Hemp has been an agricultural product for millennia, and it was once an important crop central to the founding of the U.S. Yet for decades, the cultivation of hemp was banned and a once flourishing industry died with it. That all changed with the passage of the 2018 Farm Bill, which made hemp cultivation legal again.

Suddenly a timeless plant with countless industrial and medical uses is back in a big way. As individual states work to create regulatory programs, many established and emerging businesses are leaping at the opportunity to cultivate hemp or use it as an ingredient in a wide variety of uses.

What exactly is industrial hemp?

Industrial hemp is a variety of the plant Cannabis sativa L, a genetic cousin of cannabis. The major difference between them is that hemp has 0.3 percent or less of THC, the psychoactive ingredient in cannabis. The Farm Bill effectively descheduled hemp as a controlled substance, so that hemp and all of the useful products derived from it, are no longer regulated in the same way as cannabis (although CBD, remains in a regulatory gray area).

A brief history of industrial hemp

The cultivation of hemp is as old as farming itself. Anthropologists have found evidence of human cultivation dating back to the advent of agriculture, roughly 10,000 years ago. Hemp was also one of the first plants to be spun into fiber. An 8,000-year-old piece of ancient Mesopotamian cloth, the oldest ever found, was made of hemp. Evidence has shown China has grown hemp for about 6,000 years, while cultivation in Europe and the rest of the ancient world began around 1,200 BCE. By the sixteenth century, hemp’s fiber and seeds made it an important cash crop in Europe, and soon after it became the dominant crop in the British Isles and Russia’s number one export.

Hemp was also an important agricultural product and commodity in the U.S., where in the 1700s it gave rise to cordage and canvas businesses across the nation. It remained a core crop for a century until other industries, along with anti-cannabis legislation, contributed to its being banned. But, with thousands of uses, from paints to textiles to paper (the original Levi’s jeans and the paper the U.S. Constitution was written on were made of hemp), industrial hemp has always been a vital agricultural crop worldwide.

Some of industrial hemp’s innumerable uses

• Hemp as Food — Hemp seeds are about 30 percent oil by weight, and the U.S. Department of Agriculture has shown hemp seed oil to be highly nutritious, with 20 percent high-quality digestible proteins. Meal made from the seeds is also used in food products, from nutrition bars and tortilla chips to beer, as well as in animal feed.
• Hemp as Fiber — Hemp fibers were once widely used to make, among other things, canvas for sailing ships. The word “canvas” comes from “cannabis.” Today hemp is used to make rope, paper, and plastic and composite materials for everything from car parts to bathroom fixtures. It’s also used to make consumer goods, including clothing, shoes, and accessories.
• Hemp as Medicine — Cannabidiol (CBD), which can be derived from industrial hemp or from any cannabis plant, has surged in popularity in recent years for its potential health benefits, which are growing in number as more research is done. The Food and Drug Administration has approved the first drug with cannabidiol as an active ingredient, and more drugs are likely on the way. With CBD already an additive in a wide variety of food and beverage products, cosmetics, skincare, and health products, the market is set for significant growth.
• Hemp as … — Hemp can be used in bio-diesel fuel, lubricants, paints and varnishes, inks, plastics, a wide variety of body care products, animal bedding, garden mulch, and building materials.
  

  First Steps of the Industrial Hemp Market

  With so many uses both new and old, industrial hemp is quickly becoming a market to be reckoned with. U.S. farmers quadrupled the acres of land planted with industrial hemp to more than 511,000 between August of 2018 and August of 2019, according to the USDA. That represents a 368 percent growth, larger than any other cash crop in the same time period.

As of September, 16,877 new licenses to grow hemp were issued in 34 states in 2019, four times more than the previous year, according to one report. And, the number of licenses issued to process hemp jumped 483 percent.

Who is building the industry?

