An Uncertain Future for U.S. Hemp?

green cannabis plants during daytime

It seems like there are new developments surrounding the hemp industry every day–and not all of them are positive. The European Union recently voted to deny a hemp industry-supported application to add hemp & hemp-derived CBD extracts to the EU’s list of “novel foods.” Hemp’s addition to that list would have allowed all hemp parts and extracts containing less than 1% THC to be used in foods and dietary supplements. The European Commission’s denial was a shocking blow to the European hemp market after a period where hemp products seemed to enjoy widespread support.

The aftershocks of the European Commission’s decision may soon ripple through the hemp industry in the U.S.. That decision and the recent release of the USDA’s interim rule on domestic hemp production is already beginning to infuse uncertainty into many domestic hemp stakeholders.

The 2018 Farm Bill removed hemp “and all derivatives” thereof from the DEA’s list of Schedule I Controlled Substances, allowing the cultivation and processing of hemp in the United States, ending an 81 year ban on the plant’s production. An industry seemed to emerge overnight encompassing everything from seed breeding programs to the manufacture of hemp-derived building materials. But the most high-profile of those industries, hemp-derived CBD extraction, now appears to be under threat.

Though the first lines of the 2018 Farm Bill appeared to encourage the proliferation of any and all hemp extracts, the devil is in the details. Federal agencies including the FDA, Federal Trade Commission, and DEA have been threatening to enforce regulations that weren’t explicitly repealed or changed by the 2018 Farm Bill, miring the emerging industry in red tape and restrictions.

But an even greater stumbling block to the success of domestic hemp production is the lack of technological infrastructure available to process hemp into value-added products other than CBD. Many grain farmers took a leap of faith into hemp production with the expectation that their crop would be easy to sell–only to find that the price paid for organic food-grade hemp seed was less than what they paid for the highly-regulated seed they planted in order to grow the crop to begin with. As of the time of writing, there are just three large processors of food grade hemp seed in the U.S. who turn hemp seed into food grade oils and proteins, so the market for hemp seed rapidly saturated. Producers found they could command a greater price for their crop by growing hemp specialized to produce high CBD yields.

Hemp has been touted as an industrial panacea–a crop with so many uses that it might just save the American farmer. Hemp fiber can be turned into rope, concrete, “wood” products, bricks, insulation, bio-plastics, animal bedding, potting mix, textiles, food, beverages, and even guitars. So what’s the problem? Why isn’t the hemp industry booming as promised?

Again, it’s a question of infrastructure. While the 2018 Farm Bill did much to allow farmers to grow the crop, it did nothing to subsidize the creation of the industrial complex necessary to turn hemp from plant to economic savior.

Before hemp can be turned into any of the “green” products that hemp supporters were hoping for, it must first be turned into fiber using “decortication” machines. And before hemp can be decorticated, it has to be baled and trucked to a decortication facility–an expensive proposition when there is currently only one large-scale decorticator in the entire country, and it’s in North Carolina. While there are many green building products businesses ready and waiting to turn hemp fiber into new products, the nation’s capacity to produce that fiber is crippled without sufficient access to the right equipment.

Smaller-scale decortication machinery manufacturers are springing up in places like Monte Vista, Colorado, while a larger decorticator is proposed for installation in Montana. A Canadian company called Greenfield manufactures a system that can separate the seeds from hemp, extract cannabinoids from the flowers, and decorticate the stalks in a single integrated equipment line it calls “HempTrain.” If you’ve got a spare airplane hangar-sized building going to waste, Greenfield can install one of their processing lines there at a cost of just under $2 million dollars (Canadian).

But can farmers continue to grow field hemp without the existence of processors to buy it? Probably not. And will investors decide to put money into hemp processing infrastructure while government agencies squabble over which components of the plant are legal? It’s perilous. So if farmers can’t risk growing it, and the manufacturing sector can’t risk ponying up the money needed to process it, is hemp dead on arrival? Maybe, but maybe not. Never underestimate the scrappiness of people gutsy enough to get in on the ground floor of an emerging industry.

CBD extraction manufacturing is keeping hemp on life support for the moment. The equipment needed to support this segment of hemp products is no different than the equipment used in the essential oils and flavorings manufacturing industries, so the infrastructure to support CBD extraction existed in the U.S. prior to the 2018 Farm Bill. Though there are segments of the government voicing objections to the emergent CBD industry, its success in the interim is a necessary prologue to the development of further hemp processing infrastructures.

After an 81 year ban on the cultivation of hemp, it should come as no surprise that hemp-specific processing equipment doesn’t exist in the United States. While it’s available in Canada–where hemp has long been legal to grow–trucking raw, baled hemp further than 100 miles for fiber processing isn’t economically viable. This often means CBD extraction is currently the only sound financial outlet for many current hemp producers who are not within trucking distance of one of the three major oil seed buyers. Though the CBD industry faces increasing regulatory pressure its continued proliferation may be vital to the future of hemp in the U.S. as farmers wait for additional sectors to develop.

There are bureaucratic, legislative, and technological challenges to topple in order for all value-added product sectors of the “hemp industrial machine” to function, and it’s going to take time, money, and a lot of gumption to make it work. The economic rewards of endeavoring to create new industries out of nothing are enough to keep many hemp advocates charging through the red tape.