Cultivating Market Potential: The US Hemp Industry

US hemp cultivation received a huge boost from the US federal government in late 2018.

For 81 years, the hemp plant, which has no psychoactive properties, was prohibited as a dangerous drug in the United States. The best explanation is that hemp was grouped together with its close relative marijuana, which faces ongoing illegality, with multiple US industries paying the price. However, thanks to recent legislation, hemp — varieties of the cannabis plant containing less than 0.3 percent tetrahydrocannabinol (THC) — is now legally distinct from its cousin. This is a development with huge implications and opportunities for American cannabis companies.

The changing CBD landscape

According to a June 2018 report by Grand View Research, the global industrial hemp market is expected to grow at a compound annual growth rate of 14 percent, reaching US$10.6 billion worldwide by 2025. Legislative changes could provide a significant growth catalyst as a number of jurisdictions warm to the idea of a legalized cannabis industry.

When the Marihuana Tax Act was passed by Congress in 1937, the law made no distinction between THC-rich cannabis and hemp. Up to that point, hemp had been grown in America for hundreds of years; the industry effectively disappeared overnight. Decades later, when the Marihuana Tax Act was repealed, both cannabis and hemp were deemed to be Schedule 1 narcotics. This designation meant that both cannabis and hemp were seen to be as dangerous as other Schedule 1 substances like heroin.

While the US federal government’s policy towards THC remains firmly planted in 1960, the passing of the US farm bill in late 2018 has separated hemp from marijuana from a regulatory standpoint. Under the new law, hemp is no longer a Schedule 1 substance and no longer falls under the Controlled Substances Act, allowing licensed producers to grow, transport and sell hemp and hemp products anywhere in the United States. Despite the fact that psychoactive cannabis remains federally illegal, the passing of the farm bill represents a dramatic shift in US cannabis policy, with huge implications for the agriculture industry as well as producers of a plethora of products. The ones most excited by the change, however, are cannabis producers.

“As we enter the hemp-processing business in 2019, the new legislation will create a robust market for hemp at competitive rates and will provide greater access to biomass, while highlighting the need for cannabidiol (CBD) processing facilities,” Brayden Sutton, president and CEO of licensed cannabis producer 1933 Industries (CSE:TGIF,OTCQX:TGIFF), told the Investing News Network. “The untapped versatility of CBD will become sought after, as regular products begin to be infused with CBD and national retailers enter this sector.”

Hemp cultivation a new opportunity

The industry most affected by this regulatory change will be the American CBD market. A non-psychoactive cannabinoid, CBD has become increasingly popular as a treatment for chronic pain, anxiety, stress, post-workout soreness and more, without the characteristic “high” associated with THC. An October 2018 report by the Brightfield Group projects that the global hemp CBD market will reach US$22 billion by 2022, becoming larger than all other segments of the cannabis market combined. Since CBD can be derived from non-psychoactive hemp, hemp-derived CBD products have been opened up.

For cannabis producers, the opportunities are clear. The growing conditions for hemp and other cannabis plants are virtually the same. This means that cannabis growers already have the infrastructure to produce hemp that, unlike their more psychoactive products, can be sold all over the country. There is a robust and growing market for hemp-derived CBD products that now extends well beyond the borders of legal medical cannabis states. Hemp plants are also easier and less expensive to grow compared to their THC-rich cousins. In short, there is very little standing in the way of US-licensed producers getting into this huge market and accessing states that were previously entirely closed off to the cannabis industry.

US hemp cultivation companies

Cannabis companies are well aware of the implications of the US farm bill. 1933 Industries sees the legislation as something that could positively impact the company’s pre-existing plans to produce CBD extracts on a large scale for the American market. Through its subsidiary Infused, the company develops and produces a wide range of non-psychoactive CBD products. The passing of the farm bill has the company optimistic that it will soon be able to sell these products at major mainstream retail chain stores and outlets across the nation. Already, the legislation has set the stage for the company to bring these products into new markets across the United States.

As a company specializing in hemp-based protein foods, Naturally Splendid (TSXV:NSP) is also seeing potential in America’s legislative breakthrough. The company has developed a wide range of health foods and ingredients and will now be able to more easily distribute and sell these products at major retailers in the US. In February 2019, shortly following the passing of the farm bill, cannabis company CROP Infrastructure (CSE:CROP,OTC Pink:CRXPF) received licenses for 2,115 acres of hemp operations in Nevada, greatly expanding its footprint in the US hemp market.

Takeaway

Between the US farm bill opening the door for the production and sale of hemp products and the intense demand generated by the emerging CBD market, big things are happening in the American hemp market. As a result, we are seeing huge growth in the hemp cultivation space that could be sustained for years. American cannabis producers capable of meeting the growing demand for CBD could be greatly positioned to benefit from this new wave of legal hemp cultivation.

This article was originally published by the Investing News Network in May 2019. 

This INNSpired article is sponsored by 1933 Industries (CSE:TGIF,FWB:1QF,OTCQX:TGIFF). This INNSpired article provides information which was sourced by the Investing News Network (INN) and approved by 1933 Industries in order to help investors learn more about the company. 1933 Industries is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.

This INNSpired article was written according to INN editorial standards to educate investors.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with 1933 Industries and seek advice from a qualified investment advisor.