Too much product, some high-profile bankruptcies and continued regulatory uncertainty contributed to making 2019 a tough year for hemp growers, but proponents of the versatile plant say it’s still viable in the long term for uses including CBD (short for cannabidiol), food and fiber.
More than 500,000 acres were licensed for hemp planting last season, a more than a fourfold increase from the year before, advocacy group Vote Hemp estimated last fall. But the group also said that usually, only half those acres are actually planted to hemp.
This season, Vote Hemp President Eric Steenstra says he’s hearing only about half that amount will be licensed, and will be accompanied by a significant drop in planted acreage.
Prices plummeted over the winter for hemp biomass and other categories.
“There’s a lot out there” in storage, says Dion Oakes, a grower in Colorado’s San Luis Valley who started Wright-Oakes LLC with his father-in-law. “That’s what we’re seeing with this market crash. People are trying to recoup what they can with product in stock.” In many cases, however, the quality is not very good, he says.
Part of the problem is some growers did not heed warnings to make sure they had a contract before growing. Another problem is the industry has been hit by bankruptcies, such as vertically integrated GenCanna Global and its partner, hemp producer and CBD manufacturer Atalo Holdings in Kentucky.
Most of GenCanna’s assets were recently sold to an investment group, which GenCanna said would allow it to keep operating with reduced debt, and biotech firm Atalo’s assets were sold off to Entoura, another vertically integrated hemp and CBD producer.
Another issue continues to be the Food and Drug Administration’s stance on CBD products. The agency says it is “illegal to market CBD by adding it to a food or labeling it as a dietary supplement” and has sent warning letters to dozens of companies about CBD health claims.
Steenstra acknowledges there are companies out there making unverified claims and selling hemp-based products without the promised amount of CBD, but says that’s why FDA should be regulating to protect consumers. Hemp extracts “should be treated like any other herb or botanical,” he says.
FDA has raised concerns about liver toxicity of CBD, but Steenstra says the evidence does not support those concerns, pointing to a Project CBD analysis raising questions about existing research on CBD’s effects on the liver.
“They’re claiming they need to do these tests on liver toxicity,” he said, but at the dosage levels people are getting with products now, “it’s not an issue.”
The Center for Science in the Public Interest, however, and three other consumer groups said the FDA process should not be short-circuited. In a letter to members of Congress last month, the groups said lawmakers should reject any attempts to provide a legislative fix allowing CBD use in foods and dietary supplements.
Eric Steenstra, Vote Hemp
FDA “is correct to gather the evidence on the risks of CBD, including adulteration and serious liver toxicity at high doses,” the groups said.
In a letter to President Donald Trump last month, however, Vote Hemp and six state-led hemp groups said the administration “could play a crucial role by resolving the regulatory barrier created by FDA that has prevented FDA from recognizing cannabidiol (CBD) as a legitimate botanical ingredient for use in food and dietary supplement products.”
“There are still market uncertainties for our nascent industry, and it is critical to open end markets for our crops,” the groups, including the Kentucky Hemp Industries Association and the Midwest Hemp Council, said in the letter.
Despite the state of the market and regulatory uncertainty, growers are still eager to get into hemp, says Caren Wilcox, executive director of the U.S. Hemp Growers Association, which launched in December and is now approaching 200 members.
Last year, “A lot of people were misled about becoming millionaires if they planted one crop of hemp,” Wilcox says. Nevertheless, she says grower interest is still there.
“It’s a fantastic crop; it’s a wonderful plant,” Wilcox says, adding there is more interest around the various products that can be made with hemp, such as packaging and food.
“We have a ways to go,” she says, noting that hemp had been illegal for 70 years before the 2018 farm bill opened the floodgates.
Oakes, who is in his seventh season growing hemp flower for CBD and hemp seed for food products, says despite some claims to the contrary, growing hemp is not as easy as just throwing a seed in the ground.
He started off persuading his father-in-law, a longtime farmer of potatoes, alfalfa and other crops, to join him in researching hemp, and they began indoors with a few dozen plants. ‘We probably had one or two survive,” he says with a laugh. Now, however, they’re planting 3,500 acres.
He’s making a living, but there’s always more to figure out. “It’s still a learning experience, 100%. We’re trying to maximize this plant to its full use,” Oakes says.
He says the feed industry is also being closely examined. Research is almost done on the value of hemp-seed meal and cake feed for chickens, which, if approved as a feed ingredient, could open a whole new market.
But to realize the full potential of hemp, including its use as fiber in things like car interiors or building materials, “We’ve got to have processing plants, we’ve got to have places for the farmers to take it,” Oakes says.
There is still confusion surrounding the difference between marijuana, which has high levels of psychoactive THC, and hemp, which in order to not be considered a controlled substance cannot contain more than 0.3% THC on a dry weight basis. Hemp industry groups are trying to get that level increased to 1%.
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“I had to explain to a very well-informed gentleman the difference between growing hemp and growing marijuana,” Wilcox said.
That confusion has led to some banks refusing to do service with hemp growers and companies, a problem the federal and state governments tried to ease with guidance issued last year.
The Federal Reserve, Federal Deposit Insurance Corporation, Financial Crimes Enforcement Network (FinCEN), Office of the Comptroller of the Currency, and Conference of State Bank Supervisors issued a statement emphasizing that “banks are no longer required to file suspicious activity reports (SAR) for customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations,” the entities said in a news release.
And last week, FinCEN issued supplemental guidance explaining how financial institutions “can conduct due diligence for hemp-related businesses” and identifying “the type of information and documentation financial institutions can collect from hemp-related businesses to comply with [Bank Secrecy Act] regulatory requirements.”
FinCEN’s new guidance “is intended to enhance the availability of financial services for, and the financial transparency of, hemp-related businesses in compliance with federal law.”
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