Are Hemp Oil Forward Contracts the Next Step?
CBD is extracted from the hemp plant’s flowers and its biomass. A cannabinoid unique to cannabis, CBD lives in abundance in the trichomes of hemp flowers. After hemp plants with a .3% or less THC concentration became legal nationally here in the U.S., the rush to grow hemp was extraordinary. In Canada, where the whole cannabis plant is legal, the rush was even crazier, relatively speaking. As a commodity, the economic world is drooling over the opportunity such a rare event brings.
The question still remains; what are the next steps for the complete normalization of hemp and its byproducts? Growing hemp, cultivating it, ingesting it and everything else having to do with the plants were prohibited for about 80 years. The stigma that built-up around it was severe and many people still have a mental block on it. But, now that it is legal, acceptance is spreading. People are loving the non-psychoactive benefits of CBD and more people try it every day.
There are a number of exchanges popping up for the buying and selling of pure hemp biomass contracts, like the PanXchange. It’s a place where people can buy and sell large quantities of hemp biomass to make all sorts of things. Some of those things include CBD isolates to make CBD oils that they can be used in CBD recipes or be purchased as CBD gummies or CBD cookies. It is only producers and wholesale purchasers using the exchange. There is still not enough liquidity, meaning enough people interested in it, to make trading the contracts feasible for your everyday speculator. Without a large volume of buyers and sellers, the buying and selling prices are too far apart anyway.
Prices along the entire supply chain – biomass all the way to isolate – are opaque and unreliable. There is a huge bid/ask spread in the market, and the same buyer or supplier will quote different prices on the same day. Efficient price transparency brings the bid ask spread in, which benefits all players except for ‘unscrupulous brokers.’ PanXchange members accessing the platform can see all orders on the exchange, and quickly narrow down to a specific product.
What exchanges mean for the hemp industry as a whole, is that if market makers are willing to take a risk on hemp and CBD oil, then it must be a real market. They have thoroughly assessed the market for hemp biomass and deemed it a very real opportunity. They are taking a big financial risk, because if they are wrong about the interest in the industry the price of the contracts they hold could fall out on them. It happens all the time in the commodity market and we have already seen big price fluctuations in hemp prices. It is simply one more sign that hemp and CBD is here to stay.
Read more at PanXChange.com.