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Industrial Hemp – the New Cash Crop?

This article was written for Attorney At Law Magazine, a national trade publication for and about private practice attorneys.

As of 2018, approximately forty state legislatures have defined industrial hemp and have removed restrictions on its manufacture and distribution. Among these states, 18 have approved the cultivation of industrial hemp. The Hemp Industries Association reports that the total U.S. retail sales of hemp products have increased about 10 percent annually since 2011, with $688 million in sales in 2016. Total sales for the U.S. hemp industry in 2017 were $820 million, according to the Hemp Business Journal and sales of industrial hemp are projected to reach a staggering $1.9 billion by 2022. While Kentucky and Colorado are the largest cultivators of hemp, at least 35 other states have now passed legislation related to industrial hemp, creating a growth in overall hemp production across the country. Researchers estimate the gross value of hemp production per acre to be about $21,000 from seeds and $12,500 from stalks.

What is hemp?

Hemp is derived from a species of cannabis sativa with lower concentrations of tetrahydrocannabinol (THC), the psychoactive component of marijuana. The familial relationship between hemp and marijuana has meant the U.S. has been slow to embrace industrial hemp as an agricultural commodity. Hemp fibers are used in fabrics and textiles, yarns and spun fibers, paper, carpeting, home furnishings, construction and insulation materials, auto parts, and composites. Hemp is used in animal bedding, material inputs, papermaking, and oil absorbents. Hemp seed and oilcake are used in a range of foods and beverages (e.g., salad and cooking oil and hemp dairy alternatives) and can be an alternative food and feed protein source. Oil from the crushed hemp seed is used in soap, shampoo, lotions, bath gels, and cosmetics. Hemp is also being used in nutritional supplements and in medicinal and therapeutic products, including pharmaceuticals.

What is the legal pathway for industrial hemp in the U.S.?

The U.S. industrial hemp market exists due in no small part to Section 7606 of Congress’s 2014 “Farm Bill”, which created a legal pathway for state sanctioned cultivation of industrial hemp. The Farm Bill, defines as, “cannabis Sativa L. and any part of such plant… with a [THC] concentration that does not exceed 0.3% on a dry-weight basis”. The Farm Bill permits state departments of agriculture and institutions of higher education to cultivate and manufacture industrial hemp for research purposes through state sponsored agricultural pilot programs. In 2015, Congress supplemented the Farm Bill and passed the Consolidated Appropriations Act of 2016. This Act significant because Section 763 of the Act explicitly precludes the use of federal funds to “prohibit the transportation, processing, sale or use of industrial hemp” that is grown pursuant to the Farm Bill. Therefore, this funding prohibition impacts all state agencies that receive federal funds, which includes state drug interdiction programs and joint federal-state drug task forces.

In 2016, the DEA and the USDA issued a Joint Statement of Principles (the “Joint Statement”), which clarified the position of each agency with respect to industrial hemp and the scope of the Farm Bill. Notably, the Joint Statement explicitly acknowledges that it is lawful for a state department of agriculture to license, register or otherwise authorize an individual to cultivate industrial hemp. Similarly, institutions of higher education are permitted to enter into industrial hemp production contracts or leases with individuals.

What is the status of industrial hemp in the DMV?

In 2018, Virginia and Maryland both established industrial hemp pilot programs. Maryland’s program took effect July 1, 2018, and removed industrial hemp from the state’s definition of marijuana. The Maryland Department of Agriculture is currently working with state universities in an effort to draft regulations for the program. The regulations are expected to be finalized by the end of this year, ushering in the first participants in the market. Virginia’s program also took effect July 1, 2018, and have already finalized its regulations. Hemp is currently being produced in the state by licensed growers, and hemp is even once again a crop at Washington’s Mt. Vernon estate. Industry observers predict this region will flourish into a robust industrial hemp market as these programs progress.

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