How the Coronavirus Outbreak Will Hit the Hemp Industry
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How the Coronavirus Outbreak Will Hit the Hemp Industry

From event cancellations to supply chain disruptions, here's all you need to know about the coronavirus and the hemp industry.

It’s unclear what the total economic impact of the coronavirus will be, but one thing is for sure: The hemp industry will not be immune to market effects that will reverberate for weeks, if not months, to come.  

Some changes brought on by the novel virus might bolster the nascent hemp industry, but it could also bring additional challenges and obstacles for the nascent hemp industry.  

Here’s everything you need to know about how COVID-19 could or is already impacting the hemp industry. 

Research Implications 

The National Hemp Research & Education meeting was slated for March 17-18 but has been postponed—and so too will its conference proceedings that could have aided hemp growers. The invitation-only meeting, sponsored by the U.S. Department of Agriculture (USDA) and National Institute of Food and Agriculture (NIFA), was to feature panel discussions and presentations on hemp genetics, best management practices and supply chains. Results of a national hemp survey were scheduled to be unveiled. The conference was also set to establish working groups that would have identified hemp research and education priorities for the next three to five years.  

“The conference cancellation will have ripple effects over this next year,” says Alyssa A. Collins, Ph.D., Director of Southeast Agricultural Research & Extension Center and assistant professor at Penn State University. “One major goal of that meeting was to hear directly from hemp industry stakeholders that we personally invited [to learn] what their needs are and use that to set the research priorities for collaborating with scientists across the nation for work beginning in 2020. We now unfortunately won’t get that opportunity to have immediate industry input prior to the start of the season when the research will already be underway.” 

Collins says that at all Penn State Extension in-person events have been canceled through early April. Many of these events will be moved to an online format. However, many people in parts of Pennsylvania, New York and Ohio, which is entering its first year of production, will not have access to this education. There are cultural considerations, including Amish communities, and lack of access to sufficient broadband. That means it will be more difficult for extension specialists and educators to disseminate information to farmers about production and other best practices.  

Broadband access is not a new issue for farmers, but it raises new concerns about finding alternative methods of delivering much-needed information.  

In November 2018, Penn State University researchers concluded after a year-long study that less than 10% of the state meets the Federal Communications Commission’s minimum required speed for broadband connectivity.  

“When we think of the new growing season and all these new people for the first time coming into hemp, all these educational events that are being affected—that is education and sources and tools that are not getting out to the hemp community.” —Joy Beckerman, President, Hemp Industries Association 

More Events Canceled 

The research-heavy meetings are just two of several industry events that have been postponed or canceled so far, with more likely to come. 

The American Herbal Products Association (AHPA) has postponed its Hemp-CBD [cannabidiol] Supplement Congress, due to be held in April, to Aug. 26-27. The NoCo Hemp Expo has been postponed to Aug. 6-8 for the time being, while the International Cannabis Business Conference (ICBC) in Berlin has been moved from early April to July. 

South by Southwest (SXSW), a culture conference that draws nearly 300,000 attendees annually and included a cannabis track this year, has been canceled for the first time in the event’s 34-year history. 

“We’ve learned that if there’s anything more difficult than producing an event the magnitude of SXSW, it’s cancelling one,” writes SXSW’s communications director Linda Park on the conference’s website. “The cancellation of SXSW due to concerns around COVID-19 by the city of Austin was the right decision, but it has rocked us to the core, as well as the thousands of people who help make SXSW an extraordinary and unique event.” 

Even Hemp Grower has been faced with the difficult decision of whether to proceed with Cannabis Conference 2020, which was set for April 21-23. On March 16, Hemp Grower, along with sister publications Cannabis Business Times and Cannabis Dispensarydecided to postpone the conference for a date to be determined.     

"In the effort to protect the health and safety of our attendees, employees and communities amidst the developments of the coronavirus disease (COVID-19) global pandemic, we have made the difficult decision not to hold Cannabis Conference 2020 in April, and are actively working with our meeting hotel, Paris Las Vegas Resort & Casino, to determine potential alternative dates for the event," according to a statement issued by the Cannabis Conference.

Virginia Lee, CBD research manager at Brightfield Group, had flown out to Anaheim, Calif., in March 2 to attend the Natural Products Expo West and the Hemp and CBD Summit. She sent a tweet the night before the event was set to start.  

“I had gleefully posted on Twitter a photo of my Lands’ End shoes, business cards and Expo West brochure saying, ‘I’m excited to go to Expo West,’” Lee says. But that excitement was quickly tampered when Lee started to receive messages that the event was canceled. Lee soon learned the email announcing the conference’s postponement had been in her junk email folder. “I flew out Monday morning from Chicago, and I was scheduled to fly back Friday on a red eye. I flew back Tuesday on a red eye.” 

Aside from travel interruptions, Joy Beckerman, the president of Hemp Industries Association, says the loss of educational and networking opportunities, especially in an industry where new information is constantly flowing, is a blow to new and experienced growers alike. 

“When we think of the new growing season and all these new people for the first time coming into hemp, all these educational events that are being affected—that is education and sources and tools that are not getting out to the hemp community,” Beckerman says. 

Labor Shortages 

While a shortage of workers has permeated labor-intensive jobs for years, the coronavirus may exacerbate those shortages and spread them into industries that have yet to see it as a major issue. 

