

The truth is, becoming a commodity isn't as bad as some people make it out to be. In fact, it could be a good thing for the industry. For hemp to become a commodity, it would need to be a widely traded and interchangeable product with consistent quality standards. That means the market could rely on a consistent supply of hemp that meets certain specifications like THC levels, moisture content, and purity.

But, fear not! With growing demand for hemp-based products and the recent legalization of hemp in many parts of the world, there's a good chance that hemp could become a commodity in the future. And that's not a bad thing, folks.

Sure, some people may fear that "big business" will take over and ruin the industry. But, the truth is, a commodity market could actually benefit the industry by providing a more stable market and attracting larger investments. Plus, it could help to reduce the stigma around hemp and bring more mainstream acceptance to the crop.

So what would it take to commoditize this incredible plant? That’s a great question, and the truth is, for hemp to become a commodity, it needs to have a transparent and efficient market with pricing that reflects supply and demand dynamics. And when we talk about "transparency," we mean a level of openness that's been sorely lacking in the US hemp market. We're talking about unethical trading, a lack of documentation, and a non-existent chain of custody model. It's no wonder the plant has a less-than-stellar reputation in the eyes of global financing and trading.

Let's face it, trust is hard to come by in the world of agricultural commodity trading. Often, the product's life cycle cannot be traced, and the quality of the crop is questionable. Fake certificates of authenticity are traded among brokers, and farmers end up selling their crops for pennies on the dollar. It's a mess, and we need a solution. Perhaps we should look to those who have stabilized high-risk crops in the past or consider voluntary certifications rather than relying on advocacy groups that promise change only if you pay into their network.

Voluntary certifications require an initial investment, but the benefits are worth it. Certification can open doors to new markets, improve credibility with customers, ensure consistent quality, and demonstrate a commitment to sustainability and ethical practices. In fact, the costs of certification can be offset by the benefits it provides. For example, certification can help command higher prices for crops, increase yield, and establish long-term relationships with buyers. It can also help identify and address inefficiencies in farming practices, leading to more efficient and sustainable operations.

If you're a farmer hesitant about certification, don't be. Certification can help access new markets, improve the consistency and quality of crops, and demonstrate a commitment to sustainability. While there are upfront costs associated with certification, the benefits can easily offset those costs in the long run. Certification isn't just about meeting standards; it's about meeting business goals. By getting crops certified, farms can set themselves apart, gain access to new markets, and build trust with customers. The benefits of certification can lead to higher yields, better prices, and a more sustainable business.

Certification can be a valuable investment for farmers, providing access to new markets and increasing the value of their crops. While there may be some costs associated with certification, the long-term benefits can make it a worthwhile investment. Don't let cost be a barrier to certification. Consider the potential benefits and take the necessary steps to certify crops. Certification is a commitment to quality and sustainability that can help improve farming practices, meet market demand for sustainable products, and demonstrate dedication to responsible agriculture.

Let's be real, if hemp is going to be a true commodity, we need to get our act together. That means having a standard market with reliable data and price reporting. And to get there, we have two options: either regulations need to catch up with the hype and put an end to the ∆9-THC bickering, or certifying bodies need to step up and provide voluntary certifications, like Control Union's Responsible Hemp Standard. This certification is a big deal, as it's the first of its kind agricultural scheme focused on...[insert more info on RHS]. But we also need a liquid futures market that lets buyers and sellers manage price risk. It's a lot to ask for, but we can do it with the right approach. And who knows? Becoming a commodity could be the best thing that ever happened to hemp.

For hemp to become a legitimate commodity, we need widespread legal acceptance with clear regulations and a supportive legal framework. Unfortunately, this is still decades away due to private legal organizations monopolizing the debate on cannabinoids and allowing synthetic cannabinoids to be passed off as natural. We must stop letting manipulators speak for the entire industry and acknowledge that calling ∆8-THC "natural" is no different than calling cocaine "natural." Both require harsh chemicals like sulfuric acid and diesel fuel, respectively. To build trust and reduce uncertainty in the market, we need to stop exploiting grey areas and produce hemp with sustainable farming practices, traceability, and full documentation. In short, we need to treat hemp like any other crop and follow the best agricultural practices.

So, why are some people so afraid of hemp becoming a commodity? Perhaps they worry that big business will take over and drive out smaller players. But the truth is, the hemp industry needs large-scale investment and infrastructure to grow and thrive. Turning hemp into a commodity could attract the investment needed to build out the industry, while also creating more transparency and efficiency in the market.

In the end, the idea of hemp as a commodity shouldn't be something to fear. It could be a positive development for the industry, opening up new markets and opportunities for growers and businesses alike. So let's not be afraid to embrace the possibility of hemp becoming a commodity – it might just be the boost the industry needs to reach its full potential.

Consistency is key

For hemp to be a commodity, it needs to meet consistent quality standards, which means that it should be a widely traded and interchangeable product. The market must be able to rely on a consistent supply of hemp that meets certain specifications, such as THC levels, moisture content, and purity. With consistent quality standards in place, buyers and sellers can trust in the reliability and consistency of the product, making it more attractive as a commodity.

Transparency is not "Woke"

Transparency and efficiency are crucial for any commodity market. A transparent and efficient market, with pricing that reflects supply and demand dynamics, would require a level of market standardization, as well as reliable market data and price reporting. This would help build confidence among market participants and attract new investors to the market.

Futures Trading

For hemp to achieve commodity status, it needs a liquid futures market. This would allow buyers and sellers to hedge their positions and manage price risk, adding stability to the market. This would require the development of a robust trading infrastructure, including a well-functioning futures exchange.

Ethical trading required
Hemp Traders vs Hemp "Brokers"

Let's get real here, folks. If we want hemp to be taken seriously as a commodity, we need to stop pretending like legal acceptance isn't crucial. Without a supportive legal framework, we're just a bunch of cowboys playing fast and loose with a crop that the rest of the world doesn't know what to do with. And don't even get me started on the shady characters out there trying to make a quick buck off of exploiting legal loopholes. We need to clean up our act and show the world that we're not a bunch of snake oil salesmen. This means comprehensive regulations, real certifications that actually mean something, and holding ourselves to a higher standard. No more participation trophies, no more half-baked organic labels that are basically meaningless. Let's grow this industry the right way and leave the charlatans in the dust where they belong.

Sure, achieving commodity status for hemp won't be easy. It'll take a lot of work to develop infrastructure, standardize practices, and establish legal and regulatory frameworks. But hey, with the growing demand for hemp-based products and legalization happening all over the place, it's definitely possible. We need to stop hating on the business folks who see a real opportunity here and start celebrating those who are investing in this sector with financial know-how and calculated risk management. Risk isn't a bad thing, after all - just look at how banks handle it.

There are companies like First Citizens Bank and Almastone Financial that have dedicated funds to strengthen the industry, and they just need to see more attempts at risk management through the involvement of 3rd party certifying bodies. We should also listen more and interrupt less - let's not be the people who try to argue that hemp is "special" or unique. It's just another crop that can make farmers a lot of money, as long as we use reason instead of emotions and get out of our own way.

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