President Trump signed the 2018 Farm Bill Thursday, officially removing hemp from the DEA’s list of Schedule I controlled substances. The resulting excitement amongst stakeholders in the industry is palpable. We all have a pretty good idea about what this means for companies that grow industrial hemp to produce seeds and fibers, 70 percent of which are currently imported from China. But what effects this will have on the development of the nascent medicinal hemp industry which cultivates a type of hemp that is more akin to marijuana than to industrial hemp remains to be seen.
Any cannabis strain with levels of THC of no more than 0.3 percent falls under the definition of hemp. THC is the compound produced in marijuana which is responsible for its intoxicating effects.
The back story
Until the 2014 Farm Bill was passed, the federal government made no distinction whatsoever between marijuana and hemp. Both categories of cannabis became taboo for American farmers in 1937 under the Marihuana Tax Act and were formally made illegal in 1970 under the Controlled Substances Act.
As a result, items of great importance to U.S. consumers and industry such as textiles and rope were replaced with products made from made from cotton and other crops. Furthermore, hemp extracts, which were a common ingredient in many forms of medicine, were replaced with pharmaceuticals.
A provision in the 2014 bill distinguished industrial hemp from marijuana. It created provisions for legally growing and studying hemp in a number of U.S. states. However, the legislation did not remove hemp from the DEA’s list of Schedule I controlled substances.
Because of this many of the roadblocks in the way of industrial hemp and CBD companies remained in place. For example, Google, Facebook, Instagram and most of the traditional media outlets prohibited advertising of CBD products. Furthermore opening a bank account or securing a payment processing gateway for credit cards was extremely difficult for hemp companies.
While the previous 2014 Farm Bill was a good first step, after 81 years of federal prohibition, the 2018 Farm Bill represents a giant leap towards undoing the damage done by the Marihuana Tax Act of 1937 and the Controlled Substances Act of 1970 in the form of lost opportunities for America as well as the millions of lives ruined by the War on Drugs.
The signing of the 2018 farm bill opens up a myriad of possibilities including interstate commerce, financing and investment opportunities, research and development opportunities, and, possibly, opportunities not yet imagined.
What the farm bill does for hemp farmers
The group that will benefit the most from the 2018 Farm Bill is American farmers.
As mentioned earlier, the vast majority of hemp products in the U.S. are currently imported from China. Much of the hundreds of millions of dollars currently being sent overseas can now be kept at home. This fact is even further accentuated by President Trump's trade policy as it pertains to China which gives U.S. hemp farmers a competitive edge.
Add on top of this the fact that the demand for hemp products is growing exponentially and you’ve got the ideal climate for hemp farmers to flourish. The market for hemp products in the U.S. is expected to grow from around $1 billion in 2018 to tens of billions of dollars by 2022.
Under the 2018 Farm Bill hemp joins the ranks of other agricultural commodities such as corn and soy. As a result, hemp farmers will now enjoy certain protections not the least of which is federal crop insurance. Interestingly, unlike other crops, one of the ways that farmers can lose a hemp crop is if that crop is tested to contain higher levels of THC than are allowed under the bill. If this happens, the entire crop must be destroyed. In the past, this scenario resulted in huge losses for the farmer. With Uncle Sam now covering those losses, this risk has been completely removed.
Furthermore, of great benefit to farmers, hemp is an extremely resilient and useful crop that produces high value at a low cost. Industrial hemp grows very quickly, often reaching heights well over 12 feet. It can produce multiple crops per year. Hemp does well in a variety of soils and climates and can be grown in areas where other crops might fail. A healthy hemp crop requires about half as much water as does corn. Little to no pesticides are required to grow hemp. By replacing other crops with hemp, a farmer can free up water supplies and reduce operating costs.
U.S. farmers report that cultivating industrial hemp can earn them hundreds of dollars more per-acre of crop than canola or corn which fetches around $600 per acre. Although growing cannabinoid-rich hemp for CBD oil is far more time intensive and costly than growing industrial hemp, cannabinoid-rich hemp can pull in thousands of dollars per acre.
