The nascent hemp industry remains a complex but potentially profitable market for financial institutions. The cannabis industry is projected to reach $34 billion in U.S. sales by 2025. The global industrial hemp market is projected to grow from $4.6 billion in 2019 to $26.6 billion by 2025. In order to support and guide their hemp clients through the next five to 10 years, bank leaders must understand how the landscape of this industry might evolve and keep their eyes open for opportunities.
The Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) implemented a pilot program for hemp production and sale which has been amended to conform with the 2018 Farm Bill. Specific regulations from the 2018 Farm Bill are implemented in an interim final rule published by the U.S. Department of Agriculture (USDA). Wisconsin’s pilot program, which currently governs how licensed growers and processors operate, will expire on Oct. 31, 2020. After that date, DATCP will provide new information on a transition to a new program under the USDA interim final rule.
Read more about hemp happenings in this Compliance Journal article from WBA’s Scott Birrenkott.
While WBA does not anticipate the new program will place any new requirements on financial institutions, banks should be aware of changes when they occur.
In addition, several market factors have the potential to impact the hemp industry over the next few years. One of the biggest is the ongoing pandemic. In many states, hemp suppliers were deemed “essential businesses” in stay-at-home orders. Wisconsin’s Safer-At-Home order specified that cannabidiol (CBD) shops were not essential, but classified hemp agriculture businesses as essential.
Today, cannabis and hemp-related businesses continue to evolve, adapting to shifting regulatory, legalization, and market pressures. One area for banks to watch closely is which products are most profitable. A forecast from Research and Markets projects hemp seed and hemp seed oil, along with hemp fiber, will drive growth in the industrial hemp market through 2025.
Another trend to watch: rising consumer expectations. According to Forbes’ predictions for the CBD sector, consumers will become more “savvy” and “begin to insist” on CBD standards, including potential additional regulatory oversight of product labeling and medicinal claims.
The new playing field for the industry means there is opportunity for dramatic growth for a company with a solid business plan and sustainable strategy. For example, Curaleaf, the largest cannabis company in the U.S, has a market capitalization of $3.2 billion and has been steadily acquiring other cannabis companies in an effort to become a national brand.
In Wisconsin, banks should continue to serve their hemp clients with the same diligence and expert financial advice they offer other business customers. WBA will continue to keep the industry appraised of regulatory and legislative changes as they occur.