The commercial hemp industry in the United States, finally legal after decades of prohibition, is rapidly moving from its infancy to a thriving agricultural crop, grown not just in marijuana-friendly states, but also states that have maintained some of the most prohibitive laws in the country.
As the industry continues to grow and evolve, SunGrower & Greenhouse takes a deeper look at some of the trends and lessons learned from the commercial cultivation sector.
Acreage
Fueled by the growing consumer demand for CBD, hemp cultivation has been expanding rapidly throughout the United States. In 2018, state-sanctioned farmers planted 78,176 acres of hemp, more than triple the acreage from 2017 (25,713), according to the most recent U.S. hemp crop report from Vote Hemp, a nonprofit advocating for a free market of low-THC and industrial varieties of cannabis.
Montana made the biggest jump, from a mere 500 acres in 2017 up to 22,000 in 2018 to become the nation’s largest hemp-producing state.
Much of the growth came in the country’s established hemp leaders: No. 2 Colorado planted 21,578 acres (up from 9,700); No. 3 Oregon was at 7,808 (up from 3,469); and No. 4 Kentucky was at 6,700 (up from 3,271).
The report covered 24 states with active hemp programs, of which only four reduced their acreage from one year to the next (Minnesota, Nebraska, North Dakota and Washington). Now 41 states have enacted hemp bills, 3,546 hemp licenses have been issued; the acreage planted will likely continue to increase in 2019 with the passage of the 2018 Farm Bill.
In 2016, the first year Vote Hemp produced a crop report, only 9,649 acres were planted, with Colorado (5,921 acres) and Kentucky (2,525 acres) planting the vast majority of the crop.
The United States, a late-comer to the global hemp market, is fourth internationally in hemp production, following Canada (137,000 acres), China (114,000) and France (421,000).
Extraction Demand
As farmers expand their acreage to keep up with the demand for CBD, the foreseeable kink in the supply chain will be in the extraction and processing sector. The equipment designed for marijuana has long since become obsolete as hemp growers produce more and more plant material, leading to the innovation of larger and larger extraction machines.
“Consumer demand is going to continually outpace production for the next three to five years,” says Adam Kurtz, co-founder of Fusion CBD, which has operations in both Oregon and New York. “But we’re still working out mechanization and how to harvest thousands of acres. There are not enough labs right now to process all that plant material.”
To put the numbers into perspective, the Washington State Liquor and Cannabis Board recently measured just under 4.1 million square feet of marijuana canopy — roughly 94 acres — in the state’s legal, recreational market, compared to 142 acres of hemp. Washington state is one of the top producers of state-legal marijuana, but it ranks 18th in hemp production. Montana farmers have planted 235 times the hemp as Washington’s state-licensed marijuana growers — and virtually all the domestic hemp needs to be extracted for CBD, while at least half of the marijuana is sold as flower. That means a boom for companies specializing in extraction, including equipment manufacturers and operators.
Even in a state like South Carolina, which had a relatively small industry in 2018 — just 256 acres — extractors like SC Botanicals are dealing with mass amounts of plant material.
SC Botanicals director of operations at Christopher Cortina says a big lot is in the range of 3,000 pounds, so he’s adopted some techniques and equipment from the tobacco industry, including the boxes used to bring in crops.
“Handling that amount of biomass is a whole different ballgame than anything I saw in marijuana,” he says. “It’s funny how quickly you get used to it.”
Hidden Challenges
Despite the passage of the 2018 Farm Bill, which effectively legalized hemp and descheduled cannabis plants with less than 0.3% THC, there are still a wide number of regulatory questions and legal concerns that could derail businesses.
The primary concern appears to be the Food and Drug Administration’s stance on CBD; it remains to be seen whether the agency’s ominous statement on foods containing cannabis derivatives is saber rattling or a credible threat to clamp down on the burgeoning industry.
“According to legal experts and some politicians, the FDA’s position on the inclusion of CBD in food or it being marketed as a dietary supplement is, at best, antiquated in view of the 2018 Farm Bill, and at worst, plain wrong, in view of evidence that CBD is properly excepted from the various prohibitions cited by the FDA,” attorney Lauren Rudick wrote in the April issue of Marijuana Venture.
There are also a lot of business-related challenges, independent of any rules and regulations — “A lot of horses and carts,” as Kurtz puts it.
“It’s not a terribly expensive crop to farm,” says Boring Hemp Company co-founder Barry Cook, “but it is a ridiculous amount of money when it comes to your cashflow burn rates, and that’s because we’re talking about an annual crop. It’s a significant investment that will eat cash for 12 to 18 months.”
Getting seeds was a major challenge in the early years for many state-licensed hemp farmers. Now, the problem is not so much getting seeds, but getting seeds with the right genetics.
“You have seed breeders and seed makers,” Kurtz says. “A lot of seed breeders think they are seed makers, but they are not.”
Kurtz’s comment strikes to the heart of a major issue for everybody in the CBD industry, from growers all the way to the end consumer: It’s important to make sure the product is what the seller says it is, whether it’s seeds, plant material, concentrate, isolate or a finished, shelf-ready product.
Isolate vs. Full-Spectrum
Within the CBD industry, there’s plenty of debate over the merits of CBD isolate versus full-spectrum hemp oil. The majority of research available indicates that full-spectrum hemp oil has a greater medicinal value than CBD isolate.
According to the Hemp Business Journal, CBD isolate sold for $6,500 per kilogram in 2018, compared to $4,000 for full-spectrum oil (60% CBD or higher).
However, at SC Botanicals, Cortina focuses on full-spectrum oil, and he sees it having a more stable wholesale value, even as more cultivators come on line.
“Isolate is turning into a commodity and the price is tanking,” he says. “The full-spectrum market is diverging because of quality.”
The Hemp Business Journal reported that the wholesale price of both isolate and full-spectrum oil has fallen about 74% since 2015. Meanwhile, CBG isolate — a minor cannabinoid that is now starting to gain recognition for its medicinal potential — has become highly sought after, reaching a wholesale price of $27,000 per kilogram in 2018.
Legitimate Research
In addition to the thousands of public and private companies growing hemp, there were 40 universities conducting hemp research in 2018. This research will provide a foundation for best practices in farming, as well as the many medical claims associated with CBD (despite repeated warnings from the Food and Drug Administration, CBD product manufacturers have marketed their wares to treat and/or cure just about everything from epilepsy to eczema to acne to itchy bug bites).
“Everyone I talk to who’s not from the cannabis world is so hyped up about CBD,” says Robert Arabian, co-founder of the marijuana edibles company Pop-Up Potcorn. “If you have any ailment, the immediate answer is ‘just take CBD for it.’ I’m curious to see if it continues this momentum and how medical research will help keep it on track. Is it just the hype that’s going to plateau at some point or will it continue to grow and gain momentum in the mainstream marketplace?”
Although the vast majority of research is being focused on hemp, the findings will also prove invaluable to the marijuana industry.
“There’s going to be much more legitimate research to cut through the ‘bro science’ of the marijuana industry,” Cortina says.
The recent, widespread publicity surrounding CBD has also helped drive acceptance of marijuana as a medicinal product and reduce the stigmas associated with cannabis.
“Acceptance is what matters most to us,” says Kyle Spiedell, co-CEO of The Green Solutions, one of the largest recreational cannabis retail chains in Colorado, which incorporates CBD into many of the products it sells, for both the medical and recreational sectors. “We were able to be pioneers in this industry and we’re not going to stop that until cannabis is accepted throughout the United States. At this point, CBD should be in just about everything — look at Estee Lauder or Clinique. There’s no reason it doesn’t become a regular part of our everyday life.”