New York became one of more than a dozen states permitting recreational marijuana use in 2021. Their recreational program will officially launch later this year or in early 2023. In the meantime, the state is giving struggling hemp growers a second chance at success by giving them first crack at marijuana cultivation licenses.

Industrial hemp was legalized by federal legislation in late 2018. At the time, the number of legitimate hemp growers was limited enough that the market wasn’t flooded with biomass. That kept prices stable. But as more cultivators entered the market, supply exceeded demand. Prices crashed accordingly. That has left many hemp cultivators – in New York and elsewhere – struggling to stay in business.

A Boost for Hemp

Obtaining a marijuana cultivation license gives a NY hemp farmer options. They can switch exclusively to growing marijuana or grow both industrial hemp and marijuana side-by-side. But given the greater difficulty of producing high quality marijuana plants, it seems likely that hemp growers transitioning to marijuana would go all-in on pot.

Assuming that happens, enough cultivators leaving the hemp market could actually end up being a boost to those that remain. Hemp supply would fall as more cultivators made the switch. Those that remain in the hemp market should enjoy greater market share and, hopefully, higher prices as well.

Hemp and Marijuana Processors

What is not clear is how processors will fare once New York’s recreational pot sales begin in earnest. In theory, the same hemp extractors utilized by processors to extract CBD crude oil from industrial hemp can be utilized to extract THC from marijuana. But chances are that most of the recreational demand will be for raw marijuana flower.

THC extracts will still be needed to make medical marijuana products. Likewise, some recreational users might prefer to use vaping liquids and tinctures instead of smoking pot. This is to say that THC extraction will still have a place. But will there be enough industrial hemp to keep the CBD market supplied?

Getting CBD from Marijuana

One line of thinking suggests that CBD can be extracted from marijuana plants. According to Houston-based CedarStoneIndustry, it is technically possible. Hemp extractors are not cannabinoid specific. They extract crude oil containing all the cannabinoids and terpenes plant material has to offer. The problem is this: marijuana is normally not bred with the goal of maximizing CBD. It is bred for THC.

The vast majority of CBD produced for the American market comes from industrial hemp. Marijuana plants rarely contain enough CBD to make going after it worthwhile. Therefore, a large number of New York hemp farmers transitioning to marijuana could have a significant impact on CBD availability.

It Will All Play Out

New York will officially allow recreational marijuana sales in the near future. How it affects the hemp and CBD markets is unknown. All we can do right now is speculate. It could be that enough farmers make the transition to marijuana that the hemp market in the Empire State finally stabilizes. Both the growers who transition and those who stick with hemp should do better financially. But there are no guarantees.

As for processors, they will continue using the exact same hemp extractors whether their target is CBD, THC, or something else altogether. So what we really have is a question of how consumer demand will influence both hemp and marijuana supplies. New York giving struggling hemp farmers a second chance could end up being a very good thing for the state’s agricultural sector. Consumer demand will ultimately determine the outcome.