• Jeffrey Friedland

Is China a Threat to America’s CBD Industry?

What does this mean for hemp farmers and food, beverage, cosmetic, and dietary supplement companies that include CBD in their products?

Author: Jeffrey Friedland (jf@phytointel.com)

November 27, 2019 - China’s history of growing cannabis goes back thousands of years. Traditionally, hemp strains of cannabis were primarily cultivated for their fiber and as an important source of traditional Chinese medicine.

Confirming its role historically for thousands of years, the traditional Chinese character, 麻 or Má, is a pictograph portraying plants hanging upside down in a shed.

China views the 18th-century Opium Wars with western powers and the period that followed, as the “Century of Humiliation.” The first Opium War started in 1839 when England went to war with China over the closing of the country to the importation of opium. A second opium war followed with France joining Britain in the conflict. China does not view the Opium Wars and the period that followed as ancient history. Instead, the wars and the results of the treaties that ended them, continue to impact China’s view of its role in the world today and in the future. Almost as a “get even” strategy, Beijing views our current century as “China’s Century.”

Primarily as a result of the legacy of the Opium Wars, Beijing continues to view psychoactive forms of cannabis as dangerous narcotics, but, at the same time, it views hemp as a major agricultural crop. China has become one of the world’s largest producers of hemp and recently has been described as the world’s “hemp powerhouse.”

While traditionally hemp was grown in China primarily for its fiber and medicine, this is changing rapidly. Today, hemp is increasingly grown in the country for its CBD. It’s clear that Beijing wants a major piece of what the Brightfield Group sees as a $23.7 billion market for CBD by 2023.

The center of hemp cultivation in China is Yunnan, a province in southwestern China. Yunnan was the first province to allow the cultivation of hemp on an industrial scale. In the province, one can see hemp fields stretching for kilometers. The hemp is primarily harvested by hand, dried in the sun and processed.

Heilongjiang, a province in northeast China will be the second province to legalize the growing of hemp. A neighboring province, Jilin, is also likely to legalize the growing of hemp. Government leaders in these and other provinces view hemp as a way of diversifying their agricultural economies, a way to increase agricultural jobs, and the development of a new export industry, one that has a fast-growing international market.

Yang Liu, a hemp field manager was recently quoted in the Wall Street Journal as saying, “It’s an industry that can revitalize the activities of farmers. I”m already in love with it, and I feel this thing will bring me a lot of benefits in the future.”

Implications for the US CBD Industry

China’s major push to justify its title of “hemp powerhouse” has a potentially significant impact on America’s hemp growers, extractors, and CBD product manufacturers.

In the past, there have been quality issues regarding hemp and CBD imported into the United States from China, due to primarily residual heavy metals. If China is going to develop a viable new export product, it’s inevitable that the quality will improve over time.

I don’t see China becoming a major threat to America’s hemp and CBD industries anytime soon. But, neither the US Farm Bill of 2018, which legalized the growing of industrial hemp, as well as the recent US Department of Agriculture interim hemp regulations do not preclude imports of hemp fiber, oil, or CBD.

Increasing quantities of CBD being produced in the United States will continue to be the primary source of the cannabinoid for food, beverage, cosmetic, and dietary supplement companies. But long-term, China could become an alternative source of CBD, especially if the price is a primary consideration for product manufacturers, it could at the same become a problem for America’s hemp farmers.

The significant increase in the supply of American hemp and CBD over the past few months has led to a significant decline in the wholesale price of CBD. This is primarily due to the summer and fall harvesting seasons and the increased supply of CBD being on the market. I think it’s likely that CBD prices will bounce back somewhat over the winter and next spring. But, recent statements made by Chinese officials indicating that the country could produce CBD profitably with a price as low as US$300 per kilogram should be a wake-up call to America’s hemp and CBD industries.

About Phyto Intel

Phyto Intel provides strategic assistance to enable businesses and entrepreneurs to enter and succeed in the fast-growing and fast-evolving legal cannabis, hemp and CBD markets in the United States and globally.

Phyto Intel’s services are focused on four general areas:

Formulation of food, beverage, cosmetic and dietary supplement products that include CBD

Providing proprietary information on federal, state, and local regulations regarding CBD and products that include CBD

Development of branding, marketing, and sales strategy for products that include CBD

Post-product launch services including analytics and market feedback

Phyto Intel also provides market intelligence, formulation and “go to market” strategies for Consumer Packaged Goods (CPG) companies and CBD producers interested in developing, formulating, manufacturing and marketing food, beverage, nutritional supplement, cosmetic and dietary supplement products containing hemp seeds, hemp seed oil and/or CBD.

Phyto Intel’s affiliate, Growth Advisory Group provides various programs and services for cannabis, hemp and CBD producers and marketers.

Copyright 2019 - Jeffrey Friedland

Phyto Intel LLC

Michael King-Sadick, CEO

Email Michael@phytointel.com

Tel. 303-815-6261

©2019 by Phyto Intel Inc.