Price slump saps Texas hemp crop, but optimism still blooms

Aaron Owens says he’s confident he’ll turn a profit from the two-acre hemp crop he’s growing just south of Dripping Springs, despite a steep drop in commodity hemp prices over the past year. Owens said he’s able to produce a premium hemp extract that’s rich in a variety of healthful, non-psychoactive components of the plant. RICARDO B. BRAZZIELL/AMERICAN-STATESMAN

By early October, Aaron Owens anticipates that the young hemp plants he’s cultivating on two acres just south of Dripping Springs will be about six feet tall and ready for harvest — giving him a successful crop in the inaugural season of legal Texas hemp production.

But it’s no surprise to Owens that many other prospective hemp growers are opting to sit out the state’s first year.

Texas hemp farmers have sought and received permits to cultivate about 5,500 acres in 2020, well below some forecasts that had projected over 10,000 acres. In addition, no more than about 4,000 acres of the non-psychoactive cousin of marijuana — which has a variety of consumer and industrial uses — are thought to actually have been planted in the state.

“The reality in Texas this year is that most people are just doing a pilot” hemp crop if they planted at all, Owens said. “It’s just an R&D thing” for most growers.

The relatively low first-year acreage — despite widespread excitement surrounding the new crop after Texas lawmakers voted to legalize it in 2019 — is largely attributable to a steep drop in commodity hemp prices stemming from overproduction in the three dozen or so states that previously allowed it to be planted.

The broad economic downturn triggered by the coronavirus pandemic has played a role as well, some experts in Texas agriculture say, as had a dearth of hemp processing infrastructure in the state.

Hemp “is not quite as lucrative as everybody thought it was going to be” before the price slump, Texas Agriculture Commissioner Sid Miller said in a recent interview.

“And then the (coronavirus) has had an effect on it,” Miller said. “I just think people are waiting to see if the economy is going to open back up — kind of sitting on their money. Maybe they were going to put $100,000 into four or five acres, (but instead) they may go, ‘I don’t know, I don’t know when we’re going to be able to go back to work.’ Just things like that.”

Still, Miller said the amount of hemp acreage that his office has licensed in the state is about what he anticipated when applications from prospective growers first started being accepted in March, even if “maybe a year ago we expected more” as the regulatory framework was being developed.

The hemp industry has lost some of its shine nationwide since then because of the big supply-induced price declines. Hemp cultivated for cannabidiol has fallen more than 80% since last summer, according to PanXchange, which provides commodity price quotes. Cannabidiol — commonly known as CBD — is an extract heralded for a multitude of perceived health benefits.

“When the (2019) harvest came in last fall and into winter, it became apparent there was just this massive oversupply,” and prices plummeted, said Adam Koh, editorial director at Hemp Benchmarks, an industry data provider.

“Unfortunately for farmers in states like Texas that just started their legal hemp programs in 2020, they are having to deal with the fallout,” Koh said. “The market conditions are leading (hemp farmers across the country) to hesitate or plant less” this year.

Hemp production boomed in 2019 in states where it already was legal because growers rushed to profit from rising consumer demand for CBD. Amid rampant tales of riches reaped by those who got in early, about 290,000 acres of hemp were planted in the United States last year, according to Vote Hemp, an advocacy group — nearly quadruple the amount in 2018 and far outstripping demand.

This year, in the wake of the big price decline, Vote Hemp estimates that no more than 250,000 acres have been planted nationwide, even with Texas and other newly producing states in the mix.

“In 2019, the industry busted wide open (because of strong consumer demand for CBD), and people who aren’t hemp people, they all threw their money at it” to try to get rich quick, said Owens, whose Dripping Springs hemp operation is called Tejas Hemp.

Owens said he views the ensuing price drop, as well as a plethora of what he considers low-quality CBD oil on the market, to be the inevitable results.

But he said he remains confident he’ll be able to turn a profit regardless this year with his own small crop. He has deep roots in the industry — having worked for years with a partner in Colorado, where hemp already was legal — and he said he’s able to produce a premium extract that’s rich in healthful, non-psychoactive hemp elements beyond just CBD.

Still, the broad industry downturn prompted Owens to scale back his plans substantially for the inaugural Texas growing season.

He initially anticipated cultivating about five acres near Dripping Springs this year — or more than double his current acreage — as well as up to several hundred additional acres in West Texas. The hemp plants he intended to grow in West Texas are varieties that produce fiber and other components for industrial uses.

Those plans have been put on hold, but Owens vowed he eventually will go through with them. He said he considers the outlook bright for Texas hemp, particularly for industrial varieties, once the market settles and more processing facilities are in place.

“It’s going to be big long-term,” he said.

Plenty of hemp proponents concur that the market remains promising, chalking up the recent turmoil as merely par for the course in a young, fast-growing industry.

“A lot of growth in a short amount of time makes things volatile,” said R.J. Hopp, director of hemp markets at PanXchange.

But “I absolutely have faith in this market” to get back on an upward trajectory once supply and demand balance, he said.

That’s what Gene Dietrich, who along with his wife, Elsie, owns CBD retailer Green Mountain Flower in Austin, is waiting for.

The couple sought and received permits to grow several dozen hemp acres in West Texas this year but ended up not planting. Instead, they’re punting to next year, Dietrich said, when he anticipates they’ll also cultivate a crop in Austin.

“Are we going to do something in the growing season of 2021? Absolutely,” he said.

Right now, however, “there’s too much upheaval in everything” to make the investment, Dietrich said. “The first ones that go running down a hill always get slaughtered, so we thought, ‘let’s just pull back’ ” for the time being.

The decision by the Dietrichs illustrates what Owens views as a silver lining to the crash in prices shortly before the inaugural Texas growing season.

“I am actually glad it happened (when it did), because it protected Texas farmers from losing their money,” Owens said. “It’s a blessing. (Texas farmers) saw it happen” but avoided being taken to the cleaners because of it.

Calvin Trostle, a professor and agronomist at Texas A&M AgriLife who is studying hemp varieties potentially suitable for the state, said the crash probably served as a wake-up call for some prospective growers.

“By the time we got to planting, I think there were very few (Texans) who saw this as a get-rich-quick scheme,” Trostle said. “If they did, they had their head in the sand and were just not paying attention.”

Aaron Owens, owner of Tejas Hemp, is farming the newly legal crop on about two acres just south of Dripping Springs. He initially intended to cultivate more, but market conditions prompted him to scale back substantially, although he remains upbeat regarding long-term prospects for Texas-grown hemp. RICARDO B. BRAZZIELL/AMERICAN-STATESMAN