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Law360 (May 28, 2020, 6:20 PM EDT) -- A hemp industry group said prices for the crop have collapsed amid the coronavirus pandemic, imploring the U.S. Department of Agriculture to stanch the bleeding by including its farmers in a $19 billion relief fund.
The U.S. Hemp Roundtable said in a letter to the agency Wednesday that prices for hemp and hemp-derived products have fallen as much as 46% since January, a decline far more severe than the 5% threshold for the USDA's Coronavirus Food Aid Program.
"The COVID-19 pandemic and response has wreaked havoc on hemp farming, resulting in significant disruption to the industry," the group said, adding that additional costs imposed by the pandemic have deepened the industry's woes.
The pandemic has delivered a gut punch to a hemp industry already roiled by downward-spiraling prices. By most benchmarks, hemp prices have dropped by roughly 80% since May 2019, according to data cited in the letter.
Jonathan Miller, author of the letter and general counsel to the U.S. Hemp Roundtable, told Law360 on Thursday that the tailspin started last year when the U.S. Food and Drug Administration signaled skepticism toward hemp-derived CBD.
"Their continued delay on developing regulations for CBD has shrunk demand for the product," he said. "That coincided with a year where interest in farming grew tremendously, creating the price pattern that we've seen."
Unlike most commodities, hemp does not have firmly established market prices, owing to the industry's relative infancy. The letter cited data from two price-tracking firms — Hemp Benchmarks and PanXchange — whose best estimates pegged this year's decline between 19% and 46%.
The declines have been seen in hemp CBD biomass, flower, refined hemp oil and CBD isolate. Crude oil from hemp flower saw the steepest drop, falling to $376 per kilogram from $668 in January, according to the estimates.
The letter said the data reveals other concerning trends, including limited price fluctuation that could force farmers to accept lower assessed values for their hemp. Industry-standard contract structures also means many farmers still await processing fee reimbursement for their 2019 crops, according to the letter.
"Given the clear data demonstrating significant price drops during the COVID-19 crisis — far greater than the agency's benchmark of 5% — we urge the USDA to supplement the commodities currently listed in the CFAP regulation by including hemp," the letter said.
The USDA unveiled the aid program earlier this month, saying it would offer farmers of certain crops direct relief from bailout funds provided in the Coronavirus Aid, Relief and Economic Security Act. Commodities from soybeans to sorghum made the cut, but hemp was excluded as a crop that hadn't demonstrated a clear price drop amid COVID-19.
Farmers and industry groups have until June 21 to make their case to the USDA for inclusion on the list.
"We are hopeful that this data is so clear it will compel them to act sooner than that," Miller said.
The USDA did not immediately respond to a request for comment Thursday.
--Editing by Michael Watanabe.
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