Politics
Federal Government Is Significantly ‘Undervaluing’ Hemp Market Based On ‘Flawed’ Methodology, Analysis Says
The U.S. Department of Agriculture (USDA) is “undervaluing” the hemp industry, relying on market research in a way that could be “inadvertently hurting the very same farmers they are trying to regulate,” according to a new analysis.
The research firm Whitney Economics released the report on Thursday, saying it identifies an improper methodology for data collection on the value of the cannabis crop that’s “contributing to the misperception that farmers are not benefiting from the rise in the hemp-derived cannabinoid industry.”
USDA started annually surveying hemp farmers across the country shortly after the crop was federally legalized under the 2018 Farm Bill. And while the value of hemp increased from 2023 to 2024, industry stakeholders have routinely pointed to the lower-than-expected average value of products such as grain, fiber and consumable cannabinoids as a reflection of insufficient regulatory policies.
“The lower value of the crop is making it tougher for farmers to raise money, inhibiting infrastructural development and suppressing market growth,” Beau Whitney, chief economist of Whitney Economics, said. “These USDA errors are also disincentivizing farmers from adding hemp into their crop rotations.”
“In reality, farmers in the hemp industry are benefiting by their contribution more than corn or soy farmers,” he said.
While USDA collects data from hemp farmers in much the same way as other commercial crops—soliciting information about total yields and the purpose of the production, for example—Whitney said the department is not accurately accounting for the unique value of floral hemp in the marketplace. Instead, it assesses value based on “a blended average of the sales of biomass and the flower.”
By doing so, “the combined average price per pound seriously undervalues the crop,” he said.
“The methodology to calculate the value of the floral output is considerably flawed as there are multiple uses of the cultivated output that vary significantly in value.”
For example, the market value of floral hemp last year was an average $330 per pound, while the biomass value of the crop was $2 per pound. Yet, using USDA’s methodology, the total value of floral hemp produced in 2024 (20.8 million pounds) was $386 million. Whitney said that, in reality, it would only take 1.2 million pounds of floral hemp to reach that value.
“By undervaluing the floral crop, investors do not have an accurate picture of the market potential,” the analysis says. And that means “farmers are less willing to plant the crop or include it in their rotation, and policymakers are using erroneous data to make decisions.”
It noted a recent congressional hearing where one senator who is pushing for restriction on the hemp industry said farmers are making less than one percent of revenue that comes from the sale of their crop. But if USDA put the value of floral hemp at $330 per pound, last year’s 20.8 million pounds of production would have translated into about $6.9 billion at the wholesale level, “which represents 24.2 percent of the total retail value.”
“This would indicate that farmers are getting significantly more from hemp (24.2 percent) than corn (15 percent) or soy (7.9 percent),” the report says.
“Highlighting how much farmers are benefiting from hemp cultivation would also influence policies at the federal level,” Whitney said. “This error by the USDA is having a profound effect on the entire hemp industry and must be immediately addressed, or the hemp industry will be negatively impacted, and the growth of the market will continue to be suppressed.”
Meanwhile, amid a contentious debate over federal laws on intoxicating hemp products, congressional researchers recently published a report outlining current policies and options for lawmakers to resolve outstanding issues related to a proposed THC ban.
CRS separately released a report in June stating that the legislation would “effectively” prohibit hemp-derived cannabinoid products. Initially it said that such a ban would prevent the sale of CBD as well, but the CRS report was updated to exclude that language.
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Meanwhile, Sen. Rand Paul (R-KY) recently said he has plans to meet with House lawmakers to “reach a compromise” on an approach to regulate hemp in light of his opposition to a proposal in Congress to ban products with any “quantifiable” amount of THC.
While Sen. Mitch McConnell (R-KY) has contested the idea that the legislation he sponsored would “completely destroy” the market, as Paul and industry stakeholders have insisted, he ultimately agreed to pull the language from the agriculture bill following Paul’s procedural protest. The Senate passed the underlying legislation earlier this month.
Separately, Paul recently filed a standalone bill that would go in the opposite direction of the hemp ban, proposing to triple the concentration of THC that the crop could legally contain, while addressing multiple other concerns the industry has expressed about federal regulations.
The senator introduced the legislation, titled the Hemp Economic Mobilization Plan (HEMP) Act, in June. It mirrors versions he’s sponsored over the last several sessions.
Hemp industry stakeholders rallied against that proposal, an earlier version of which was also included in the base bill from the subcommittee last year. It’s virtually identical to a provision of the 2024 Farm Bill that was attached by a separate committee last May via an amendment from Rep. Mary Miller (R-IL), which was also not enacted into law.
A leading alcohol industry association, meanwhile, has called on Congress to dial back language in the House spending bill that would ban most consumable hemp products, instead proposing to maintain the legalization of naturally derived cannabinoids from the crop and only prohibit synthetic items.
Wine & Spirits Wholesalers of America (WSWA) President and CEO Francis Creighton said in a press release that “proponents and opponents alike have agreed that this language amounts to a ban.”
Separately, key GOP congressional lawmakers—including one member who supports marijuana legalization—don’t seem especially concerned about provisions in the bill despite concern from stakeholders that it would put much of the hemp industry in jeopardy by banning most consumable products derived from the plant.
Jonathan Miller, general counsel at the U.S. Hemp Roundtable, told congressional lawmakers in April that the market is “begging” for federal regulations around cannabis products.
At the hearing, Rep. James Comer (R-KY) also inquired about FDA inaction around regulations, sarcastically asking if it’d require “a gazillion bureaucrats that work from home” to regulate cannabinoids such as CBD.
A report from Bloomberg Intelligence (BI) last year called cannabis a “significant threat” to the alcohol industry, citing survey data that suggests more people are using cannabis as a substitute for alcoholic beverages such a beer and wine.
Last November, meanwhile, a beer industry trade group put out a statement of guiding principles to address what it called “the proliferation of largely unregulated intoxicating hemp and cannabis products,” warning of risks to consumers and communities resulting from THC consumption.
