Hemp farmers have rapidly off-loaded a vast majority of the crop surplus that’s been weighing down the industry’s fortunes, according to a new survey.

Prices for raw hemp have already begun rising due to the lower inventory, though regulatory uncertainty may delay a broader industry rebound, according to the economic firm that compiled the data.

“It’s finally bottomed out. You’re finally seeing increased biomass prices,” said Beau Whitney, chief economist at Whitney Economics, which tracks the hemp industry. “Because there’s such a massive reduction in inventory, it makes sense the price has stabilized.”

The nationwide unsold hemp inventory plummeted roughly 70%, from about 200 million pounds to 60 million pounds, between 2020 and 2021, Whitney said.

The remaining biomass is held by larger farmers who can afford to carry it, while smaller growers don’t have much left, he said. “That tells me there’s not a lot of slush in the market right now.”

Hemp prices topped $32 per pound of biomass during the 2019 boom, after it was legalized at the federal level, but plunged after that year’s harvest, according to Whitney Economics.

A pound of biomass averaged about $1.20 in the autumn of 2021. Since then, the price has risen to $1.50 per pound and in some cases hemp is fetching $2 per pound, Whitney said.

“That’s starting to become the norm,” he said.

The consumption of delta-8 THC by the public, a psychoactive compound derived from hemp, has been a double-edged sword for the industry.

The substance is similar to the delta-9 THC that’s found in marijuana, a related cannabis crop that’s illegal under federal law.

While hemp must contain less than 0.3% delta-9 THC, some processors extracted and marketed the delta-8 cannabinoid, which has milder psychoactive properties.

Excess supplies of hemp were funneled into delta-8 production, using up a lot of the crop surplus but also raising alarms about children accessing psychoactive products, Whitney said.

It’s unlikely that delta-8 production will continue to play a major role in the hemp industry now that crop prices are increasing again, he said. “I think delta-8 was a bit of a one-hit wonder that saved a lot of farmers. It has its evils but it saved a lot of farmers and processors.”

The downside of the delta-8 controversy is that it’s made hemp easier to demonize as a drug crop, prolonging the regulatory uncertainty that’s prevented the industry from finding its legs, Whitney said.

In reality, the hemp industry stands to gain a lot more from fiber and grain products than from cannabinoids, or the compounds extracted from its flowers, he said. Cannabidiol, or CBD, is a major cannabinoid touted for its healthful properties, for example.

CBD and other cannabinoids accounted for about 82% of the hemp planted nationwide in 2020, but that proportion dropped to 60% in 2021, Whitney said. By 2030, he expects cannabinoids to account only 2.5% of total acreage.

Bioplastics, textiles, building materials, livestock feed and other hemp applications will eventually dwarf the cannabinoid market, he said. “This is right at the doorstep of hemp. They just need some support from state and federal regulators.”

A lack of clarity about federal hemp policy has state governments adopting a patchwork of different laws, which currently serves as a barrier to business transactions, he said.

“Nobody knows if it will be legal to ship from Oregon to Colorado or from Colorado to Kansas,” Whitney said.

Those ambiguities will hopefully be cleared up by the 2023 Farm Bill, which is likely to contain better-defined federal policies for hemp, he said.

Hemp farmers can also do themselves a favor by improving their business practices: Specifically, by waiting to grow the crop until they have a market for it, he said.

In 2020, 65% of hemp growers said they didn’t have a buyer identified for their crop, which decreased to 44% in 2021, according to the survey. While that’s a step in the right direction, too many growers are still planting “on a wing and a prayer,” Whitney said.

“Use your common sense here. This is a business. Run it like a business,” he said. “You shouldn’t expose yourself, because if you do, you could lose your farm or your house.”