Cannabis production in maturing markets like Colorado and California are seeing price erosion because they’re doing what markets are supposed to do, competing with one another and achieving efficiencies that ultimately benefit the consumer. But with industrial hemp production now legal, major cannabis producers have been aggressively entering the suddenly enormous domestic market. Companies like Canopy Growth and Tilray are among many Canadian cannabis producers that have invested heavily in industrial hemp-fueled markets in the U.S. in 2019.

Producers of other crops are moving into the hemp market, too, switching from crops like corn, cotton, and wheat. Hemp requires far less water and has thousands of uses that utilize the entire plant, and as experienced large-scale farmers, they’re already set up to cultivate hemp. The Farm Bill also created a path for hemp cultivators to access to privileges conventional farmers have always enjoyed, including crop insurance, legal interstate travel, and basic banking services.

A bright future

Industrial hemp’s 2018 revenues were $1.1 billion, and are expected to reach $2.6 billion by 2022. New Frontier Data, a research company focused on the cannabis industry, predicts that with the signing of the Farm Bill, hemp-based industrial products will see stronger growth than any other cannabis sector over the next five to 10 years.

With that growth will come new jobs, as well, in nearly every sector and at every income level. In addition to roles on farms, the industrial hemp industry will create opportunities for specialized law experts, state and local regulators, financial and insurance experts, marketers, C-Suite executives, and distributors, just to name a few.

The hemp industry has a long way to go before we can accurately assess the crop’s market value, but in less than a year, legal industrial hemp is already a clear disruptor.

60 speakers were given three minute slots, during which they could make a public statement regarding the treatment of hemp in the Farm Bill. The speakers (selected via a submission process) represented a wide variety of related parties and included: representatives from state-level agriculture, regulatory and law enforcement agencies; private sector business owners and entrepreneurs; Native American tribal leaders; and a variety of other industry advocates and stakeholders.

The diversity of speakers helped represent a broad view of issues and concerns related to the expansion of hemp cultivation. Due to the fact that it was a listening session, the USDA did not respond to any concerns raised. In the following article, we examine a number of recurrent themes raised by speakers, which illustrate concerns regarding the future of industrial hemp production in the US.

Difficulty distinguishing between hemp and cannabis

Hemp and “consumable cannabis” (adult-use or medicinal cannabis) are the same plant, and are only distinguished by the level of THC. Per the Farm Bill’s definition, industrial hemp contains less than 0.3% THC, in contrast to “cannabis,” which can contain up to 20% THC. To sight and smell, the two are indistinguishable, which places a great amount of importance on testing measures for THC.

A recurring issue, raised by both regulatory and law enforcement officials and hemp cultivators and advocates, is the lack of universal testing measures. Officials expressed concern that it was incredibly difficult to test THC content via roadside stops or in customs examinations. This results in delays to traffic and other processes and can lead to unlawful detainment and seizures. On the commercial side, hemp producers don’t want to see their legal shipments delayed or seized.

Speakers from all sides of the issue agreed that for the hemp industry to move forward, the USDA will need to define consistent testing measures and help provide training to officials tasked with regulating the cultivation and transportation of hemp.

Treating hemp as a viable agricultural commodity

The Farm Bill removed industrial hemp (as defined previously) from the Federal Controlled Substances Act, in effect decriminalizing hemp production. And yet, many advocates brought up concerns related to provisions in the Farm Bill that they felt continued to treat hemp as a scheduled drug.

For example, the Farm Bill requires license applications prior to cultivating hemp, which leads to background checks for the licensees. No other commercial crop requires diligent background checks, and subsequent application and processing fees.

Similarly, the Farm Bill did not eliminate the requirement under the Controlled Substances Import and Export Act wherein the importation of hemp seeds requires registration with the DEA. Industrial hemp has a strong history of cultivation in other parts of the world, including Canada and Europe, and the agricultural science and genomics of hemp in these regions are far ahead of the US. Access to advanced genetics in hemp crops is essential to commercial production and the DEA requirement presents a major roadblock to free trade.

