Industrial Hemp Market Overview and Historical Production Data

COWEN COLLABORATIVE INSIGHTS February 25, 2019 Industrial Hemp And Sustainable Bioproducts (Osborne) Figure 132 - Industrial Hemp Use Cases Part of Plant Fiber Hurd Entire Stalk Hemp Nut Hemp Oil Seed Cake | Building Materials, Foods, Personal Care Product Category Textiles . Energy Products Foods ; i Pressed Products Industrial Products, Paper Products, Technical Oils Apparel Fibre Board Ethanol Bread Supplements Animal Feed Netting Mulch Biofuels Granola Soap Proteins Common Uses a ; Canvas Printing Cereal Cosmetics Flour Cardboard Solvents, lubricants, fuels Source: Cowen and Company Hemp plants have been used for industrial applications for thousands of years. Hemp stalk fiber was traditionally used as a textile for use in rope; clothing; and sails due to its tensile strength. Hemp seeds are used in foods and compressed to make oils that were used as a lighting fuel. The original diesel engine was designed to run on a variety of biodiesel fuels, including vegetable oils and seed oils, which included hempseed oil. In 1937, hemp production was banned due to its similarity to marijuana despite low THC presence, but to aid the war effort the federal government requested that farmers plant industrial hemp to make up for a shortfall in imports from the Asian Pacific. Farmers planted 36,000 acres of hemp in 1942 and set a target of 50,000 acres in order to produce the 34,000 feet of hemp that was needed in each Naval battleship and for other textile uses. The cheap availability of petroleum based synthetic products and federal regulations against hemp production caused hemp production to decline rapidly again after the war in the U.S. and throughout most of Europe. As hemp now looks to make a comeback in light of recent legislation, we see the use cases for industrial hemp to include many of the traditional textile and food uses that were previously common, in addition to the growing CBD market. Figure 133 - Industrial Hemp Imports In 2017 ($1,000) Figure 134 - Industrial Hemp Imports In 2017 (Metric Tons) True Hemp, True Hemp Yarn True Hemp Woven True Hemp, True Hemp Yarn raw/proc. not $2,739 Fabrics raw/proc. not 34 spun $1,819 spun $780 N Hemp Seed 621 « Oilcake and Solids 7 Hemp Seed 1,475 Oilcake and Solids f $11,494 Hemp Oil and Fractions 749 Hemp Oil and Fractions $7,603 Hemp Seeds $42,897 Hemp Seeds 7,606 Source: Cowen and Company, Compiled by CRS using data from the U.S. ITC Sustainability Of CBD And Hemp Production As the CBD industry grows in size, we believe that producers will look to minimize the environmental impact of production. In addition, we could see producers try to monetize the entire waste stream of the hemp production process by converting parts of the plant that aren’t used to produce CBD or other products into biomass energy. We believe the most common use cases for hemp biomass will be in the form of pelleting for 94 COWEN.COM HOUSE_OVERSIGHT_024910