Hemp Production: Declining in the US?

The Agriculture Improvement Act of 2018 (also known as the 2018 Farm Bill) legalized commercial hemp production in the United States, creating an opportunity to revitalize the agricultural sector and the U.S. economy. Now regulated by the U.S. Department of Agriculture, farmers can once again legally grow hemp in rotation.

The 2018 Farm Bill provides authority for states and tribal governments to invoke primary regulatory authority over production within their jurisdictions, through USDA approval of a state or tribal plan. The state and tribal plans are required to meet the minimum requirements of the current interim final rules, published October 31, 2019. The interim final rules sunset October 31, 2021, or upon publication of final rules.

While legalization was a huge victory on its own, the USDA’s interim final rules regulating the Domestic Hemp Production Program are setting the industry up for failure. The interim final rules do not provide a solid regulatory foundation for the hemp industry, threatening the success of both nascent and established hemp businesses.

Why? The interim final rules are more restrictive than many pilot programs developed under the authority of the 2014 Farm Bill, putting the industry at risk of losing the protections achieved over the past six-and-a-half years. For example, the interim final rules require mandatory testing of every lot of hemp produced, defined as “a contiguous area in a field, greenhouse, or indoor growing structure containing the same variety or strain of cannabis throughout,” and a requirement that the laboratories conducting pre-harvest THC crop testing be registered with the DEA — neither of which were required for the previous six production seasons under the pilot program authority. Additional concerns with the interim final rules include: a change in the THC compliance standard from delta-9 THC to total THC; non-representative sampling methodologies; allowing farmers only a 15-day harvest window with each sampling; an arbitrary negligence THC threshold that delineates a farmer’s criminal risk; and approximately 40 call-outs to the DEA in the interim final rules.

Consequently, 25 of 48 legal hemp states elected to remain under the 2014 Farm Bill pilot program authority for the 2020 production season rather than applying for approval to operate under the 2018 Farm Bill commercial hemp production program. States were able to do this and maintain their current programs because the 2018 Farm Bill provided for a one-year transition from the 2014 Farm Bill pilot programs to full implementation of the 2018 Farm Bill and interim final rules, which will end October 31, 2020. Unless a new federal law is passed providing for an additional extension of the 2014 Farm Bill pilot program authority, on November 1, 2020, all production within the U.S. is required to comply with the 2018 Farm Bill and interim final rules.

Additional FDA Concerns

In addition to the production-side issues with the USDA’s interim final rules, the Food and Drug Administration has created major obstacles for the hemp-derived cannabinoid sector.

While hemp grain-derived ingredients of hulled hemp seed, hemp seed protein powder and hemp seed oil are generally recognized as safe (GRAS), the FDA maintains that CBD products cannot lawfully be marketed as dietary supplements and that it is not currently lawful to add CBD to human or animal food. The FDA does, however, encourage and support “research to explore the therapeutic potential of CBD, as well as other compounds in cannabis, and will continue to make available regulatory mechanisms to expedite cannabis and CBD drug development.” These position statements from the FDA have led to restrictions on what products may be sold in different jurisdictions throughout the country. These restrictions and lack of clear enforcement guidance from the FDA, in addition to overproduction in 2019, has created a downturn in the market for hemp-derived CBD products, the very market that helped get the commercial hemp industry off the ground.

The regulatory hurdles the industry is facing in every step of the supply chain have resulted in a decline in production of hemp nationally. Hemp Industry Daily reported in June 2020 that there was a 9% decrease in licensed acreage for the 2020 production season from the 2019 production season.

It is imperative that stakeholders within the industry act now by voicing their concerns, proposing solutions and supporting lobbying efforts not only to address issues with the FDA, but those that are focused on influencing USDA final rulemaking to secure adoption of rational final rules consistent with the intent of the 2018 Farm Bill and that broaden protections for U.S. hemp farmers and ancillary businesses.

The USDA held an initial public comment period on the interim final rules from October 31, 2019 to January 29, 2020, during which 4,716 comments were submitted. The USDA is expected to hold a second comment period this fall. The USDA has announced plans to have program rules final in time for the 2021 production season. In other words, publication of the final rules is expected potentially as early as January or February 2021.

We are currently in rulemaking with the USDA for the final program rules and now is our time to lobby and educate the USDA, the DEA, the Department of Justice and Congress, to amend the rules and meet the needs of U.S. farmers and processors. Working together, we can secure reasonable and rational oversight by the USDA and the Department of Justice in final rules and, in turn, a successful future for our industry.