Politico recently noted that the hemp industry “hasn’t panned out” and that hemp hype has died down. This assertion is naive at best. The article noted that: (1) the USDA had only approved 29 out of 41 submitted state hemp plans; (2) the numbers of acres planted are down; (3) many states had not submitted plans to the USDA; (4) the lack of FDA movement on permanent CBD guidelines.  

This analysis is misplaced, misguided, and based on a fundamental failure to understand what it takes to develop a new agricultural market, while ignoring the real progress in the hemp industry. This seems to be a case of “you ain't gonna learn what you don’t want to know.”

Hemp has over 25,000 estimated uses including paper, textiles, biodegradable plastics, construction, ... [+]

There is currently tremendous restraint imposed on the industry because relevant federal agencies (i.e., the FDA, the USDA, and to a lesser extent the DEA) have not issued permanent appropriate market-based guidance by way of regulatory enactment — let alone communicated amongst themselves to fully implement the 2018 Farm Bill regarding industrial hemp.

Make no mistake about it: the 2018 Farm Bill was the most sweeping and groundbreaking cannabis reform ever enacted in the United States at the federal level. So we cannot expect that these will move swiftly and concertedly on such a landmark policy change. This is all new to the FDA and the DEA, but less so for the USDA, and great tension exists between the federal agencies and the states seeking to move forward with responsible hemp regulatory policy.      

It has been documented that there are six core elements of an agricultural transformation plan. The brand new agricultural sector of industrial hemp has yet to specifically identify market-driven opportunities for farmers based on crop productivity. Industrial hemp is a versatile crop that can service multiple verticals. The gauntlet that's been thrown in front of us is to move away from a single-purpose, cannabinoid-driven hemp industry.

To do so, “change agents” must be “identified and mobilized,” which will occur with the right “enabling policies.” This requires a cogent, stable government regulatory and legislative framework, something lacking to date. As a result, much of the market restraint is because of the absence of government policy advancement. This isn’t a bad thing and doesn’t eliminate the hype surrounding hemp, but bolsters it.  

We’re seeing a tremendous development in the agronomic foundation needed to sustain an agricultural sector. This has a bearing on another critical “core element”: scaling. Without foundational infrastructure development - i.e., non-extraction hemp processing capabilities, decortication, grain processing capabilities, and subsequent manufacturing buildout — the industry would be ill-prepared to advance as a true agricultural commodity.  This is all happening now on a major scale across the United States. It’s a matter of patience.

Let’s not forget that hemp was a significant national and international cash crop for a large variety of purposes until outright cannabis prohibition in the 1930s. So the precedent here. Back in 1938, long before this modern wave of acceptance and approval, Popular Mechanics was bullish on cannabis, though not for recreational purposes. Instead, it covered the economic potential for hemp, the so-called “billion-dollar crop.” We’re right there again in the U.S., but better equipped with technology and the ability to grow more versatile, agricultural innovation in terms of crop selection.  

For the past several years, market activity, government policy, and the investment community have all been focused on cannabinoid extracts as the backbone of the hemp industry. This singular focus has led financial speculators to look at this extremely versatile crop as they’ve viewed the CBD gold rush.  

While this path was lucrative for some, the same approach doesn’t work for farmers. It’s created inflated acreage of hemp biomass that could not be moved into the marketplace due to regulatory and market-based constraints. And it was short-sighted. These speculators failed to examine where the “puck was going” and instead focused on where the puck was at – a classic mistake. This has led to increasing infrastructure buildout for the more broad applications of the hemp crop. This represents progress, not failed hype.  

More importantly, the hemp industry now has a connected global hemp supply chain. This is again significant progress for the industry, as we’ve seen numerous international governments enact hemp legislation and regulations to better connect the international hemp supply chain. All of this is “‘beyond just CBD!”

This infrastructure buildout represents Hemp 3.0 – beyond extraction labs and into more wide-ranging processing capabilities and more versatile genetics – not single purpose cannabinoid crops. We’ve seen this in Colorado where the state leader of cannabis policy, Ean Seeb, has moved forward with a focus on agricultural hemp industry infrastructure beyond cannabinoids.  

Yet the USDA has not approved Colorado’s hemp program, but again this doesn’t represent failure. It shows viable good-faith negotiations between the state and this federal agency. States are in a position of power during these negotiations; the pushback from the Colorado to the USDA is a good thing; not the opposite.  

Colorado has spearheaded the effort to obtain ongoing protection for hemp farmers under the more limited 2014 Farm Bill. This protection was to end in October 2020, but has been extended until September 30, 2021. Accordingly, several states are operating under the 2014 Farm Bill after opting out of the 2018 version. All of this represents progress in the agricultural sector.  

The lack of FDA guidance has limited the number of retail outlets cannabinoid products can be sold in. Again, this resets the focus on the broader uses of the plant, something I’ve been advising clients, processors, and farmers on for years now. It’s all coming to fruition because of this necessary retooling.   

The most significant chill to the hemp-derived CBD world was promulgated by the DEA in recent weeks with its Interim Final Rule. We’ll explore that in detail later, but for now this is all positive and reveals tremendous progress. A hemp industry based around only one of this plant’s 50,000 uses never made any sense. The infrastructure to service the plant’s broader uses is coming, but not overnight.  

Hemp is a crop that will not compete with other American products. Instead, it will displace imports of raw material and manufactured products produced by underpaid peasant labor and provide thousands of jobs for American workers.

Hemp’s future as a major cash crop remains very, very bright. The hemp hype hasn’t died down, just slowed a bit, as the most significant cannabis reform in American history rolls out. The eyes of the world are focused on the U.S. and industrial hemp will make us proud.