These are just two examples of ways in which the specter of hemp’s past as a controlled substance continues to linger. Asking the USDA and other federal agencies to go all the way with decriminalizing every aspect of hemp motivated commentary across a number of regulatory and operational concerns.

Access to financial institutions for hemp growers

Like any other agribusiness, hemp businesses need access to lines of credit, insurance, and other traditional banking relationships. And yet, like the cannabis banking crisis, a number of hemp cultivators expressed concern related to the reluctance of financial institutions to work with them.

Representatives of financial institutions, including banks and credit unions, also made their voice heard, asking for clear protection against liability so they would feel able to serve hemp producers. Both parties concurred in requesting that the USDA make a clear pronunciation regarding access to banking for hemp producers.

While the SAFE Act has made progress in recent months, there are no guarantees about access to banking for all cannabis businesses. In the meantime, the industrial hemp industry seeks clear and strong direction at the federal level to ease the path to traditional banking.

Lack of clarity for Tribal Lands and sovereign nations

A number of Native American communities and leaders were given an opportunity to speak during the listening session and all shared enthusiasm about the potential economic benefits of hemp cultivation on tribal land. And yet, many pointed to a lack of clarity regarding regulation and self-governance for tribal communities in the 2018 Farm Bill.

For example, the management of much tribal land is a complex web of oversight from federal agencies combined with the autonomous control of tribal governments. A number of Native American leaders asked for further guidance regarding hemp production from the USDA so tribal nations can participate in upcoming planting seasons.

The balance of federal and state oversight

The 2014 Farm Bill carried provisions allowing for the creation of hemp-growing pilot programs at the state level. The successful inclusion of hemp production in the 2018 bill owes much to the success of these pilot programs. During the listening session a number of representatives from state agricultural agencies raised their voices to speak to the success of their programs and to support a continued balance between federal and state oversight.

Kentucky, Wisconsin, and Colorado all provided details on the growth of hemp in their respective states and made the case that future USDA laws should not interfere with state’s rights in the matter of hemp. At the same time, they acknowledged the essential role in federal oversight protecting and ensuring factors that include: intra-state commerce, managing import/export laws and enforcement, and the implementation of standardized testing protocols.

What is next for industrial hemp in the US?

The above topics were a sample of the diverse range of issues and concerns that remain undefined under the current wording of the 2018 Farm Bill. In coming months, each state and tribal nation will have the opportunity to submit a regulatory system governing hemp production in their respective jurisdictions. Those proposals will then be reviewed and approved by the USDA.

The USDA also seeks to implement a regulatory system that addresses these concerns, and more, which is scheduled for release in fall of 2019. If all goes well, hemp producers across the nation will have clear guidance to move forward as early as 2020.

Many cheered the passage of the 2018 Farm Bill, which descheduled industrial hemp and its derivatives (including CBD). But that was just the start of a much more complicated regulatory story that continues to have a major impact on entrepreneurs, investors, and advocates and patients who rely on CBD.

CBD and the 2018 Farm Bill

When President Trump signed the 2018 Farm Bill into law one of the key changes affecting the cannabis industry was the separation of “hemp” and “marijuana.” Before the Farm Bill, any incarnation of the cannabis plant and its byproducts were lumped into a single category and considered a Schedule 1 drug. Key language in Section 1103 of the Farm Bill defines hemp as:

“the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”

In short, the Farm Bill descheduled industrial hemp and its byproducts as long as it stayed under the threshold of less than 0.3 percent THC. CBD is derived from the cannabis plant, whether there are significant levels of THC or not. CBD industry advocates have interpreted the language “all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers” as descheduling CBD when industrial hemp is the source. And they are “mostly” correct in this interpretation. Unfortunately, there are other federal agencies in play.

