European hemp farmers increasingly pessimistic, Canxchange report shows

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European hemp farmers are increasingly pessimistic, with those in the flower and biomass sub sectors continuing to express dark views, according to the Q1 2022 benchmark report from London-based commodities platform Canxchange.

The company said its Canxchange Farmers Sentiment Index (CFSI) dipped 15% from Q4, 2021, to 97.2 for the most recent quarter. That’s down from a high of 111.7 in July of last year, Canxchange noted.

Lower confidence is evident among growers of all sizes, according to the most recent Canxchange research, which tracks farmer attitudes in three categories: those farming less than 500 hectares; farms 500-1,000 hectares; and those with more than 1,000 hectares under hemp.

‘Grim market view’

“This in-between seasons period showed a grim market view for flower and hemp biomass producers, with high dissatisfaction for the outcome of the last harvest, pessimistic market prospects for 2022, high level of stock, and anticipation of lower production for the 2022 harvesting season,” according to the report.

While the biggest farmers have a higher level of confidence, especially those producing hurd and technical fibers, low sentiment among small and medium-size farms is driven in part by those operators’ low potential for diversification, Canxchange observed.

Producers in the cannabinoids supply chain, including big operators, show waning confidence amid a continuing oversupply of flowers, oils and isolates that underpin the sector, the report said.

“On top of this product offer and demand distortion, the market seems to struggle to find price equilibriums across different products, and the recent inflation of production costs is not helping the market imbalance,” according to the report.

Price disparity

In comments on the overall market, Canxchange said price disparity among similar products and difficulty in choosing the right pricing benchmarks continue to plague producers.

“The lack of market integration, the lack of product standardization, large differences in production costs from one territory to another, the absence of specialization, and the difficulty for the operators to get decent market visibility,” are all contributing to volatility, Sigfried Legeay, the company’s Chief Financial Officer, observed in the report’s introduction.

“Over time, the negative impacts of these factors will be resolved by a so-called ‘invisible hand’ effect, but this process can be lengthy depending on what pace the market structures itself,” Legeay wrote. “Raw materials still need to transit towards a different model in order to become a commodity.”

In other key findings from the Canxchange Q1 2022 benchmarks report:

  • Producers of CBDa are running low on supplies after demand was sparked by press reports that the compound helps ease the symptoms of the Covid-19 virus. That has resulted in significantly higher prices.
  • The European demand for hemp food seed continues rapid growth, but most new buyers are not happy with the price increase from last year; the price of European-origin conventional seeds has reached nearly €2/kg.
  • Isolate prices have plateaued at the mid €300/kg level, with occasional drops below that for bigger-than-standard orders.
  • Distillate prices in Europe have remained relatively stable at around €1,400/kg for material with a concentration of CBD above 70%; but those prices are coming under pressure as some U.S. producers have cut their prices to as low as €600/kg in recent weeks.
  • Interest in CBN suddenly dried up in the last few weeks, which has suppliers ready to offload stocks at €2,200/kg.
  • Demand for hurd (shives, shivs) for the construction industry are holding at high levels amid tight supply. Some big suppliers have had order cancellations, making hurd available on a limited basis on the spot market at €400-€550/ton.
  • The supply of technical fibers is also running tight, with top French suppliers having no availability this season due to existing long-term contracts.

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