Agriculture and Forestry

Could Hemp Farming Act Open Floodgates for Domestic Hemp Industry?

By

July 13, 2018

Though it was one of the first row crops grown in the United States, hemp has been classified as a controlled substance in the United States since 1970, despite its low psychoactive content.  But that is set to change under a provision included in the recently passed Senate farm bill, the Hemp Farming Act.  Among other things, the provision would remove industrial hemp from the Controlled Substances Act. States and farmers nationwide are eager for the change, with 38 states now allowing the limited cultivation of hemp (often in pilot programs) for either commercial or research purposes, as of the end of 2017. But questions still remain about the viability and profitability of a crop that has not been widely cultivated in the United States for more than 75 years.  

The U.S. hemp industry is worth approximately $700 million annually, yet most of the hemp used to make products in the United States is primarily grown in Canada, China and Europe.  Worldwide, 30 countries cultivate hemp. With the Hemp Farming Act, lawmakers hope to add the United States to the global hemp marketplace, with Senate Majority Leader McConnell (R-KY), the bill's sponsor, commenting that, “Consumers across America buy hundreds of millions in retail products every year that contain hemp … But due to outdated federal regulations … American farmers have been mostly unable to meet that demand themselves.”     

 

Environmental, Social Benefits of Hemp

Hemp is a low input crop that can be used for a myriad of food, industrial and other products – from clothing to building materials, plastics to industrial lubricants, and consumer care products to health foods. Additionally, cannabis oil (CBD), which can be derived from both hemp and marijuana, is making waves as a new potential therapy for diseases ranging from cancer to epilepsy. In June, the FDA announced its approval of Epidiolex, a CBD-based drug for epilepsy.  

Industrial hemp was one of the first row crops grown in the United States and was originally used for paper, textiles and ropes. The Declaration of Independence was first drafted on hemp, and many early U.S. flags were made from hemp fabric. After the passage of the Marihuana Tax Act in 1937, hemp began to be placed in the same bucket as marijuana, causing harassment of growers by law enforcement and, ultimately, prohibition of cultivation under the Controlled Substances Act.  

Yet, hemp grows well in many climates, requiring low inputs of fertilizer and pesticides. Hemp is a durable alternative to cotton, requiring less land and approximately half the water of conventional cotton crops, according to one 2005 assessment. Hemp can also be used to make paper, biofuels, bioenergy, plastics, construction materials and food products.  Hemp seeds and oils are gaining popularity as a food product and additive, as they are an excellent source of omega-3 and omega-6 fatty acids, which benefit cardiovascular health.

 

Lawmakers Have Sought Change for Years

Beginning in the 109th Congress, various laws have been introduced to allow the cultivation of industrial hemp once more. In the 2014 farm bill, industrial hemp’s status was upgraded – and was allowed to be grown for research purposes.  In subsequent appropriation bills, lawmakers took further steps to protect industrial hemp production against action from federal law enforcement authorities.  However, hemp’s status remains murky, with its growth still restricted at the federal level.

Following the 2014 Farm Bill, many states quickly acted to legalize industrial hemp cultivation in some form. Currently, 38 states allow the cultivation of hemp to a certain extent, many as research or pilot programs that focus on cultivation techniques, processing, potential products and the economics of hemp production.

The Hemp Farming Act would provide clarity to industrial hemp’s legal status, amending the Controlled Substances Act to state that marijuana does not include industrial hemp. It was included in the Senate passed farm bill, but not the House version. It’s inclusion in the 2018 farm fill will be decided through negotiations during conference committee.  The current farm bill expires on September 30.

 

Hemp’s Long-Term Viability as Major Row Crop Still Unknown

Domestic hemp’s potential is limitless – but faces many headwinds.  Despite the heady feeling around industrial hemp, if it were to be legalized, there are still major questions surrounding its viability as a major U.S. crop.  According to a recent Congressional Research Service report, because hemp has not been an agricultural commodity in the United States since the 1950s, the supply chain, equipment, manufacturing and market opportunities do not exist for widespread domestic hemp production.

While one estimate put the crop value of hemp at $21,000 per acre for the seeds and $12,500 per acre for the stalks (for comparison, corn averages anywhere from $474 to $710 per acre in 2017), other studies remain more bearish on hemp’s potential.  One USDA study from 2000 noted that the long-term demand for hemp and hemp products in the United States is still largely unknown. Other studies cite high labor costs and emit doubts as to whether farmers would switch from grain production to hemp.  Even in Canada, the number one hemp-producing country, hemp makes up only 1 percent of total cropland. Globally, hemp is cultivated on less than 0.5 percent of total cropland.

The small acreage that will likely be devoted to hemp makes developing high-value products from the plant key. A 2016 study in the journal Agronomy finds that the highest value products from industrial hemp may be from pharmaceutical applications, such as CBD oil. With the new FDA-approved Epidiolex, it is expected that the Drug Enforcement Administration will move to declassify CBD as a controlled substance in the next 90 days. The move is seen a major step in the dismantling of federal laws classifying both hemp and marijuana as controlled substances and could open the door to more pharmaceutical applications of hemp.

Despite the uncertainties, farmers are optimistic, with states allowing cultivation seeing a marked uptick in the number of applications for permits to cultivate hemp.  States like North Carolina, New York and Hawaii are experiencing a surge of interest from farmers for industrial hemp production permits.  A hemp-preneur in Upstate New York commented on the interest in industrial hemp, stating, “once you completely go and say ‘all industrial hemp products are legal and they are not marijuana…’ you are going to see massive investment.  You’re going to see massive interest in hemp products.”

 

For more information see: