Optimism

Optimism

There is much to be optimistic about in hemp markets and hemp prices in 2021, and throughout the ‘Roaring Twenties’.  A new administration has sown hope among those active in the cannabis space, including hemp and MJ. The arbitrary line that separates the two is blurring, as society reaches an inflection point with regards to cannabis acceptance.  This process will accelerate over the coming years, driven by medical and adult use. The many other cannabinoids will tag along, as consumers embrace a wide spectrum of cannabinoids for therapeutic uses.

2021 will see more consolidation than we’ve seen in 2020.  PPP funding provided a lifeline for some operators and helped others to continue to improve efficiencies and broaden product offerings.  Those that do not have the fundamentals dialed in will forego the accretion enjoyed by some, particularly those large companies that are operating on both sides of the THC line.  Management and effective leadership is key, and without this, additional funding on the horizon will not lead to profitability.

2020 did have some M&A, like Dublin based Perrigo’s strategic partnership with Colorado based Kazmira, or Edmonton based Aurora’s purchase of Boston based Reliva CBD.  Other 2020 business deals show a continued confidence in CBD markets.  The markets are increasingly being seen in a broader context of cannabinoid markets, and underlying these markets is a philosophical shift to getting well rather than getting high. Aside from policy, hemp and MJ extracts only vary in the amount of THC contained therein, so from a practical perspective, they are inseparable.

The number of retail products, product manufacturers, and buyers is increasing.  Just this week we’ve spoken to extractors who are seeing steady transaction volume from wholesale buyers with existing product lines and existing shelf space, or ecommerce funnel.  Based on the retail movement we’re seeing in cosmetics and beverages, we expect wholesale buying to continue. In this fragmented market, not everyone will see this activity.

Buyers – and everyone else in the hemp space – are seeking reliable counterparties, after negotiating an obstacle course of hustlers and big talkers over the last couple of years.    We continue to hear principals glow at the prospects for industry normalization, with conventional business practices.  Banking reform would help to ameliorate the financial no man’s land of cannabis, a strange purgatory that hemp enjoys by virtue of being a Schedule 1 narcotic just a couple of years ago.

The SAFE Banking Act has been widely embraced by hemp stakeholders and bankers.  Larger banks have yet to venture into banking hemp and CBD clients, though some smaller ones have moved to fill a vacuum.  The elevation of Sen. Pat Toomey (R-PA) to Chair of the Senate Banking Committee bodes well for cannabis banking.  The former banker and free-market pragmatist sees the vast revenues generated in adult use states, and will move to normalize these unstoppable multibillion-dollar markets.  His announcement that he doesn’t intend to seek reelection frees him to seek bipartisan deals without the fear of dissention from his caucus.

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