Farm Bill May Spur Hemp Gold Rush

As Farm Bill Legalizes Hemp, Farmers in Some States Better Positioned to Profit Than Others

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The 2018 farm bill will declassify hemp, such as this on a Kentucky farm, from being a Schedule 1 drug, making it easier for farmers to get into hemp production. Already, hemp oil companies and others are looking to expand their businesses. (DTN file photo by Chris Clayton)

OMAHA (DTN) -- Talking to Iowa soybean farmers last week about the 2018 farm bill, Deputy Secretary Steve Censky briefly mentioned their new potential cash crop.

"You guys are all hemp farmers now," Censky said to a mix of cheers and chuckles. "Great to see that in there (the farm bill)."

Legal hemp is all the rage coming out of the 2018 farm bill, but Iowa farmers aren't in a position to grow it. Neither are farmers in Connecticut, Georgia, Idaho, Louisiana, Mississippi, New Jersey, Ohio, South Dakota and Texas. As of now, none of those states allow for any cultivation of hemp, according to the National Council of State Legislatures. Other states, such as Nebraska, may have cultivation laws on the books, but the law and rules so far have made it impossible to farm.

"We have a law and it's a good law, but in practice, the rules written for it don't allow farmers to be involved," said Bill Achord, president of the Nebraska Hemp Association. "They made it extremely restrictive."

After the 2014 farm bill allowed state pilot programs, a few states jumped out ahead. According to a cannabis research group, New Frontier Data, there were roughly 80,000 acres of hemp grown this year in 11 states, of which Montana is the largest at 22,000 acres, followed closely by Colorado at 21,500, Oregon at 11,000 and Kentucky at 6,700 acres. The other top seven states -- North Carolina, Tennessee, North Dakota, New York, Wisconsin, Vermont and Nevada -- combined split up a little more than 18,000 acres of production.

Suddenly, though, there's a new rush to expand hemp production now that the 2018 farm bill officially removes hemp from being a Schedule 1 drug under the Drug Enforcement Agency. Driven by Senate Majority Leader Mitch McConnell, R-Ky., who took ownership of the issue, USDA will treat hemp like any other crop, including allowing farmers to buy crop insurance or use other USDA assistance open to other specialty crops.

"There's going to be a gold rush mentality with everybody trying to get involved, and it's going to take some time for everybody to figure out who the good players are and the bad players, who's legitimate and who's not legitimate," said Brian Furnish, a Kentucky farmer who grows and markets cannabidiol (CBD) products.

Hemp is distinguished from its cousin marijuana based on the level of tetrahydrocannabinol (THC), the compound that provides the "high." Marijuana can average roughly 20% THC, while legal hemp is only allowed to have 0.3% THC in the harvested crop.

Iowa officials never advanced hemp production after the 2014 farm bill. A spokesman for the Iowa Department of Agriculture stated to DTN that state officials are still looking at the new farm bill before considering how to move forward.

"Legislative action is likely needed if Iowa is to proceed with industrial hemp," the spokesman said. "If Iowa moves forward on industrial hemp, our department, the governor's office and the chief law enforcement official in Iowa need to submit a plan, as per the farm bill requirement, to USDA for their approval. We have had some conversations with legislators at this point, but pretty preliminary."

Alabama officials issued a news release last week stating hemp is not legal to grow in the state until a plan is developed and approved by the U.S. secretary of agriculture. It added that USDA will require participating states to include information on applicants, testing procedures, inspection of growing/processing facilities and disposal procedures.

"I am happy that hemp production was addressed at the federal level," said Alabama Ag Commissioner John McMillan. "In 2016, we were tasked with administering the Alabama Industrial Hemp Research Program Act by the state legislature. The process has been complicated, but with the farm bill amendment, we can move forward with a more unified plan."

Despite the lack of state action in some places, the fledgling hemp industry sees itself taking off. The industry is filled with dozens of smaller private companies and a handful of companies trading as over-the-counter (OTC) penny stocks. Those companies have been active lately, sending out news releases about how they are positioned in the market to take advantage of national legalization. Hemp companies such as MariMed, Folium Biosciences, Dewmar International BMC and Hemp Inc. all issued statements late last week highlighting how they were ready for hemp expansion.

"With restrictions on hemp research likely to lift, MariMed is beginning to collaborate with researchers to develop more effective delivery mechanisms and product options for specific medical, health and beauty treatments," said Robert Fireman, MariMed's CEO.

The market for CBD oils, the main hemp market so far, was less than $400 million nationally in 2018, according to New Frontier Data, but could grow to $1.3 billion by 2022. Others have floated unrealistic figures about the potential growth of hemp, considering its small amount of acreage compared to traditional commodity crops.

The market could also become oversaturated with farmers, but that will shake out over time, said Furnish, who also is board member of the U.S. Hemp Roundtable. Regardless of how the market turns, the farm bill opens the door to create a more established industry.

"It's always been a concern that we don't know what the demand is or what the supply is," Furnish said. "Nobody really knows what their yields are going to be, but by legalizing it completely and permanently, it opens up the market for many more people to consume the product, and it gets the DEA off our backs, and you can borrow money and get a bank account. We had businesses that couldn't get bank accounts, so there are a whole list of reasons this is good."

Kentucky farmers such as Furnish grow hemp for CBD oil much like they grow tobacco. He expects that, as hemp expands, grain farmers will likely move into growing the crop more for fiber.

"I'm not sure these grain farmers are going to be all that excited about it when they figure out you need a lot of labor," Furnish said. "That's why I think these tobacco states have an advantage, for awhile. Eventually, there will be fiber production and grain production that will favor the Corn Belt area more than what we are currently doing."

Achord hopes Nebraska officials will be more aggressive in opening up hemp farming than the state has allowed thus far. He'd like to see state officials move ahead with a more practical commercial farming bill.

"We need biodiversity really bad right now with corn prices and soybean prices down," Achord said. "They (farmers) are calling me, asking where they can get seed and when they can plant, and I have to tell them the whole story about where we are with the state right now."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/SK)

Chris Clayton