By Sarah Gonzalez, Director of Communications and Digital Media
The U.S. Department of Agriculture (USDA) on Oct. 29 issued its long-awaited interim rule for the domestic production of hemp, launching a major step in the implementation of the 2018 farm law and providing clarity about how the crop will be federally regulated.
Under the 2018 farm law, Congress legalized the commercial production of hemp and directed USDA to establish a national regulatory framework for hemp production in the United States.
The advocacy group Vote Hemp estimates that farmers have planted more than 500,000 acres of hemp this year (up from about 78,000 acres in 2018) in hopes of accessing a growing market. But transporting the crop across state lines has been risky given differing and unclear testing procedures used to distinguish between hemp and marijuana. USDA’s newly published rules are designed to help eliminate this risk and assist producers in making planting decisions for 2020, the agency noted.
Farmers in the four states that have not authorized hemp production (South Dakota, Idaho, Mississippi and New Hampshire) continue to be prohibited from growing the crop.
The regulations, which take effect after being published in the Federal Register on Oct. 31, establish testing protocols to distinguish between legal hemp and federally controlled marijuana. They also provide legal protection for interstate transportation of hemp and make producers eligible for federal programs, including loans and insurance coverage. Under the new rule, states and tribes may submit their own plans for the domestic production of hemp to USDA for approval, and USDA is responsible for establishing a federal plan for states and tribes that do not have their own USDA-approved plan.
“We are always excited when there are new economic opportunities for our farmers, and we hope the ability to grow hemp will pave the way for new products and markets,” Secretary of Agriculture Sonny Perdue said in an Oct. 29 video.
Perdue said the testing protocols will “ensure that hemp grown under this program is hemp and nothing else.” Under the farm law, hemp cannot contain more than 0.3 percent Delta-9 tetrahydrocannabinol (THC) – the primary intoxicating component of cannabis. Cannabis with a THC level exceeding 0.3 percent is considered marijuana, which remains classified as a federally controlled substance and is regulated by the U.S. Drug Enforcement Administration. While low in THC, hemp contains higher concentrations of the non-intoxicating cannabidiol (CBD).
Three main types of hemp are grown for different markets – fiber, grain/seed, and CBD. But CBD currently is driving hemp production growth, according to an October 2019 report issued by CoBank’s Knowledge Exchange Division. Despite the widespread presence of CBD in the market, it is not approved by the U.S. Food and Drug Administration (FDA) for use in food (human or animal), beverages or dietary supplements.CBD could be a short-term boom or a solid long-term market, CoBank said, depending on what FDA studies determine. (Several pros and cons of growing hemp for fiber, grain/seed and CBD are outlined in the CoBank report. It should be noted that some of these risk assessments may change with the implementation of USDA’s interim rule, which was published after CoBank issued its report.)
In its report, CoBank also noted CBD prices range from $3 to $5 per percentage point of concentration. A hemp crop yielding 10 percent CBD and 2,000 pounds of dry material per acre can generate $60,000 to $100,000 per acre in gross revenue. “Some processors and a few lenders are willing to take on the risks in anticipation of huge revenues,” CoBank said. “Given the lack of available financing in the face of growing demand, some processors are paying huge risk premiums.”
According to a publication from Oregon State University, the hemp-derived CBD market is expected to reach $22 billion in value by 2022.
Other hemp products include textiles, cordage and paper. The crop also is used in horticultural planting and shows promise as a bioenergy source, noted Oregon State. Hemp also contains essential nutrients and vitamins as a food product – about 30 percent of a hemp seed is edible, the publication added.
USDA will open a public comment period after its hemp production rules are published in the Federal Register.A preview of the rule is posted on USDA’s website. The agency also developed guidelines for sampling and testing procedures that are being issued concurrently with its rule. More information about the provisions of the interim final rule is available on theU.S. Domestic Hemp Production Program web page at USDA’s Agricultural Marketing Service (AMS) website.