The Nickel Report

Industrial hemp has officially returned as a legal agricultural commodity in the United States.  On December 20, President Trump signed into law the Agriculture Improvement Act of 2018, otherwise known as the 2018 Farm Bill. See PL 115-334, December 20, 2018, 132 Stat 4490. The 2018 Farm Bill re-legalizes the production of hemp after the crop was banned for more than eighty years under federal law.  Hemp is a “cousin” of marijuana; both are varieties of the Cannabis sativa L. plant, but hemp does not have the psychoactive properties of marijuana.  Hemp is one of the oldest cultivated industrial crops in the nation.  It was grown as early as the 1600s until the mid-1930s when state and federal laws effectively ended the legal production, sales and use of the cannabis plant.  The Controlled Substances Act of 1970 (CSA) officially categorized “marihuana” as a Schedule I controlled substance, which was defined to include “all parts of the plant Cannabis sativa L.,” such as hemp.

The 2018 Farm Bill changes the regulatory landscape for industrial hemp because it expressly excludes hemp from “marihuana” under Schedule 1 of the CSA.  The term “hemp” is specifically defined as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis.”  In other words, hemp is no longer a controlled substance and may become a legal agricultural commodity.

States and tribes desiring to regulate the production of hemp are required to submit plans to the US Department of Agriculture (USDA) for review and approval.  The plans must include procedures for testing the concentration of THC, enforcement, inspections and the disposal of “non-compliant” plants. If a plan is not approved, then the USDA is required to establish a plan to monitor and regulate the production of hemp.  The USDA also has sole authority to promulgate federal regulations and guidelines that relate to hemp production.

Legalization of industrial hemp will mark a new era for the agricultural industry.  Most hemp-derived products are biodegradable, renewable and have many different uses that include clothing, medicine, alternatives to plastic and paper, personal care products and biofuel.  According to a 2017 report for Congress, the global market for hemp consists of more than 25,000 products.  Further, the production of industrial hemp uses significantly less water and fewer pesticides than corn and soybeans.  Although hemp cultivation has a comparatively smaller environmental footprint than other cash crops, growers still face existing state and federal laws that address environmental impacts typically associated with larger-scale agricultural enterprises.  Many routine farming activities can be a potential source of surface water or groundwater pollution.  And, depending on where the industrial hemp farm is located, there may be additional environmental regulations regarding water use, erosion control, pesticide leaching, nutrient runoff and wildlife protection.

Domestic hemp cultivation has already grown since 2014, when Congress allowed hemp cultivation as part of university research in states that permitted hemp farming.  In 2017, more than 25,000 acres of hemp were reportedly grown across 19 states, a 163% increase over 2016. Hemp production is expected to rise again in 2018.  The increase in hemp production is likely to be driven largely by the demand for cannabidiol, also known as CBD.  Hemp-derived CBD is one of more than 100 cannabinoids in Cannabis sativa L. that is credited with treating a host of medical problems—everything from chronic pain to headaches to epileptic seizures to sleeplessness.  Indeed, a reported 70% of domestic hemp grown today is used to make CBD oil. (Importantly, CBD derived from marijuana still falls within Schedule I of the CSA.)

Although industrial hemp is likely to see burgeoning growth over the next decade, experienced and soon-to-be growers of industrial hemp should be aware that hemp cultivation will be tightly regulated at both the state and federal level.  At least forty-seven states already regulate the cultivation of industrial hemp or of cannabis products, and with the passage of the 2018 Farm Bill, the USDA will be developing new regulations as well.  Growers should anticipate that the laws applicable to the cultivation of industrial hemp may be different from those applicable to marijuana because their cultivation practices are strikingly different.  For example, hemp can be grown in most climates with minimal care, while marijuana requires a carefully controlled atmosphere to ensure proper growth.  Further, the whole hemp plant—from its stalk to seeds—can be used for thousands of applications, whereas marijuana plants are grown for the flowers which produce the psychoactive effects.

Industrial hemp’s comeback officially goes into effect on January 1, 2019.  With that, the Nickel Report wishes you and yours a very Happy New Year!