Cannin Group
Posted by Cannin Group on Dec 12, 2018 10:10:00 AM

2018 Farm Bill: What you need to know

 
The 2018 Farm Bill, likely to pass Congress this week, is expected to make industrial hemp federally legal for the first time since 1970—and could ignite its growth into a multi-billion dollar industry. A non-psychoactive form of cannabis, industrial hemp is a main source of cannabidiol, or CBD, the key ingredient in a fast-growing global health and wellness market.

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By legalizing hemp, the law will open the market to increased production, research, education, acceptance, sales and use of hemp-derived CBD products, as well as long-term improvement of the products sold. The effect of the law could be monumental enough to grow the hemp-derived CBD market to $22 billion by 2020, according to a report by Brightfield Group released in September

As CBD sales increase, investors may also see the stock prices of cannabis and CBD producers rise—if the expected market growth is not already baked into current stock prices.

“This is a watershed moment for CBD in the United States,” said Bethany Gomez of the Brightfield Group. “…this shift will allow…large mainstream packaged goods companies in industries like drinks, beauty, pet, skin care and tobacco to develop CBD products…. Even with minimal marketing and limited distribution channels, Gomez added, “CBD has grown by more than 80 percent this year to reach $590 million.”

Many inside and outside the cannabis industry stand to gain if the Farm Bill passes. Farmers, who will now be able to buy insurance for hemp crops, can be expected to shift acreage from lower margin crops to hemp at a faster rate. Tobacco companies that have been suffering declining sales will likely move resources into hemp production. (Altria invested $2.4 billion in Cronos Group just last week.) And already established hemp growers and CBD product manufacturers stand to gain by greater market acceptance.

Consumers, already buying CBD-based products such as lotions to lozenges in many states, will be exposed at a greater rate—think grocery stores—to the products and potential benefits of CBD. Many producers and users already attest to CBD’s ability to relieve pain, stress, anxiety, nausea and some epileptic and MS issues, although the scientific evidence is still lean and in need of expansion.

Roughly 18 states currently have programs growing hemp and producing CBD, with Montana the largest with over 13,000 acres in hemp cultivation. Colorado, Kentucky, North Carolina and North Dakota round out the current top-producing hemp states. But much of the CBD in today’s CBD products comes from other countries such as Canada and China, and dosage, not to mention quality (notably from China), is not always reliable. One of the hoped-for outcomes of the new legislation, pushed by Mitch McConnell from tobacco state Kentucky, will be to shift greater production to the USA.

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Industrial hemp is defined at Cannabis Sativa, aka “marihuana”, that contains less than 0.3 % THC, the psychoactive ingredient. In fact, Farm Bill House/Senate Committee Conference Report Section 12619 (p. 540) states that Hemp is essentially removed from the definition of “marijuana” and that the THC found in hemp is excluded from the definition of a controlled substance. After all, hemp has a long history in the US and was grown here as far back as the 1600s. Historically, hemp had many uses, such as for clothing, rope, paper, fiber materials and fuel oil.

Other noteworthy language within Conference Report Section 297B (p.429) essentially empowers states and tribes to submit plans to the USDA to grow hemp. These plans can be accepted or rejected within a 60 day period. The USDA may conduct audits and help states to develop corrective measures where necessary in certain states.

Cannabis, including its non-psychoactive sister, hemp, was ruled an illegal substance in the 1970 Controlled Substances Act. No one could grow it without a special license. This changed when the Farm Bill of 2014 loosened the ruling, allowing states to grow industrial hemp for state-controlled pilot programs. It is worth noting that p. 739 states that ‘drug felonies committed after the permanent program begins will ban participants from participating - even for those who participated in the 2014 pilot program’. Since 2014, hemp cultivation in the US has grown enormously, from roughly 2,000 acres in 2015 to over 30,000 acres in 2018.

In a landmark decision, this past June, the FDA approved Epidiolex, a CBD-based drug for epilepsy made by England-based GW Pharma, and the DEA approved it for prescriptions. It is now available in 50 states.

With regard to CBD use in food, the law is a bit complex. The FDA does not yet allow CBD itself as a food ingredient, food additive or dietary supplement. It does allow oil and fiber from hemp seeds in food products. This ruling appears to apply to food made by food companies, not edibles made by cannabis companies. California’s Department of Public Health issued a new state policy in July prohibiting hemp-derived CBD in food products, conforming with the FDA.

As the 2018 Farm Bill legislation moves forward, some of the larger hemp and CBD companies to watch include: Canopy Growth, Aurora Cannabis, GW Pharma, Tilray, Aphria, CV Sciences, Endoca, CW Hemp (Charlotte’s Web), Gaia Botanicals, Isodiol International, Medical Marihuana, CBD American Shaman, Elixinol, and Irie CBD - among many, many others.

Sources:

Quartz

Cannabis Business Times

Green Market Report

Cannabis Law Report

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Tags: Legalization, Politics

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