Beau Whitney, the founder and chief economist of Whitney Economics, has been studying cannabis trends in Kirkland, Wash., since the area experienced a major outbreak of the virus in early March. (Adult-use cannabis is legal in the state.) 

Whitney says dispensaries there haven’t been experiencing less foot traffic or a change in product preferences. What they have experienced, though, is a shortage of employees. Whitney says he’s seen anywhere from 10% to 25% of dispensaries’ workforce out due to feeling ill, self-quarantining or taking care of children who are out of school. 

“How does this relate to hemp? As this gets more pervasive throughout the U.S., rather than having it in isolated pockets, there’s a real threat to having sufficient labor [throughout the country],” Whitney says. “When you need people to work in a processing facility or need people to work the farms, you may not have them.” 

“One of the things the coronavirus will do for us is probably open our eyes [to the fact] that we’ve relied too much on foreign products for too long. We need to be in control of our own destiny." —Jim Benham, President, Indiana Farmers Union board of directors

Supply Chain Disruptions 

Like nearly every other industry in the U.S., experts predict the hemp industry will inevitably experience disruptions along the supply chain. A new economic report out of China shows plummeting retail sales, industrial output and investments for the first quarter of the year, and economists are predicting the plunge is far from over, according to CNN

Just where those supply disruptions will occur, how long they’ll last and whether they’ll have a positive or negative outcome for the U.S. hemp industry in the long run, however, is up for debate. 

While Whitney has yet to see product preferences or methods of purchasing change, he anticipates it coming soon. Deliveries are likely to pick up, Whitney and Lee say. Meanwhile, consumers may trade in smokable products for more sharable products, like edibles, to avoid direct contact with one another.  

And while CBD products have been an increasingly popular option for younger and older consumers alike, the market may experience a stall as potential customers put seeking education on cannabinoids on the backburner.   

“I think that the coronavirus is likely to have a slightly negative short-term impact on the U.S. CBD market," Lee says. "For me, I see the coronavirus and the fear impacting people new to CBD because places like CBD specialist retailers, beauty specialist retailers, department stores in general many of them serve to educate Americans about CBD. I feel like existing CBD users will continue purchasing CBD but switch over from going to the stores to e-commerce if they weren’t already buying CBD online.” 

Supplying those customers with their products, however, may begin to be a challenge. Much of the packaging used in cannabis products is shipped from overseas, Whitney says, where widespread outbreaks have already occurred and halted business operations. According to the new economic report out of China, the country’s retail sales fell 20.5% during January and February over the same period in 2019, industrial output fell 13.5%, and fixed asset was down by nearly 25%, according to the National Bureau of Statistics. 

Economists are predicting the numbers could lead to a contract in the country’s economy for the first time in decades, according to Bloomberg, which is likely to have rippling effects on the U.S. economy. 

Some farmers and analysts, however, have a more optimistic outlook on what China’s contracting economy could mean for hemp in the U.S. 

Because the U.S. still imports much of its hemp fiber from China, some are predicting the wavering economy overseas could bolster the U.S.’s hemp production in the long-term. 

"Given the glut of U.S.-grown hemp and the huge downturn in prices of U.S. hemp, I don’t see, even after this outbreak is cleared and supply chains are open, how it’s attractive to ship in hemp from China, which is over 7,000 miles away," Lee says. "Even beyond [the] coronavirus, shipping things by boat takes a long time and shipping things by air is more for electronics, which are high-margin products. I think that overall, demand for hemp grown from China will go drastically down."

It's a prediction farmers are making as well but also hoping will come true.

“One of the things the coronavirus will do for us is probably open our eyes [to the fact] that we’ve relied too much on foreign products for too long," says Jim Benham, president of the Indiana Farmers Union board of directors. “We need to be in control of our own destiny." 

What Businesses Can Do 

The Centers for Disease Control and Prevention (CDC) has published comprehensive guidance for businesses on how to prevent workplace exposures to the coronavirus. Highlights from those recommendations include:  

  • Actively encouraging sick employees to stay home. 

  • Separating employees who appear sick immediately. 

  • Emphasizing staying home when sick, respiratory etiquette and hand hygiene to all employees. 

  • Performing routine environmental cleaning. 

  • Advising employees before traveling to take certain steps. 

The CDC has also published planning considerations if there are more widespread community outbreaks of the virus. 

Beyond health considerations, Whitney says businesses can take extra steps to protect themselves for the months to come. 

“Branding, scale, and supply chain management will be the differentiating factors in this space,” Whitney says. “If you don’t understand the supply chain, you will be setting yourself up for failure.”  

Regardless of where businesses are in the supply chain, it’s important to know who is involved in every step, from the processors to lenders, Whitney says, to avoid broken contracts. It’s also important for producers to understand their positions in the supply chain and where the supply is going so they can evaluate their risks and take steps to mitigate them, he adds. 

Whitney says a supply and demand shock is likely to occur in many industries, including those in the hemp space, so preparing for that shock is essential. 

"Understanding from end to end is critical, and then also understanding your business and having contingency plans for labor, supply and demand shocks, supply chain, all of that," Whitney says. “The more that people plan, the more successful they’ll be.”