Policy

Pot restrictions add risks and costs to hemp growing

Cannabis cousins hemp, marijuana are often hard to tell apart

Hemp flower on display at the Tennessee Grown booth at the Southern Hemp Expo in Franklin, Tenn., on Sept. 7, 2019. (Bill Clark/CQ Roll Call file photo)

Hemp and marijuana, both cannabis plants, are hard to tell apart. The average person and law enforcement officer can struggle to tell the difference in their leaves, buds and flowers. The two plants differ in their levels of Delta-9-tetrahydrocannabinol, or THC, the chemical responsible for marijuana’s high. Hemp typically has less than 1 percent, but marijuana can have THC levels up to 30 percent.

More important for many in the hemp industry, however, is a federal law that puts the THC ceiling for legal hemp at 0.3 percent of its dry weight. States can order the destruction of a grower’s entire hemp crop if testing finds the THC exceeds that maximum. The THC ceiling is designed to draw a clear line between the cannabis cousins, hemp and marijuana.

David Wilkinson, co-founder of The Hemp Business Advisors in Fort Collins, Colo., says he knows of several growers in 2018 who lost their crops because they didn’t make arrangements for the tests that would have alerted them that their crops exceeded approved THC levels.

A vigilant grower can harvest early if sampling indicates his crop is approaching that limit. THC levels in a hemp plant can fluctuate throughout the growing season. The timing of the sampling and the parts of the plant used can make a difference.

The 2014 farm bill that cracked open the door for hemp production put the maximum at less than 1 percent in controlled scenarios. The 2018 farm bill that legalized hemp left in place the ceiling of 0.3 percent for THC content.

Wilkinson says he thinks regulations the U.S. Department of Agriculture is expected to release this fall will give the production side of hemp structure. He remains concerned about what he sees as the murkiness of federal banking rules on hemp and their effect on farmers and others in the supply chain.

Others with ties to the hemp industry say overly cautious banks refuse to allow them to open business accounts or abruptly freeze accounts. They want the federal government to issue guidelines that clarify that transactions involving hemp should be treated like transactions done by other legal industries.

As he scouts for candidates to recommend to his investors, Wilkinson said he’s heard stories of financial institutions either hesitant to provide business services to CBD enterprises or setting tougher requirements for those businesses to meet.

“We know people who have been without credit card processing for four to eight weeks. There are banks that if you do not keep a daily $50,000 balance you cannot have your CBD company have a checking account there. The monthly fees are $300 to $1,000.”

Hemp’s similarity to marijuana and the decadeslong ban has left its mark in regulations throughout the federal government. The U.S. Postal Service has scrutiny over shipment of illegal substances. Banks have obligations to report suspicious transactions.

Hemp farmers may have an easier time than others in the hemp supply chain as the USDA implements the 2018 farm bill and puts the federal stamp of respectability on the plant.

Farm Credit Council CEO Todd Van Hoose says lenders, who are crucial to most farm operations, have largely overcome their hesitation about funding production of a once illegal crop although he called occasional stories about law enforcement seizing interstate shipments of hemp seeds, plants or products worrisome.

Mostly, Van Hoose says bankers want to know if they could lose money on a loan for hemp. A farm lender considering a loan on corn, soybeans or other established crops recognized by USDA has limited documentation on hemp production and markets.

He expects lenders to proceed cautiously.

“If you’re a diversified farmer and say you’re going to add five acres of hemp, then that’s a pretty easy loan to make because you have an entire crop you’re raising to make repayments. If the only crop you’re raising and your source of repayment is going to be selling that hemp crop, then you better have a really locked down marketing situation and some way to project repayment,” Van Hoose says.

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