The United States federal government has been slowly warming up to legalizing cannabis and its derivatives as more pro-marijuana laws are passed, and anti-marijuana officials are moving out of office. Examples of these moves include the Drug Enforcement Administration’s decision to classify GW Pharmaceuticals PLC’s (NASDAQ:GWPH) epilepsy drug Epidiolex to its least restrictive category, Jeff Sessions resigning as Attorney General, and now the approval of a farm bill which will allow farmers to grow hemp and legalizes CBD use in the United States.
Until this bill passing, federally legal hemp production in the U.S. has only been allowed for research and trial programs, so this marks another regulatory shift in the United States.
While the passing of the 2018 Farm Bill through Congress is considered another huge win for the United States marijuana industry and the country’s rapidly growing CBD market (which currently has $591 million in sales per year in the United States and is expected to be worth $22 billion by 2022), the stock market is still on the decline.
The North American Index closed down 6 percent Thursday, with stocks like Tilray Inc (NASDAQ:TLRY), CV Sciences Inc (OTC:CVSI) and MariMed Inc (OTC:MRMD) present double-digit percent losses. This might lead investors to question, how much good news is needed before the marijuana market picks back up again?
When will the bubble burst?
The recent bearish stock market trends are not unique to just the marijuana industry, of course. Concerns with the China trade war and rising interest rates have suppressed investor appetite to buy, and the entire equities market has been on the decline.
According to some reports, these Chinese tariffs were actually a major driver for the farm bill. Farmers with agricultural businesses injured by the China tariffs pushed for this type of action to save some business and create growth opportunities through capitalizing on the progressing marijuana market.
According to a CNBC report, the bill will provide a safety-net for crop producers and dairy farmers. House Agriculture Committee Chairman K. Michael Conaway commented on how the bill helps farmers.
“America's farmers and ranchers are weathering the fifth year of severe recession, so passing a farm bill this week that strengthens the farm safety net is vitally important,” he said in an interview.
Tobacco states booming following the bill
The hemp industry in Oregon is already seeing a boom in response to the farm bill passing and states where there is a major focus on tobacco production are also looking to take advantage of the legalization of hemp. According to the aforementioned CNBC report, Kristin Nichols, editor at Denver-based Hemp Industry Daily, cannabis will grow well in the same areas that tobacco growth thrives, such as Kentucky and North Carolina.
Building on the tobacco industry’s ties to hemp and marijuana growth was last week’s landmark deal when tobacco industry giant Altria (NYSE:MO) announced they would be investing $1.8 billion into Cronos Group (NASDAQ:CRON). The farm bill along with Altria’s recent entrance into the marijuana industry could be foreshadowing where the market growth will be for the marijuana industry in the coming months.