CBD and the FDA

United States Department of Agriculture (USDA)  enacted the 2018 Farm Bill in their position overseeing laws related to the cultivation of industrial hemp. The United States Food and Drug Administration (FDA) oversees medicine and food additives. CBD has emerged as a “wonder drug” with a growing list of potential benefits and now appears as an additive in a wide range of consumer products. In addition, the FDA approved Epidiolex, the first CBD-derived drug, in 2018.

All of this has culminated in CBD being a priority of the FDA, so much so, that just a week after the Farm Bill was signed into law, the FDA issued a press release clarifying and asserting their regulatory control over all cannabis-derived compounds.

“We treat products containing cannabis or cannabis-derived compounds as we do any other FDA-regulated products — meaning they’re subject to the same authorities and requirements as FDA-regulated products containing any other substance. This is true regardless of the source of the substance, including whether the substance is derived from a plant that is classified as hemp under the Agriculture Improvement Act.”

Concurrent with the Farm Bill and the press release regarding CBD, the FDA also issued three Generally Regarded as Safe (GRAS) notices for hemp by-products: hulled hemp seeds, hemp protein powder, and hemp seed oil. Clearly demonstrating that (some) hemp products have been descheduled and cleared for use by the FDA.

The FDA’s policy is different toward CBD for two key reasons. Firstly, CBD products are largely marketed with a wide variety of therapeutic claims. In their press release the FDA notes:

“The FDA requires a cannabis product (hemp-derived or otherwise) that is marketed with a claim of therapeutic benefit, or with any other disease claim, to be approved by the FDA for its intended use before it may be introduced into interstate commerce.”

Secondly, the FDA’s approval of CBD-based drug Epidiolex, put CBD and THC into the category of “active ingredients in FDA-approved drugs.” Under the Federal Food, Drug, and Cosmetic Act (FD&C Act) it is “illegal to introduce drug ingredients like these into the food supply, or to market them as dietary supplements.”

In short, the FDA does not distinguish between CBD derived from hemp or “marijuana,” and until the agency approves CBD and establishes a regulatory framework, adding CBD to food and beverages is illegal.

Has the regulation of CBD slowed businesses?

While early CBD research has shown promise as a treatment for conditions like epilepsy and anxiety, as a consumer product it is unproven and has been largely unregulated until recently. In the absence of labeling standards and regulated dosage guidelines, consumers often have little understanding of what they are buying and its potential effects.

All of this uncertainty has earned greater regulatory attention for CBD. There have been reports of crackdowns on bakeries, restaurants and retailers selling CBD in California, New York, Maine and Ohio, just to name a few. This regulatory response has shocked and angered a number of hemp producers and CBD retailers who have invested millions into business ventures that they feel only supply the public with products that help manage health concerns.

Despite the confusing legality, the CBD industry appears to be moving full-steam ahead. In recent months, national retailers as diverse as Walgreens, DSW and Barney’s New York have announced plans (or have already begun) selling CBD products. Indicating the burgeoning CBD industry is well on the way to mainstream acceptance.

What is next for CBD?

In February, former FDA Commissioner Scott Pruitt testified before the House Appropriations Committee and said that the FDA is initiating a rule making procedure with the goal of creating “an appropriately efficient and predictable regulatory framework for regulating CBD products.” The FDA will launch the process with a public hearing on CBD scheduled for May 31, 2019.

Further complexity struck when Pruitt unexpectedly announced his  resignation, which took effect in early April. Pruitt has been replaced by Dr. Ned Sharpless, the former director of the National Cancer Institute. To date, it is unknown whether Sharpless intends to take a progressive stance toward CBD.

While delays occur at the federal level, states are shifting into action. Maine recently passed an emergency law governing CBD. The bill aligns the definition of hemp in Maine’s laws with the definition used in the Farm Bill. Meaning, as long as CBD is derived from hemp sources it is to be considered a food product, rather than medicine, and is cleared for use in Maine.

Ultimately, until the FDA creates a regulatory framework for CBD, it will remain illegal to add it to any food or drink products.

Learn more about the FDA Public Hearing on CBD here

Provide a public comment for the FDA on CBD here