US Congress Passed a Farm Bill That Legalizes Hemp. So What Happens Now?

 

The hoping, waiting, pleading and expectation over the 2018 Farm Bill and the much-talked-about hemp provision is over. After a Senate vote on Tuesday of 87-13 in favor, the House on Wednesday passed the 2018 Farm Bill 369-47. The five-year measure also legalizes hemp and CBD products by taking the plant out of the Controlled Substances Act.

President Trump is expected to sign the measure.

Senate Majority Leader Mitch McConnell and other lawmakers in states with large amounts of farmland often talk about hemp’s promise as a crop. They have less to say about how the CBD-rich plant will affect a global marketplace of CBD products. Interestingly, CBD can also be extracted from the marijuana plant that McConnell calls hemp’s “illicit cousin” (both plants are of the genus Cannabis), and it has a wide range of potential therapeutic uses.

But many believe its full potential is still yet untapped. That’s why something of a bonanza of activity is expected in the coming years to benefit research and supply new hemp-derived products.

“I do expect this to set off a bit of a rush [in CBD products] just like cannabis legalization did in Canada,” Justin Singer, CEO and co-founder of Stillwater, a company that sources Colorado hemp to make ingredients and CBD products, told Cannabis Wire.

Still, our sources at Cannabis Wire tell us that Farm Bill and hemp-mania is not necessarily justified — yet.

The Farm Bill is a start, not an end, they explained.

Tom Dermody is vice president of operations at Bija Hemp LLC, which grows and distributes certified hemp seed and has been involved in other areas of national agricultural policy for years. He told Cannabis Wire the industry would be wise to keep a cool head. “I think we need a more tempered response” to legalization, he said. “People are staking their livelihood on this. And breeding false expectations on what the Farm Bill will provide can have long-term impacts.”

Tim Gordon, a hemp farmer and the chief science officer at hemp oil manufacturer Functional Remedies, said some are jumping into growing hemp without doing their homework. “I don’t plant corn without having a buyer and now we’ve got people buying hemp without having a buyer,” he said.

So we’re taking a breath and a step back here at Cannabis Wire and a moment to walk through some of the key questions, hurdles and issues in the post-2018 era of legal hemp.

Why is there so much excitement about hemp?

The legalization of hemp is a significant milestone for a variety of reasons. For pro-cannabis reformers, it means the legalization and de-stigmatization of a plant in the cannabis family. Hemp became politically palatable, after years of work from lawmakers and advocacy groups, in part because it only has trace amounts of THC, the compound that gets people the “high” associated with marijuana.

Hemp has a long history in the U.S. being used for all kinds of products and building materials, predating the country’s cannabis prohibition. It makes sense why McConnell and other Republican lawmakers from big farm-producing states would be so vocally and visibly excited by hemp’s prospects.

For the embattled American farmer who has dealt with depressed commodity prices on the main staples on which most farmers make their living — corn, beet sugar, soybeans and others — hemp represents the promise of a new crop and the U.S. entry into a growing global hemp commodity market. New crops, especially ones with the potential for the wide variety of uses that hemp possesses, are rare. Hemp can also be easily grown in different climates and soil. And farmers hope to benefit from a market for a product that can be used for everything from facial cream to building materials. Pro-hemp industry advocates say the potential for hemp far surpasses what has been done so far.

But it will likely be awhile before the bigger cannabis companies take the plunge into hemp products. Experts say they’ll likely wait for federal regulators and Congress to shape rules for a well-defined marketplace and more scientific study into the benefits of CBD or other cannabinoids derived from hemp.

I already see CBD products everywhere. Isn’t it already legal?

Yes and no, which is why the clarity the 2018 Farm Bill provides is expected to be a game-changer. The 2014 Farm Bill hemp provision allowed for the crop to be grown for research purposes under a program monitored by states, and industry advocates argued that this meant byproducts of the crop were also legal. Still, there was a lot of confusion in the intervening years after 2014, as the Drug Enforcement Administration reiterated that CBD from any source was a controlled substance under the Controlled Substances Act. In 2014, the DEA even seized hemp seed shipments as Kentucky started its hemp program, enraging pro-hemp Kentucky politicians.

Adding to the confusion, not all states that allowed for industrial hemp production also opened the doors to CBD products on the shelves. In California — where the kind of cannabis many Republicans won’t vote for is legal for adult-use — regulators recently banned the products. The ban is not strictly enforced. “Until the FDA rules that industrial hemp-derived CBD oil and CBD products can be used as a food or California makes a determination that they are safe to use for human and animal consumption, CBD products are not an approved food, food ingredient, food additive, or dietary supplement,” the California Department of Public Health said in a notice.