— Donald J. Trump (@realDonaldTrump) December 20, 2018
What the farm bill does for CBD makers
For all intents and purposes, there are a few different types of hemp. The hemp strains used to produce hemp seeds, those used to produce hemp fibers, and the cannabinoid-rich strains used to produce medicinal extracts are, in fact, three distinct types of hemp.
While the industrial hemp strains cultivated to produce seeds and fiber have been around for centuries and are very low in cannabinoids and terpenes, the cannabinoid- and terpene-rich strains of hemp that are used to produce CBD oil are strains of marijuana which have had the THC bred out of them. They look like marijuana, smell like marijuana, and are grown using essentially the same methods as marijuana.
CBD oil is being touted as a natural alternative to pharmaceuticals in the treatment of a wide variety of conditions including anxiety, epilepsy, pain, psychosis, and much more.
According to estimates proffered by industry analysts, with these new measures in the 2018 Farm Bill place, the CBD market is expected to grow to 20 to 40 times its current size within the next few years.
“The Farm Bill ensures that any cannabinoid—a set of chemical compounds found in the cannabis plant—that is derived from hemp will be legal, if and only if that hemp is produced in a manner consistent with the Farm Bill, associated federal regulations, association state regulations, and by a licensed grower. All other cannabinoids, produced in any other setting, remain a Schedule I substance under federal law and are thus illegal. The one exception is pharmaceutical-grade CBD products that have been approved by FDA, which currently includes one drug: GW Pharmaceutical’s Epidiolex." — John Hudak, deputy director of the Center for effective public management at Brookings.
What the farm bill doesn’t do
Although the 2018 Farm Bill does legalize hemp cultivation, it does not allow just anyone to grow hemp in their backyard. Under the bill, oversight of hemp cultivation will be shared by state and federal regulators. To receive the blessings of federal regulators, states must submit a regulatory plan to the Secretary of USDA for approval. States may also opt to forego the above procedure in which case hemp farmers in those states must apply for licenses and comply with a federally-run program constructed by the USDA.
The Farm Bill does not make state recreational or medical marijuana programs legal, nor does it legalize CBD products produced by marijuana growers in those states.
The bill also didn’t legalize the use of CBD isolate (which can be made from hemp or marijuana) in food, drinks or dietary supplements. Although the bill removed hemp-derived products from the Controlled Substances Act, purified CBD remains a Schedule I substance under federal law.
The FDA currently considers purified CBD to be a drug. In fact, this past June, the FDA approved Epidiolex, a CBD-based drug designed for the treatment of epilepsy.
Furthermore, companies are also still prohibited from making therapeutic claims about CBD products until the FDA approves such claims.
Interestingly none of these impediments have mattered much to most CBD producers and sellers in the past.
A statement put out by the FDA upon the signing of the farm bill suggests that the agency may be relaxing its stance as a result of the bill. The statement reads:
"Pathways remain available for the FDA to consider whether there are circumstances in which certain cannabis-derived compounds might be permitted in a food or dietary supplement. Although such products are generally prohibited to be introduced in interstate commerce, the FDA has authority to issue a regulation allowing the use of a pharmaceutical ingredient in a food or dietary supplement. We are taking new steps to evaluate whether we should pursue such a process."
Hemp research is about to explode
One of the goals of the 2014 Farm Bill was to stimulate research and development. The 2018 Farm Bill greatly expands on the conditions under which such research can be conducted. The measure also expands hemp research by including hemp under the Critical Agricultural Materials Act.
Above and beyond the current value of hemp, the explosion of research that is being unleashed will result in even more uses and greater demand for the crop.
Even now hemp is used to produce textiles, exceptionally strong building materials and plastics, biofuels including diesel and alcohol, and much more. Given these new protections and some time, the industry is all but assured to develop novel and valuable uses for both industrial hemp and the cannabinoid-rich strains used to produce CBD oil.