USDA: Hemp Pilot a Success

Thom Thompson

Thom Thompson

Editor

USDA Outlines Challenges Facing a New Industry

In a report published on Thursday, the USDA announced that the recent state-level industrial hemp pilot programs had helped restart hemp production in the United States after the crop had been outlawed nationally since 1970, when it was included in the Controlled Substances Act. Pilot programs under strict state oversight were authorized by the 2014 Farm Act. 

Noting that industrial hemp production grew from zero acres in 2013 to more than 90,000 acres planted in 2018, the USDA warned that “supplies could grow more quickly than demand.” According to the report, some producers were hit with rapidly falling prices in 2019. 

Industrial hemp includes those cannabis plants, fiber, and seeds that contain less than 0.3% THC, the psychotropic component of cannabis, and the products that are derived from them. 

Restarting production of a once (and future?) major crop like hemp was fraught with risks. Access to seeds was an obvious challenge that was exacerbated by import restrictions on everything cannabis during the pilot program. Even trading seeds across state lines was complicated by the fact that each state that participated had different requirements for acquiring seeds. Finding effective pesticides and herbicides after years of ignoring hemp was a challenge for American farmers. Even now, there are no pesticides registered as safe for use on industrial hemp. 

Matching cannabis cultivars with local growing conditions was frequently a challenge – and it still is. Plus, the reliability of seed types could be disappointing. Press reports of large harvests having to be destroyed due to the crop showing higher than allowable levels of THC were not uncommon.  

By the time of the pilot program launch, Colorado had a thriving state-level medical and recreational marijuana program that ran parallel to its hemp pilot. But it was not fully prepared for growing fiber, oil seed and feed hemp. 

Kentucky, which doesn’t permit marijuana production, looked back to its historical dominance of the pre-1970s hemp production to fuel enthusiasm among its farmers. Tobacco barns, used for drying the crop, traditionally also served as hemp drying facilities, and hemp grew well. Later, with the barns still standing but demand for tobacco falling off, Kentucky was the largest producer under the pilot program. 

Demand for hemp products is an even bigger unknown facing the industry. The regulatory status of CBD oil, which is derived from hemp, and other extracts is still evolving, which adds to the market uncertainty. Kentucky’s GenCanna, a hemp farmer and major CBD producer, recently declared bankruptcy. 

CBD, the “miracle” elixir, seems to have been driving pricing in the hemp market, despite there being no proven demonstrations of its effectiveness so far. (There have been two FDA approvals of CBD applications in treating a couple of rare forms of epilepsy, but those trials used CBD that was synthetically produced in laboratories). The U.S. Food and Drug Administration warns companies not to sell CBD oil as a nutritional supplement or to claim its efficacy for treating conditions or diseases. 

Use of hemp for fiber has attracted attention and investment, but demand for the output is uncertain. Plus, hemp fiber has been importable into the U.S. for many years pretty much continuously despite the ban on local hemp production, and demand for it has been modest so far. Fiber was sourced from China and to a lesser extent Europe. However, with the greater availability and certainty provided by local hemp farming, there may be greater take-up of industrial hemp in the United States.  

The USDA emphasized the lack of knowledge about how both hemp production and consumption afflict the markets. The agency noted that research is needed into which cultivars most reliably produce which definitive results: which ones are best for CBD production, which ones for fiber, which ones for other oilseed uses? Additionally, research into pest management and cultivation practices lag. 

The markets for hemp inputs and products are in their adolescence. They generally lack transparency and much of what passes for information is actually anecdotal. “There is a significant need for more farm-level enterprise research and research-on-demand for particular products to determine the profitability of hemp for various uses (grain, fiber, and CBD or other extracts) and by regions,” the USDA report said. 

On the market level, for what it is worth, PanXchange, which lists hemp and hemp products for spot market trading, reported a decline in its biomass (unprocessed) CBD-based price index from about 440 to about 75 from the end of July 2019 to January this year. 

 

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