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Many farmers planted hemp last year, hoping for a bit of the billions in sales predicted for the newly legal, nonintoxicating variety of cannabis that yields the soothing stuff called CBD. But demand didn’t materialize, so piles of hemp “biomass” sit unsold, and the price of what does sell fell about 30% from December to January, according to researchers at New Leaf Data Services.

It’s a glut and it is going to get worse. “[L]arge volumes of biomass remain unsold,” says New Leaf’s Hemp Benchmarksreport for January, “suggesting that further price erosion is possible.”

Demand for CBD, or cannabidiol, extracted from the biomass is equally poor. Inventories are growing and cash transactions are rare. When sales of CBD oil did occur, says the report, the price in January was 25% below December’s.

Even Republican Sen. Mitch McConnell was a hemp enthusiast when Congress legalized the plant in late 2018, hoping for a new cash crop to make up for declining sales of tobacco in states like McConnell’s Kentucky. Cowen & Co. analysts predicted that CBD would prove a $16 billion opportunity for companies like Canopy Growth (ticker: CGC) and Tilray (TLRY). Boosters believed that CBD products would soon line the food, beverage and cosmetics aisles of supermarkets, drugstores, and mass merchandisers. Fashionable people would wear hemp threads. Barron’s was skeptical.

See our April CBD feature: CBD Is the New Marijuana. But Don’t Buy Into the Craze for Hemp Stocks.

Consumer packaged-goods giants like PepsiCo (PEP) and big retailers like Walmart (WMT) haven’t committed to CBD-laced products. A big reason for that is concerns voiced by the U.S. Food and Drug Administration, which says it can’t permit the biologically-active ingredient in food and drink without tests of CBD’s safety. State health regulators in places such as California are also keeping it off shelves.

Even mail-order specialists like Charlotte’s Web Holdings (CWEB. Canada) blame regulators for stunting CBD’s sales growth. The company’s stock has slid 60% since our April article, while those of CBD plays CV Sciences (CVSI) and Green Growth Brands (GGB. Canada) are down more than 80%.

CBD may someday become a hot health additive, but for now, farmers are pulling back. Hemp Benchmarks reports that only a fraction of the acreage licensed to grow hemp was harvested in 2019, yet a glut still resulted.

As the 2020 planting season approaches, farmers ought to be buying seeds and starter plants. But in a time of year when demand for those things should be high, the market researchers are finding that their January prices are lower than they were in October.

“Wholesale hemp markets continue to face significant challenges,” says Hemp Benchmarks.

Write to Bill Alpert at william.alpert@barrons.com