Policy

Hemp industry growth hints at potential field of dreams

“Maybe, just maybe, hemp could be a really big deal sometime in the future,” McConnell says

An attendee stops at the Hemp Magazine booth at the Southern Hemp Expo in Franklin, Tenn., on Sept. 7, 2019. (Bill Clark/CQ Roll Call file photo)

Sen. Mitch McConnell saw a potential replacement for tobacco in 2014, as the federal program to buy out tobacco farmers was ending. McConnell got provisions into a farm bill allowing states to license and monitor hemp production. The Kentucky Republican, now as majority leader, followed through in 2018, using another farm bill to take hemp off the controlled substances list.

Kentucky in 2019 is one of the leading hemp producers. Vote Hemp, an industry advocacy organization, says the state has licensed an estimated 60,000 acres for production. That’s still a fraction of the 58 million acres of tobacco the Agriculture Department forecast Kentucky would harvest in 2019, but it’s almost 12 percent of the Vote Hemp’s estimate of the U.S. acreage licensed to hemp.

At the Southern Hemp Expo in Franklin, Tennessee, in early September, McConnell’s face peered out from a video at the booth of GenCanna, a company based in Kentucky, touting the plant’s potential as a legal crop.

The current interest in hemp looks like it will be more enduring than North Dakota’s effort decades ago. Roger Johnson, a former North Dakota agriculture commissioner and now president of the National Farmers Union, said he unsuccessfully battled the federal government for state licenses to grow hemp.

“Right across the border to the north is Canada where they’d been growing it for years. Everything they produced up there was being processed and sold in the U.S.” he said.

Hemp dreams

Most of the hemp in dietary supplements, foods, drinks, soaps and lotions on U.S. retail shelves come from Canada and other countries where hemp production remained legal during the U.S. ban.

Hemp is best known as a potential source of cannabidiol, or CBD, a product of the plant’s flower or bud that is the most lucrative in the industry. The Food and Drug Administration has approved a CBD-based drug to control seizures in children with some forms of epilepsy, but the agency says it doesn’t have scientific evidence to support claims of pain relief, anxiety reduction or effectiveness against Alzheimer’s disease.

But hemp advocates see a crop with a potential global market encompassing more than 25,000 products in agriculture, textiles, recycling, autos, furniture, food and beverages, paper, construction materials and personal care. The dense, fibrous hemp stalk can be turned into insulation, a binder in concrete, flooring and other industrial uses. Uses such as hemp plastics are still to be tested.

“Maybe, just maybe, hemp could be a really big deal sometime in the future,” McConnell said at a July hearing. He said hemp is now grown in 101 of Kentucky’s 120 counties. Tobacco, at its peak, grew in 119 of the 120 counties.

Greg Wilson sees it as a flooring and potential furniture material. He says the HempWood he’s making at a plant in Murray, Kentucky, is 20 percent harder than oak, noting that high-heeled shoes leave it unmarked. Wilson has a contract to buy 1,000 tons of hemp stalk from area farmers.

His has also become a cause celebre among Kentucky politicians. The state gave Wilson and his company, Fibonacci, a 10-year tax credit worth up to $300,000 and has touted his facility in Murray as another step forward in expanding the state’s hemp industry.

At the Hutson School of Agriculture at Murray State University, Dean Tony Brannon offers another reason that Kentucky is emerging as a leading state in the industry.

“We’ve tried to assist him in any way we can,” he said of Wilson’s operation.

Good genes

Brannon and Murray State are trying to fill in the research gaps left by decades of illegality thanks to hemp’s close relationship to marijuana.

He oversees field trials at three farms looking for plants best suited for CBD products as well as the taller varieties more suitable for fiber.

He’s trying to deliver “good genetics” for growers in the form of reliable seeds and varieties from which high-performing cuttings can be planted for a crop.

Brannon’s field tests have already disproved a popular myth that hemp is so weed-like growers don’t have to bother buying fertilizer. At one plot, he points to browned and withering plants raised without additional nutrients.

He is also exploring how far hemp pollen can travel. Farmers raising specialized hemp varieties for the leaves and buds for the CBD market worry about cross-pollination from plants grown for seed or for fiber, which can reduce CBD levels.

“There is so much that we don’t know,” he says. “Our goal as a regional university is to provide information to growers and information to the industry that might be valuable.”

Law of the land

The 2018 farm bill directed the Agriculture Department to establish a regulatory framework for hemp growers. Officials say the proposals will be released this fall to give state and tribal governments time to adjust oversight and provide rules for growers.

But the department is discovering that other federal agencies also have a role to play in shaping the industry.

“The law is pretty straight forward about what the states’ responsibilities are and what USDA’s interaction with those states is,” Greg Ibach, the under secretary for marketing and regulatory affairs, told members of the National Farmers Union in September. “What isn’t quite so clear cut in the law is how we interact with other federal agencies that also have jurisdiction or feel they have jurisdiction in the international marketplace.”

The Nielsen Co., which analyzes trends among consumers and markets, forecast a $6 billion market by 2025 for hemp-derived CBD, but noted the state and federal regulations will affect the industry.

That’s still a far smaller market than the projected $35 billion in sales of CBD from marijuana sold in dispensaries or other outlets in states where medical or recreational marijuana use is legal. Despite the thousands of products that enthusiasts say can be made from hemp, the profitability of CBD dominates the hemp industry.

Although the hemp industry may be lucrative, farmers and entrepreneurs still face reluctance from financial institutions to open business accounts or handle transactions tied to hemp. Hemp’s past as an illegal crop and the fact it is is part of the cannabis family makes bankers cautious.

The hemp industry says it needs the same level of access to financial institutions as other businesses in order to grow. Some lawmakers are backing legislation to remove the banking obstacles.

Rep. Andy Barr, a Kentucky Republican, dropped his opposition to a House banking bill after lawmakers added hemp provisions. The bill would allow financial firms to work with state-licensed cannabis businesses without running afoul of federal anti-money laundering laws and the amendments that drew Barr’s support extended the protection to hemp companies.

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