In 1970, the Nixon administration decreed all forms of cannabis - including non-psychoactive industrial Hemp - to be schedule I drugs, on the same level as heroin and LSD. Half a century later, much has changed. As of September 2019, there are now at least 7 different multi-billion dollar cannabis companies trading publicly. After a 50 year moratorium, Hemp is finally mainstream.

Global acreage of the crop has more than quadrupled in the past year, largely fueled by the CBD explosion. Total sales for cannabinoids are expected to reach $16 BILLION over the next 6 years, and Private Equity and Venture Capital firms are rushing into the space to help the fledgling industry reach scale.

But the real economic promise of industrial Hemp is what comes after the plant hits scale.

An often repeated fun fact among Hemp activists is that the plant can be used in more than 25,000 products, but what they neglect to mention is that, as of today, it’s rarely used at all in the marketplace. Some of the plant’s most promising applications: environmentally friendly textiles, carbon-negative construction materials, biodegradable plastics, have yet to live up to their hype. In textiles, Hemp fiber makes up a dismal 1% of the market. In industries like construction materials and bioplastics, its market share is even lower.

So if Hemp’s industrial uses are so promising, why is it so rare in the marketplace?

Hemp’s lack of prevalence is not due to some deficiency of the plant itself. On the contrary, Hemp is the strongest natural fiber in the world, unmatched in terms of versatility and usefulness, and one of the most environmentally friendly crops at our disposal (an important fact to remember given the severity of the ongoing climate crisis). Rather, this scarcity is a result of the volatility in, and often the complete absence of, supply chains for Hemp biomass.

Processing facilities capable of handling Hemp fiber are exceedingly rare, which is unsurprising considering the plant’s 80 year long prohibition. This lack of infrastructure has led to a sort of chicken-and-egg problem: farmers won’t grow for fiber and biomass without processors, and processors won’t invest in facilities without farmers to supply the raw materials.

But things are quickly changing.

Global demand for CBD is causing drastic growth in the amount of Hemp being grown, and the natural consequence of this is an unprecedented increase in the amount of Hemp biomass that will soon be available on the market.

The creation of a robust supply chain for Hemp byproducts like fiber and shiv, and the price decrease that will result from this, may very well give some of Hemp’s most promising products a fighting chance in the marketplace. Their potential is substantial .Carbon-negative construction materials like Hempcrete stand to replace the $4.9 billion market for fiberglass insulation by providing a cheaper and easier to manufacture alternative. The Hemp seed (which contains no CBD) has achieved ‘superfood’ status, accounting for 17% of the total Hemp market in 2017 ($137MM). There is even promising ongoing research into the use of Hemp fiber for use in manufacturing cheap graphene alternatives. These represent only a few of the 25,000 different potential applications for the Hemp plant, and with the rise of CBD making these byproducts cheaper and more plentiful, it is only a matter of time before these products become truly market competitive.

But who will sell them?

While promising, these nascent products and companies lack the access to institutional capital necessary to reach their potential. Nearly all of the almost $14 billion dollars invested in the cannabis industry last year went towards companies dealing with medical or recreational uses for Hemp, with almost no investment going towards industrial uses. Private capital, it would seem, is largely unaware of Hemp’s true potential.

This is folly. Any sound investment strategy in cannabis must recognize not only the plants recreational and medical applications, but its industrial potential as well. Indeed the very versatility of the plant itself - the fact that so many useful products can be made simultaneously from a single acre - means that a firm taking a whole-plant approach will have a massive competitive advantage over those focusing on a single product line.

Developing the markets for these industrial products would lead to more revenue per acre available to farmers, more purchasing power for firms that can offer to purchase byproducts alongside CBD flower, and a more diversified, less risky portfolio.

If private capital can come to realize this, then we might live to see the day when the industrial side of cannabis eclipses the recreational. To paraphrase Hemp Bound author Doug Fine, Budweiser is big, but DuPont is bigger.