3 Takeaways From 'The Forward Contracting Hemp In An Oversupplied Market' Webinar

Last week, PanXchange hosted a webinar titled “The Forward Contracting Hemp in an Oversupplied Market.”

The session, which will soon be available to the public, covered many aspects of price risk management, including fixed-price transactions, crop insurance, sales contracts and various legal issues regarding contract terms..

Here are three key takeaways:

• Kim Harris, a senior policy analyst at AgriLogic Consulting, stated that “they do not foresee any major changes for the 2021 crop year. Other than looking at possible expansions to new states or counties that weren’t included in the 2020 program and then some minor policy changes.”
• Julie Lerner, the founder and CEO of PanXchange, affirmed, “fixing prices is a sign of an immature market as all mature markets are negotiated as unpriced/ basis contracts. Mature markets hedge price risk in the futures market but negotiate physical deal flow directly and with a venue like PanXchange.”
• Bob Hoban, president and founder of Hoban Law Group, answered the viewer-submitted question "how can we move the industry forward?" According to Hoban, "The market will dictate that the get-rich quick deals that never really existed at all, and if they did, it was at a time that it was just a handful of farmers and processors. We just have to go back to basic agronomic fundamentals that require that baseline, that network, people knowing what to expect … those things don’t exist in this industry right now because everyone has been chasing a get rich scheme as it relates to industrial hemp cannabinoids. There is money to be made there certainly, but not until regulations are clear and distribution is global in scope or at least national in scope, and then the market is saturated on top of it. So, farmers need to keep doing what they are doing, but they need to listen to folks that have a different perspective. Just because you passed by a slot machine and the last person that pulled it won the jackpot doesn’t mean that every time you pull the slot machine arm, all this money comes out. That’s what the farmers, unfortunately, think about CBD, but we’re moving past that.”

The step towards creating a forward selling market in the hemp industry is critical, as it is required for financing and crop insurance plans such as the Whole Farm Revenue Protection (WFRP) and Actual Production History (APH).

“Hemp is, and will continue to be, the backbone of the global cannabis supply chain,” Hoban explained. "So it is vital to know the other parties, choose a vendor wisely, and forward contract in physicals, not the forward market. This step in the market is a critical beginning of understanding how to mitigate price risk.”

Courtesy Image.