Demand for CBD still outstrips supply despite production expansion, hemp grower says

By Hank Schultz contact

- Last updated on GMT

Atalo Holdings photo.
Atalo Holdings photo.

Related tags: Industrial hemp, Hemp, Cannabis

The supply of industrial hemp is ramping up quickly, as a company formed by growers in Kentucky reported $2 million in payments to farmers for the 2016 crop. But demand for CBD still far outstrips supply, a company officer said.

The company, called Atalo Holdings Inc. a diversified industrial hemp research and production company in Winchester, KY., announced the payouts to their growers’ group yesterday.  The company’s officers are all also growers themselves.

Diversified operation

In addition to growing the raw material, the company also does crude refining of the plant into material that can be sold on for further refining into cannabidiol (CBD) for dietary supplements and other applications.  Atalo also has a research partnership with the University of Kentucky and operates several subsidiaries—Super Food Processing, KentuckyCBD and Kentucky Hemp Seed R&D—that are housed at a facility known as the Hemp Research Campus in Winchester. Among its research efforts the company does work on the development of new, certified varieties of hemp seed.  The company has also developed proprietary mechanical harvesters specific to hemp to help rationalize production.

Atalo claims to be one of the largest hemp companies operating in the US.  For the 2016 growing year, the company has 58 growers enlisted in the program with 2,466 acres approved for hemp production.  In the 2016 harvest, 410 acres were dedicated to CBD production.

Rediscovery of crop

For company chairman Andrew Graves, the story is not new; the cultivation of hemp is rather a rediscovery of one of the oldest cash crops in Kentucky’s history.  Hemp cultivation runs in Graves’ family, and his father grew hemp as critical raw material for the war effort in WWII.  That was the end, though, as the plant’s placement on the Drug Enforcement Agency’s schedule 1 list choked off all further work on hemp until very recently.  Atalo Holdings was formed in 2014 after the 2013 Farm Bill, which legitimized the growing of industrial hemp, took effect.  Industrial hemp is defined as cultivars of Cannabis sativa​ that have less than 0.3% THC content, which is the psychoactive fraction of the plant.

“I myself am a seventh generation hemp grower.  My father grew hemp in the Hemp for Victory program. We have a long history of Kentucky being a good place to grow this crop. We’re just picking up where we left off,”​ Graves told NutraIngredients-USA.

Hemp is a source of industrial fiber and protein, and there appears to be unlimited enthusiasm for the use of CBD in dietary supplements.  One driver is the potential efficacy of the cannabinoids, which have been researched for a variety of benefits including as analgesics and in seizure amelioration. Another is the newness of this ingredient on the market in an industry that is always looking for the next great thing. 

Supply concerns

There are significant drawbacks, too; the above mentioned DEA schedule 1 listing still obtains even as it fades farther and farther into the background as more states approve medical marijuana. Another significant hurdle toward greater market acceptance of CBD has been the high cost of the ingredient. While an increase in the raw material would seem to be good news along these lines, Graves cautioned that supply has a long way to go before it catches up with demand.

“We have a lot of companies calling now with products they want to put CBDs into. I do see the prices coming down, but there is still plenty of demand,”​ he said.

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Atalo Holdings photo.

Graves said the Atalo will ramp up production in a cautious way. He said he’s sensitive to the fact that as an infant market the hemp sphere could be subject to distortions if too many people jump on board too quickly.

“As a company, I don’t want us to double our production but for 2017 we are looking at something like 25% more purchased production. So the payout instead of $2 million will be more like $2.5 million,”​ he said.

A big part of Atalo’s mission is rural development.  Fifty years ago Kentucky was by a long stretch the world leader in burley tobacco production,  a light, air-dried form of the plant that is mostly used for cigarettes. Graves estimated that less than 10% of the world supply of that plant is now grown in the state. 

“This is an area that has been heavily into burley tobacco production.  We’re trying to replace some of that lost revenue,” ​Graves said.

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