Late last month, Congress passed one of the most significant bills in recent memory: the 2018 Farm Bill. In addition to mandating a number of boilerplate provisions(such as expanded farm subsidies), the new law legalizes hemp for the first time in half a century; yet, the devil is in the details as to the effects on the market.
What does the passage mean for hemp consumers and farmers alike? Here are five key takeaways:
Hemp is no longer a controlled substance.
Despite some marked differences between hemp and its more famous cannabis cousin, the federal government has persisted in treating hemp as if it was the same substance as its THC-laden relative. Under the 2018 Farm Bill, hemp has been removed from the Controlled Substances Act (CSA) and is now considered instead an agricultural product, worthy of consideration as a commodity.
Hemp-derived CBD is legal.
The Farm Bill also reworks the federal government’s definition of hemp to include its “extracts, cannabinoids and derivatives”, meaning that cannabidiol (CBD) is now legal in the United States. Nevertheless, , the Farm Bill meanwhile makes clear that the U.S. Food and Drug Administration (FDA) retains its authority to regulate CBD and CBD-involved products. At present, the federal watchdog has not passed any rules regarding CBD, although the administration has signaled its intentions to establish a regulatory framework for the substance. While CBD is technically legal, companies will need to cautiously perform due diligence toward how they market and sell CBD products before the FDA establishes its regulatory guidance.
Hemp farmers can apply for crop insurance.
Much of the uncertainty surrounding hemp farming has now been cleared away. Under the previous law, farmers participating in state pilot programs could grow hemp, but they could not apply for crop insurance. Now that hemp is considered an agricultural commodity, hemp farmers are eligible for not only crop insurance, but can also participate in USDA programs for certification and competitive grants.
Banks will be willing to work with hemp companies.
One of the unfortunate side effects of hemp’s quasi-legal status (until now) has been that banking institutions have been reluctant to provide hemp companies with basic financial services such as a checking account or small business loans. With hemp no longer a controlled substance, financial institutions will be better motivated in catering to the hemp industry. Debit and credit card companies will be able to freely process the accounts of hemp-derived CBD companies, opening doors for mass-market retailers to enter the CBD market. While hemp-derived CBD products accounted for approximately $390 million in sales in 2018, by 2022, New Frontier Data estimates mass-market CBD sales to reach $1.3 billion in sales.
An expansive new market awaits.
Beyond more favorable conditions for farmers and businesses, the hemp industry will undoubtedly benefit. Over the next five years, the hemp industry is expected to enjoy a combined annual growth rate (CAGR) of 18.4%. With the Farm Bill’s passage, the hemp industry’s potential is poised for takeoff, though questions remain. How will the FDA choose to regulate CBD, and how will it affect the hemp industry? Stay tuned to the Hemp Business Journal for more insight and analysis in the Global State of Hemp Report, and via the business intelligence platform Equio.