The Impact on Hemp & CBD from the US & China Trade Agreement

The United States and China have reached a trade agreement that will require China to import US agricultural products for the next two years. Included in this list of agricultural products is “true hemp,” which we know as the cannabis plant that tests within legal limits of 0.3% THC (whether that is delta 9 or total THC still remains unclear as of this writing). Specifically, the agreement states that China must spend at least $12.5 Billion more than it did in 2017 for the 2020 year, and at least $19.5 Billion more than it did in 2017 for the 2021 year.

How much of this agricultural product will be spent on hemp is unknown, but US hemp farmers have to feel optimistic about the potential for a new market opening up to combat the current oversupply in The States. At first glance, it would appear that those that truly stand to gain are the hemp farmers growing industrial hemp, because of China’s tight regulations on CBD.  However, reports have shown that China is beginning to loosen these restrictions and laws on CBD. If that trend continues, the market could really take off. 

Last year, 2 of the 34 regions in China (Heilongjiang and Yunnan) began growing hemp for CBD. Despite China already providing half of the entire world’s hemp products, it was still considered a big deal. China is known to be extremely strict with its drug laws. And although more and more consumers are quickly learning that hemp-derived CBD doesn’t get you high, that does not equate to lawmakers quickly changing policy. Nonetheless, we are seeing partnerships emerging between with other countries for CBD production and promotion in China, a sign that change in regulation is on the horizon. 

As if the above trends and news weren’t enough, it should also be noted that China continues to move toward becoming the largest consumer market in the world (overtaking the US). 

There are a few ways to look at what the market opportunity could become:

  1. China’s CBD laws stay tight, so the true opportunity lies in US farmers growing hemp for fiber and grain to export 
  2. China’s CBD laws relax, so US farmers provide China with high CBD seeds, as Chinese companies will need access to those specific cultivars
  3. China’s CBD laws relax, so US farmers provide China with bulk CBD oil that they manufacturer for consumer products 

There are certainly other scenarios that can play out for what the market may become, but one thing is clear: this trade agreement should have a positive impact for US hemp farmers in 2020 and beyond.

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