What Happened to Hemp?

Last week, a LinkedIn post by cannabis economist Beau Whitney caught my eye, because Beau said something pretty amazing. He said: “licensed acres in hemp are at pre-farm bill levels.”

Could that be true? Before the 2018 Farm Bill, only a few states ran limited “research” pilot programs for hemp. I did my best to confirm Beau’s statement and was reminded of how challenging it has always been to aggregate data in this space. But, take a look:

The USDA 2022 National Hemp Report, at page 1, indicates that all industrial hemp “in the open” totaled 28,314 acres. This includes hemp grown for flower/CBD, grain, fiber or seed. The report mentions another 105 acres (my math) grown “under protection.”
This USDA study, figure 2, page 4, shows states reporting nearly 30,000 total hemp acres “licensed or approved” for cultivation in 2017. It doesn’t appear that much of this was greenhouse acreage, and I presume it includes hemp cultivated for all uses.

The study with 2017 data contains a disclaimer that “not all States reported data on the same basis.” Also, the 2017 data includes acreage for “approved” and not exclusively “cultivated”, hemp. I could note a few other things, but you get the idea: it seems awfully close. Maybe there really were more licensed hemp acres in 2017 than today.

Farm Bill hemp has followed a dizzying arc. Before the 2018 Farm Bill, hardly anything happened with the crop; and even then it was fits and starts. After the 2018 Farm Bill passed, though, the gold rush commenced. We formed a bunch of companies for growers here in Oregon, for example, structuring investments, buying and selling farmland, etc. The whole thing crashed following the 2019 growing season, and a spate of lawsuits ran through the office. Today, almost no one seems to be growing hemp.

People are still selling hemp-derived products, though. Many of them are in the legally problematic CBD food and beverage space. But there are also oils, tinctures, capsules, lotions, creams, smokables, and miscellaneous categories (like pillows!). Many of those cannabinoid products are now made from legacy U.S. distillate, or from imported hemp. (If you’re interested on the legality of all of these products, check out our massive hemp/CBD archive here).

So what happened? This is something that’s been talked about extensively. The common culprit is the “CBD bubble”, but in my opinion there’s so much more going on. Mini hit list below.

Bad policy and the new cannabinoids markets

It always starts with policy. And here’s the fundamental problem, in my opinion: hemp and marijuana are the same plant, albeit with different levels of THC. But Congress is trying to regulate that plant in profoundly different ways, under statutes tethered by the most tenuous, definitional threads. Further, federal agencies are often out of step with each other and with states. And states have taken any number of approaches— not just on the THC side, but also with hemp-derived food, beverages and other products.

The legal rubric is positively Kafkaesque, starting at the federal level. Pursuant to the 2018 Farm Bill, when a cannabis plant tests at or below 0.3% delta-9 THC on a dry weight basis, it’s legally classified as “hemp.” When it tests above that threshold, it’s legally classified as “marijuana.” When it’s a seed of a marijuana plant, though, it’s probably “hemp” again. I said “probably”. Got it? It might not matter anyway, because this could change again this fall (more on that below).

Until then, there’s more– especially when we’re talking about anything beyond plants in their vegetative state. When hemp is processed for intoxicating effects (e.g. Delta-8 and Delta-10 THC products), the Ninth Circuit Court of Appeals said: those products may be OK; that’s “lawful use in commerce.” But while you’re processing that hemp you may be committing felonies!, says DEA. The D.C. Court of Appeals agreed. From FDA’s perspective, many (but not all) CBD products violate the Food, Drug and Cosmetic Act; as do other cannabinoid products (at least sometimes). Not that the FDA will do much about it.

Clearly, change is needed here. Marijuana and hemp should be regulated under a common rubric. This means that hemp legislation should be crafted with “marijuana” and hemp-derived products in mind. As it stands, due to loopholes – real and perceived – arising out of the 2018 Farm Bill, we’re left with an unwieldy, unregulated cannabinoids market. Meanwhile, the fiber and grain markets anticipated by Congress in 2018 have fizzled.

Waiting on the fiber and grain markets

Several commentators have noted an increased demand for hempcrete, animal feed and plastics. Yet, a disconnect exists between fiber and grain farmers, on the one hand, and manufacturers, on the other. This stems from the fact that hemp grown for fiber and grain isn’t exempt from the cumbersome Farm Bill testing provisions, which require these utilitarian crops to undergo THC testing. It’s just too much cost, bureaucracy and exposure for many farmers who could be growing other crops.

Low crop outputs give rise to light manufacturing capacity, regardless of any increased consumer demand. I don’t see this changing until the THC testing requirements are relaxed or removed. Ironically, intoxicant testing hasn’t hurt the “intoxicating new cannabinoids” market– it has only hurt farmers and industrial capacity. Also ironically, as industrial hemp production declines, U.S. hemp imports have increased annually. The 2018 Farm Bill was supposed to reverse that.

What happens next in U.S. hemp policy

The good news is the Farm Bill is renewed every five years. This means Congress has another bite at the apple this fall. The bad news is the Farm Bill is renewed every five years; Congress has another bite at the apple this fall. Here are five of the big picture items on trade association and politician agendas, some of which have made it into proposed legislation:

Increase the allowed THC limit. The target number here is always 1.0% Delta-9 THC, rather than the 0.3% we have today. We’ve been pushing this for years. But even if the THC limit increases, expect the “total THC” standard to remain, which means that actual Delta-9 THC won’t be the only metric for calculating THC content.
Revisit provisions of the Farm Bill or interpretations of the Farm Bill pushed by the DEA, which currently make hemp processors susceptible to civil penalties and felony charges for possession or transport of “hot hemp”, regardless of whether the THC limit is 0.3%, or 1.0%.
Clarify that certain cannabinoids are legal, or not. Especially the ones that the Farm Bill accidentally legalized, or didn’t. This ties directly into marijuana policy, the Controlled Substances Act, and what DEA is thinking about.
Jettison “in progress testing.” This would moot the problematic DEA rule referenced above, which was upheld by the D.C Court of Appeal. The 2023 Farm Bill should permit a temporary spike in THC levels, consistent with standard manufacturing processes and, you know, organic chemistry.
Incentivize hemp farmers by creating a remediation protocol for “hot hemp.” As things stand, pre-harvest hemp that tests hot must be destroyed, even if it could be remediated. Considering that a lot of the hemp on the market is turned into extract, that’s a lot of money down the drain.

I do think we’ll see some of these changes in the 2023 Farm Bill, based on introduced legislation and the  failure of 2018 Farm Bill policy. The federal government doesn’t support this proliferation of intoxicating, hemp-derived products on offer at gas stations around the country — salable in many cases to minors — or the fact that the fiber and grain markets are stillborn.

Unfortunately, I don’t feel optimistic that Congress will view these issues with the wide-angle lens needed to shore up cannabis policy. The proposed bills I’ve reviewed seem limited in scope: for example, recently introducted HR 3775 would separate the fiber and grain markets from hemp grown for flower. That’s a good start, in theory. But we need more than a good start here. We need a wholistic U.S. policy for the cannabis plant.

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