The U.S. hemp industry is poised for growth, but there are serious financial, regulatory and agronomic risks that farmers and investors must understand before taking action, according to a report released by RaboResearch Food & Agribusiness.

“The market is highly fragmented, and there is no reliable source for pricing and production data,” Bourcard Nesin, the report's lead author and analyst at Rabobank, said in a news release from the company. “The road ahead is rocky, risky and untraveled. If hemp really is a good long-term opportunity, there's no harm in being methodical.”

The report, “Hemp is Hot Right Now: Is it Worth the Risk?,” notes that the 2018 Farm Bill set off a process to completely overhaul hemp industry regulations, including the legalization of hemp and hemp-derived products.

The USDA plans to release its new rules in the fall, but new regulations won't take effect until the 2020 planting season.

Hemp crops grown or processed during 2019 still have to operate within the state pilot programs authorized by the 2014 Farm Bill.

“It’s no surprise that confusion reigns,” Nesin said. “Headlines have a lot of people excited in the hemp world, but farmers, investors and even regulators and lawmakers are unsure about what to do.”

The report also details risks such as:

  • Hemp will not be treated like other commodities. Growing hemp requires a lot of paperwork and careful record keeping, and regulatory infractions could result in the seizure and destruction of a hemp crop.
  • Hemp production is not legal in all 50 states — states can still ban hemp.
  • CBD, the most lucrative segment of the hemp industry, is illegal as both a food additive and a dietary supplement. If the FDA decides to allow CBD to enter the food supply, the process could take several years.
  • The U.S. may soon face an oversupply of hemp grown for CBD extraction, which could result in major losses for farmers once prices adjust.
  • The international hemp grain and fiber market is already in equilibrium. U.S. growers will have to compete on price to make a meaningful profit.