The American hemp industry is booming after passage of the 2018 Farm Bill, which lifted the ban on hemp and cannabidiol (CBD) products at the federal level. Consumers, farmers and everyone in between are flocking to the “green rush” to be a part of the new emerging hemp ecosystem.

Hemp CBD is the fastest growing consumer packaged goods segment in 2019, according to Stephen J. Gongaware and the National Cannabis Industry Association, with CBD products sold everywhere from grocery stores to gas stations, convenience stores, online retailers, and drug stores like Walgreens and CVS.

Farmers have been eager to get in on the green rush to meet demand, particularly generational farmers struggling with restrictive tariffs on foreign exchange and declining industries such as dairy. But an immature supply chain and steep learning curve have brought some as much peril as opportunity.

Hemp agronomy—the green rush

In its infancy, hemp could quickly become the third- or fourth-largest cash crop in the US, according to Whitney Economics, just behind crops like corn and soybeans. The hemp advocacy organization VoteHemp.com reported 511,442 acres were licensed to grow hemp in 2019, a 455% increase over 2018.

However, following years of prohibition, the American farmer faces a steep learning curve. Hemp is harder to grow, process and sell than many growers realize—and there are challenges with an underdeveloped infrastructure and supply chain.

Many farmers put seeds in the ground without having a buyer in line. According to Whitney Economics, as many as 65% of growers do not have a buyer for their crop. American farmers are holding a surplus of hemp biomass and there just aren’t enough processors to extract the most valuable part of hemp—the coveted CBD liquid gold.

American farmers face other problems, too, including:

It will take time for the value chain to balance its supply chain components so the full potential of hemp can be realized. But for now, more sophisticated large-scale processors are investing tens of millions of dollars to join the industry—and consumer demand is showing no signs of slowing.

Hemp extraction—the gateway to consumer products

Processors (or “extractors”) transform raw biomass into a variety of CBD oils and extracts–the sought-after botanical gold.

More than 2,880 processing licenses were issued in 2019—an increase of 483% over 2018, according to AgWeb Editors. Extraction is a highly involved technical process that requires a keen understanding of how to optimize yields so as not to lose precious CBD extract–and at the same time, ensure products stay compliant.

Most processors currently are smaller operators due to the nature of hemp being an emerging market and the significant capital required to establish large-scale extraction operations.

However, a number of larger companies with deep roots in botanical extraction and related intellectual property and systems are entering the space to bring scale and efficiency not yet seen in the hemp supply chain.

The following are factors that growers and consumer packaged goods manufacturers should consider when selecting an extractor:

Consumer demand

Hemp has quickly expanded into markets not envisioned just a few years ago. Beyond skin care, there are tinctures, beauty/makeup, dietary supplements, CBD-infused food and beverages (for which regulations are expected to continue to evolve), gummies, breath mints, vape and booming applications for pets and animals. Hemp also is being researched and used in everything from batteries to packaging, aerospace and automotive parts, and construction.

To be clear, CBD users aren’t looking for psychoactive effects. According to a 2019 study by High Yield Insights, they are looking for ways to relieve chronic joint, arthritis and muscle pain, relieve anxiety, and sleep better. While FDA is continuing research and has not qualified statements relating to these types of therapeutic uses of CBD, it is clear the consumer sees value and is looking for natural products they believe to be effective to bolster well-being.

As with other health and wellness products, consumers are looking for clean label compliance, and ingredients they can trust. From seed to packaged goods, best practices and transparency are critical throughout the supply chain.

Consumers are also seeking to combine CBD with other natural, functional ingredients already on the market, such as monk fruit, which reduces sugar intake and also masks the bitter taste of natural CBD.

CVS, Walgreens, Rite Aid, Ulta Beauty, GNC Holdings, and a plethora of online stores are only a few of the retailers already offering CBD products to consumers. Food and beverage giants like Coca Cola, Constellation Brands (think Corona), Molson Coors Brewing, Ben & Jerry’s and other major brands are also reported to be researching and investing in CBD due to consumer interest.

At the end of the day, the success of hemp will be driven by consumer demand—and after years of prohibition, consumers know they will win with myriad better products to improve health, wellness and the environment. Outside of CBD, hemp fiber itself is stronger and softer than cotton. Hemp for paper products takes only 120 days to grow versus years for trees. With its staggering number of applications, versatility and growing consumer sentiment focused on information, health and wellness, self-care, natural products with functionality, and sustainability, the hemp industry shows no signs of slowing.

To read related content, check out the “Hemp/CBD: Market evolution” digital magazine.

Collette Kakuk is a senior business strategist with experience in food service, restaurant, and top Fortune 100 business consulting. She has a passion for people and data and currently works with HempRise, a leading supplier of USDA Certified Organic hemp extract in the U.S. and a wholly owned affiliate for the hemp and CBD business of Layn Corp.