What’s Next for America’s Hemp Growers? Nobody’s Quite Sure

The future of hemp farming in the US–and what it means for the future of cannabidiol (CBD) CBD–is uncertain, according to experts. On one hand, rising demand calls for more hemp; however, limited legal testing facilities coupled with difficulties in ensuring correct tetrahydrocannabinol (THC) levels mean that it is not as simple as increasing production.

There has been a dramatic fall in prices from $3.50 per percentage point per pound for biomass to around $1 today, according to National Hemp Association executive director Erica Stark.

While more locations permitting hemp farming will help, the US Department of Agriculture (USDA) interim rules for hemp could have a negative impact. The USDA is accepting comments until January 29th, suggesting that there is some hope these rules could change.

Industry stakeholders have taken issue with the USDA, which mandates that only Drug Enforcement Agency (DEA)-registered laboratories can test for THC concentration levels in hemp, under the proposed final rule. This increases costs and limits the number of options available, they say.

“There are not that many of these [DEA-registered] labs out there,” according to Corey Cox, an associate at Vicente Sederberg, a national cannabis law firm providing legal and policy services to cannabis and hemp businesses. “In some states with heavy hemp cultivation, there might only be one DEA-registered lab in that state. It uses its resource for criminal tests and has no desire to test hemp.”

There are also issues with the proposed testing protocols and a lack of variance to compensate for crops with slightly elevated THC levels.

Samples must be tested within 15 days of harvest. Farmers may have to harvest the crop and store it before they get the test results back. Based on these results, farmers will either be able to sell hemp or have to destroy it.

“Farmers will be faced with the costs and challenges of harvesting and storing their hemp,” Cox added. “Then they may have to destroy it anyway. That is a lot of added cost and added stress to farmers. Farmers will have to pay for the pleasure of having it destroyed.”

According to Cox, the New Hampshire Department of Agriculture recently reported that 70% of hemp grown in the state in 2019 tested had THC levels high enough to be considered cannabis and would have to be destroyed under USDA regulations in 2020.

“Anything at 0.5% is considered negligent,” Stark said. “Cannabinoid crops have the potential to have slightly elevated THC levels [despite farmers’ best efforts].”

One option would be to raise the limit for THC. However, this is not as easy as it sounds, according to attorney Rod Kight.

“A lot of people say we could fix everything if we just raised it to 1%,” Kight said. “I don’t disagree with that. The problem is it would literally take an act of Congress to do that.

“The USDA has all sorts of authority as to how these rules should be interpreted, regulated, and carried out, but they can’t change what Congress said. Congress said the definition of hemp is no more than 0.3% delta-9 THC.”

As it currently stands, if farmers are found negligent three out of five years, their license is suspended for five years.

“This is going to limit farmers’ ability to test new varietals. It is important to be able to do the research to see which varietals will do well in different parts of the country, in different climates, and soil conditions,” Stark told CBD-Intel.

This could limit America’s ability to emulate its neighbor to the north over the coming year. Canadian researchers are making strides in hemp genomics and are conducting research in other areas, such as developing better hemp fiber and materials and biomass for energy generation.

Nonetheless, hemp producers are expected to at least double the number of acres grown from 155,000 in 2019. How much farmers earn from that is the big variable.

Producers are expected to see $25.5 million higher revenue, according to the USDA. But prices will vary depending on the variety grown. Estimates put fiber at about $260 per ton in 2020, biomass at $0.60 per percentage point per pound, and oil at $25 per ton.

“Texas and Florida are going to be huge players in the market,” Kight said. “They’ll produce an enormous amount of hemp and there will be an overstock of CBD, hemp extract, [and other hemp derived products] in the market. The law of supply and demand will increase significantly but my guess is supply will outstrip demand in 2020. That will cause some fluctuations in the market.”

All this illustrates that simply growing more hemp is not in itself a solution to increasing demand for CBD. Compliance rather than mere productivity is the most important issue to address, which in itself is difficult owing to uncertain rules and conflicting ideas, not to mention overcoming the logistical difficulties of storage and testing as well as controlling THC levels in crops.

Farmers should take full advantage of the USDA interim rule comment period in order to have their say and gain some influence over regulations.

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