The Case for Hemp
“The public markets are following these important trends and rewarding companies that are aligned with the new consumer wave. Hemp sits at a pivotal point in a new short-cycle carbon economy, and is well positioned for public market rewards.”
Market Drivers
Since November 2018, regulatory changes within the United States and across the globe have created a renewed interest in the hemp plant itself and in unlocking its vast potential across fiber, food, feed and pharma.
The wave of new consumer interest and demand has drawn entrepreneurs and scientists into the market, a lively and talented group developing cost-effective industrial uses for the plant, and in turn driving the industrialization of the supply chain.
The plant requires fewer inputs to farm, replenishes the soil as it grows and sequesters carbon at a high rate. While offering solutions to many environmental concerns, the hemp plant can be used to develop green substitutes for fossil-based materials across a whole host of industrial uses. These benefits align together as an excellent solution to the powerful forces (below) driving change in consumer demand for food, feed, fiber and pharma across the market.
Over the last 50+ years, a tremendous amount of capital had been invested in public and private research to identify how to best realize as much value as possible from America’s top three row crops (soybeans, corn, and wheat). This intensive scrutiny examined every portion of each plant, starting from genetics and through to every part of how to farm, process and use each plant.
At Sanitas Peak, we expect that the application of science to hemp, a plant that already offers so much more potential than the big three, will create huge value. As research progresses, the technological harnessing of higher complexity solutions based on hemp fiber will offer cost effective solutions for industry. But at the same time, less technologically complex products (food, feed, animal bedding and the like) can be easily incorporated in the current US agricultural and industrial complex.
Powerful forces driving change in consumer demand
The Need for Environmental Change
Universal reliance on hydrocarbons, derived from fossil fuels, has driven the escalation of global warming. The attendant health and economic ramifications are unsettling generations of Americans, fueling demand for alternatives to fossil-fuel and attracting capital (ex: Tesla has led the auto industry and many will follow). On the materials side, short-cycle renewable carbon-based materials will be key to replacing hydrocarbons, and can play a large part in healing the planet. The hemp plant is just that, a short-cycle renewable carbon-based plant with over 200 known uses.
The Need to Revitalize Rural America
Since the industrialization of agriculture in the late 19th century, crop rotation and land management has fallen by the wayside. On the plus side yields of corn per acre are up 300% since the 1955 and soybean yields have almost doubled since 1991. But the cost of modern capital-intensive agriculture includes the overuse of pesticides and fertilizers that are heavily polluting American waterways, and to such an alarming extent that they are destroying the natural habitat within the Gulf of Mexico. In addition, farming profitability is fragile and heavily reliant on government crop subsidies and subsidized finance, contributing to a tremendous financial disconnect between rural and urban areas in the US.
For the last 30 years, governors have struggled to create better opportunities for rural populations. There is a tremendous amount of interest in the country for introducing a new row crop that will create an economic stimulus for local economies. Tax-Credits, Economic Development, and AG Banks are available to provide matching capital. Even presidential candidate Joe Biden touched on the subject in a recent town hall, when he referenced his green plan and its call to pay farmers to grow healthier CO2 absorbing crops as part of his $700 Bn “Buy American” plan.
The Need for Thoughtfully Sourced Food & Fiber
Led by Millennials and Gen Xers, consumers are increasingly focused on issues of climate change, responsible farming practices and the protection of natural resources, and how their consumption habits affect each of these. At the same time, consumers are also increasingly thinking about what they are putting into their bodies, seeking healthy foods and developing an understanding of how the goods they purchase impact their environment. By bringing their focus to sustainability, environmental impact and personal health, consumers have induced companies to implement green practices and develop sustainable eco-friendly products. Ultimately, consumer demand for environmentally-conscious green products is fueling new products and product categories, and transforming corporate policies across the board, from Amazon to Nike, Walmart and beyond.