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The hemp industry is set to see significant changes in the coming years with the passing of 2018s Farm Bill, which legalized hemp on a federal level. New online trading platforms are emerging which focuses on commodity exchange at both wholesale and retail levels, for a variety of hemp-related products. PanXchange is the first of these platforms to prove their concept within the frac sand and East African commodity markets. With their additional expansion into the hemp market, PanXchange is primed to be a leader in online commodity trading for the industry.
Kristina Etter, Editorial Content Director at CannabisTech sat down with Julie Lerner, CEO, and founder of PanXchange, to discuss the current state of trading within the hemp industry, the importance of accurate online commodity trading, the role of a commodity exchange platform and plans to expand into the isolate and distillate markets.
Current State of Hemp Trading
While price data is available to hemp farmers, online trading platforms in the US are still in their infancy. In other global industries, however, such as iron ore and liquid natural gas, electronic trading of the physical product has gained more traction. Lerner adds, “Online trading in physical markets is not yet widely adopted, but hemp is coming in with the proper attitude of getting the efficiency and price transparency of online trading from the start.” Numerous other industries operate via online commodity trading – agriculture and raw materials being two of the major players, such as GlobalOre, internationally, and a few agricultural players gaining traction in the US.
“Commodities have been my life,” states Lerner, who was introduced to world trade through working the sugar trading desk at Cargill, eventually managing the commodity’s Latin American division. “For a while, I went into the electricity market here in the US, and that’s truly where the lightbulb came on for this company – because energy markets, in general, are far more advanced than the rest of us. It’s crazy today that farmers, sitting in their combines, can check futures prices in Chicago via their iPad, but if they actually want to sell that crop, they have to get on the phone. And that’s lunacy to me. The technology is there. The hemp market is ripe for online trading, and it needs to happen pretty soon.”
How the PanXchange Commodity Exchange Platform Works
Lerner utilized her background in the sugar trading industry to inform the workings of PanXchange’s platform.
“I designed our platform around what I needed as a trader, and the functionality really resonates. It’s not a bulletin board, it’s not a Craigslist, it’s not an Alibaba – it’s a full-on negotiation, and that’s why it works,” Lerner says. The platform is currently protected by two patents, with three more that are pending.
“We’re commodity people,” Lerner continues. “Every week we get calls from investors saying they’ve seen our prices in a pitch deck. Both the entrepreneur and the investor are looking at our prices for decision-making and where to price long-term contracts. So we understand the gravity of what we’re offering here. What we’ve done in the proppant market is to follow IOSCO compliance guidelines, which is the world governing body for benchmark prices. So every data point we gather is vetted from a true leading industry player. We don’t talk to brokers – we only talk to the real-deal players. You can trace every data point back to its roots. Right now we’re able to do that in crude oil and biomass in Kentucky, Oregon, and Colorado, and we do absolutely plan on expanding into the distillate and isolate markets.”
Regulation and Industry Standards
“Regulation in this industry is not bad,” states Lerner. “But we need to make sure that the commercial value remains intact for the people on the business side. And that we don’t get over-regulated.”
Compliance and quality control within the hemp industry go hand-in-hand with regulation. “This industry needs a lot of help getting to industry standards on quality, on lab tests, and on trading rules,” Lerner says. PanXchange promotes the creation of industry standards for commodities they serve, including quality standards, trade procedures, and an arbitration panel should anything go wrong with a trade.
“That’s something we’re doing immediately [for hemp]. And as soon as we get a few more vetted market participants in isolates and distillates, we’ll publish those indices as well. So I think those are the immediate things: helping to build consensus around deal flow – so you know what you’re buying and that it shows up when it says it’s supposed to show up, and what happens if it doesn’t show up – and on getting reliable prices to the market. Those are the key things we’re focused on right now,” says Lerner.
The Future of the Market
“We hope to grow as fast as everyone else within the industry,” says Lerner of the PanXchange hemp trading platform. “As soon as we have reliable vetted clients in isolates and distillates – which I think will be by our next report – we’re going to be launching those benchmark prices and down the road will be getting into the industrial side, with fiber and other commercial uses for hemp on a global scale. A lot of people are saying they’re buying farmland overseas, and they’re looking to place either their CBD product or their actual hemp within the US. And eventually, we’ll do the same thing with cannabis. The more market structure we can bring to these markets means everybody wins.”