Hemp History Week – Guest editorial

By Edward Woodford, CEO, Seed CX Mr. Woodford has previously worked at the Mayfair-based hedge fund Lansdowne Partners in the European Strategies Fund. He also gained experience at Muddy Waters Research, the options trading and research group founded by Carson Block. Mr. Woodford graduated with First Class Honors from the University of Warwick in the […]

By Edward Woodford, CEO, Seed CX

Mr. Woodford has previously worked at the Mayfair-based hedge fund Lansdowne Partners in the European Strategies Fund. He also gained experience at Muddy Waters Research, the options trading and research group founded by Carson Block.

Mr. Woodford graduated with First Class Honors from the University of Warwick in the United Kingdom, with a triple major in politics, economics and philosophy. Woodford completed his Master of Finance at MIT in 2015, specializing in agricultural commodities.

Currently, Seed CX has looked toward the future by planning the launch of the world’s first industrial hemp derivative contracts

The 6 June is the official start to ‘Hemp History Week’ which seeks to promote industrial hemp cultivation and manufacturing as well highlighting the crop’s historic role in the United States. One of my personal favorite historical stories is the fact that the declaration of independence was written on hemp paper. As we look back, it serves as an important moment to explore the future progress of industrial hemp.

Industrial hemp has three main verticals:

Seed: Hemp seeds can be consumed by humans whole or can be hulled to expose the seed meat, where the crunchy outer shell removed is removed. Cold-pressed, unrefined hemp oil is light green, with a nutty grassy flavor. After the hemp seed has been crushed for oil, the remaining product contains 25% protein and is a good source of dietary fiber.

Fibrous stalks: The stalk is separated between the fiber and the inner woody-like hurd.

CBD Whole Plant Extract: Whole plant hemp oil is a mixture of fatty acids, plant sterols, Vitamin E and phyto-cannabinoids including CBD.

Our goal is to use derivative tools to cultivate financial security in emerging agricultural markets, with idiosyncratic production risks.

Seed’s focus is on providing innovative means to secure operational stability for hedgers and new trading opportunities for speculators. Seed CX operates in areas where there have been recent regulatory shifts, which present the potential to innovate in new or obscure markets. Seed CX’s mission in hemp is to create the trading and risk mitigation infrastructure to allow the hemp industry to flourish.

Seed connects buyers and sellers of industrial hemp as well as allowing participants to secure their financial security through hedging.

Hedging tools through forwards, options and futures allow those in hemp to have access to tools which nearly every other agricultural product has. Hedging ensures that each stage of the supply chain is protected against volatility and price movements, ensuring the growth of the entire hemp industry.

Jamie Comer, who served as the Agriculture Commissioner of Kentucky from 2012 to 2016 and is one of the largest hemp growing states in the US noted that, “Having being involved in farming my entire life, I know the benefit that Seed CX will bring in creating the infrastructure for a growing viable and secure hemp market. This is exciting given that the US hemp industry has to date created over 500 jobs in Kentucky and countless more throughout the country.”

The US serves as the focal point in the global hemp market, serving as the hub of processing and consumption, although US cultivation was only legalized in 2014. One of the many historical quirks is that hemp which legally could not be sold for human consumption in Australia was being imported for US consumers, where it could not be legally cultivated.

The key drivers of the growth of hemp are new demand channels, such as hemp fiber being used in BMW and Tesla vehicles, heightened customer awareness of the 11 grams of protein per ounce of hemp seed or nutraceutical applications of CBD.

There also a number of supply drivers including the fact that farmers are are increasingly looking for security as they diversify into different and more profitable crops, and in particular former tobacco growers are transitioning towards hemp cultivation. It is salient to note that farm incomes fell over 30% from 2014 to 2015 – the largest drop since 1983.

The last year has revealed a number of key factors that have impacted the volatility and price of hemp. Supply shocks due to the weather affects all crops, however there are unique idiosyncrasies with hemp. The natural elements impact the THC ratios in plants, which is salient given that all plants must have less than 0.3% THC on a dry weight basis. This year for example, a number of farmers failed tests on their crops, which is considered a ‘crop failure.’

In the past year, half a dozen additional states have instigated the necessary regulatory procedures to allow for hemp production. Currently, 29 states currently have hemp cultivation statutes.

Looking forward at the legislative calendar, Hawaii (in particular with the decline of sugar and beets) and Florida are likely to implement the necessary state infrastructure to allow for the cultivation of hemp. Another interesting development this year has been the pace and development of agronomic research into industrial hemp.

Knowledge into increasing yields serves as a positive supply shock to the hemp market.

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