The DEA did eventually decide hemp and its derived products weren’t a priority for the agency, even if they stuck to their guns that they could crack down on CBD products if they wanted to. That’s one of the reasons — along with companies’ desire for more research and clear regulation from the Department of Agriculture and Food and Drug Administration — that big companies have stayed on the sidelines until Congress sorted out the legality of hemp.

The 2018 Farm Bill does just that by removing the plant completely from the Controlled Substances Act. Farmers will now be able to apply for USDA crop insurance and grant programs to help with hemp production.

The Farm Bill does not solve the lack of Food and Drug Administration oversight of CBD products.

We’ll get back to the looming FDA question in a moment.

What happens now that the Farm Bill and hemp legalization has passed?

State lawmakers are expected to introduce and pass hemp-related legislation to take advantage of the newly-legal crop. In the meantime, the USDA is expected to take between twelve and eighteen months to solicit feedback and finalize new rules and regulations around hemp, Dermody told us.

“The interesting thing is we don’t know what the USDA will require of those state management plans,” said Dermody, noting that the Farm Bill calls for states to have their plans approved by federal regulators.

There are immediate benefits for businesses. Gordon, the hemp farmer and hemp oil manufacturer, said he expects his business will now be able to use mainstream credit card processing services and bank accounts, two of his biggest problems to date.

Jamie Schau, who tracks hemp issues for Brightfield Group, a cannabis and CBD market research firm, said hemp businesses will now be able to operate normally. That includes relief from one of the biggest pain points in the cannabis industry — the ability to deduct business expenses from their federal income, previously prohibited under IRS code section 280(E), she said.

“CBD has been operating in a gray area up until now,” Schau said. “It gives people access to financial resources, loans, insurance all those things important to run a legitimate and scalable business.” Also, advertising restrictions that apply to other cannabis companies should be lifted, Schau said.

What’s the FDA going to do?

That’s a $64,000 question. While the Farm Bill explicitly says that hemp and hemp-derived products don’t conflict with laws governing the FDA, Dermody says FDA regulators, or Congress, will have to act to ensure consistent standards and regulations for consumable products.

“I think Congress still has work to do,” Dermody said. “Generally regulators are very conservative unless Congress supplies clear intent. The Farm Bill is a great step in the right direction but there is a long fought battle as to the use of consumable (products) particularly those that contain cannabinoid complexes.”

The FDA’s decision and impending regulations for CBD-based items could become complicated by its use in pharmaceutical products. Already, a new drug called Epidiolex, a CBD-based cannabis plant extract, received FDA approval this summer for use by patients with epilepsy and recently became available by prescription.

Singer, the Stillwater co-founder, said he’s looking forward to not having to compete with products making bogus or inflated claims once expected federal regulations arrive. “I can’t wait to operate in a market where people have to verify what’s on their label,” he said.

A FDA spokesperson did not respond Wednesday to a request for comment.

Are Coca-Cola or other big companies going to rush hemp products or CBD drinks to market?

While some of the biggest beverage and food companies have indicated interest, experts say they’ll likely wait to see how regulations and markets develop before jumping in. Larger pharmaceutical and supplement companies are also expected to follow-suit once there is more certainty around regulation and depending on the early success of early products, while small and medium-sized businesses are expected to grow and profit more quickly.

Big retailers, though, are expected to start stocking products quickly — meaning companies that have products that are ready for store shelves will benefit, Schau said. It’s easier and less expensive for a retailer such as Wal-Mart to pull a product from a shelf if a problem arises than for a large company to develop a new line of products.

The reason for the hype, though, goes to what could be.

“The potential market is enormous and the growth in natural medicine and natural foods is huge right now,” Schau said.

In the meantime, potential investors and businesses have been pushing for answers. “‘Where do I invest? What sector is going to do the best?’” Schau said of questions Brightfield is getting. “We’ve got our theories. But we’ll need to see how things unfold with the FDA and how they approach supplements and foods. That will determine a lot of the growth.”

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Cannabis Wire
Cannabis Wire
Cannabis is rich territory for serious journalism. Legalization raises urgent questions about regulation and law, technology and taxation, science and business, criminal justice and individual liberties. It stands at the intersection of a booming billion-dollar industry and promising advances in medicine, all while remaining federally illegal.

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