2019 Lesson Learned Part 2: Growers should push for advance purchase contracts.
The bottom dropped out. I feel like there’s an old song with a chorus that sings that on repeat. “I’ve seen better days. And the bottom dropped out.”
That same chorus has been ringing through the ears of many hemp farmers for the past month or so. Anyone growing hemp for CBD is likely aware that the market for oil has been a bit of a mild roller coaster throughout the year and has recently taken a long quick ride down that scary steep drop.
If there’s one lesson worth taking away from this experience, its that having advance purchase contracts in hand going into the season vs looking for buyers on the tail end would’ve made a world of a difference for a lot of farmers. A number of growers took advantage of early market signals when CBD values were still high and contract for the purchase of their biomass or mature plants. In doing so they avoided the drop at the tail end of the season that many of us are now experiencing.
Another reason for early contracts is the Whole Farm Revenue Protection plan. As of this writing, it’s one of the few, if not the only, way growers can insure their hemp crop. One of the requirements for participating in the WFRP program is that a purchase contract must be in hand before the insurance applies. The WFRP also requires that farmers grow multiple crops, and if doing so, the plan will subsidize 50%-80% of expected income in the event of a market drop or loss of product.
2019 has proven that a little planning and due diligence early will go a long way as we continue to work on learning and understanding this complex crop. Expect farmers to start their homework a bit earlier in 2020, with many hoping to contract buyers for their upcoming harvest early in the year.
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Lyrics from Better Days by Citizen King