After years of wrangling, the U.S. Congress stands on the verge of legalizing the cultivation of industrial hemp.
- Hemp is a variety of the cannabis sativa plant that doesn’t generate a psychoactive effect.
- Traditionally used to produce cloth and rope, hemp can also now be used in wellness products and food.
- Competing legislations by the House and Senate are being aligned with an anticipated September 30 deadline.
- The legalization of hemp has cross-party support and appears likely to pass.
The expected change in U.S. law will be beneficial for companies such as Marijuana Company of America, Inc. MCOA, -3.94% (MCOA Profile), which is already invested in industrial hemp and support for hemp growers. Across the border, Canopy Growth Corp.CGC, -11.77% has established acres of Canadian hemp cultivation and gained financial backing that would support huge growth. Aurora Cannabis, Inc. ACBFF has also received substantial funding in the past few months, which will help its ongoing expansion effort. Hemp cultivation will provide plentiful CBD to be used by companies such as CV Sciences, Inc. CVSI, -0.95% as an ingredient in a wide and growing range of health and wellness products. All this growth is aided by support companies such as Terra Tech Corp.TRTC, +0.19% which provides equipment for cannabis cultivators.
Hemp: Caught Between Politics and Business
Industrial hemp is a crop with a strange history in the United States. For centuries, it was used to produce products such as ropes and sails, playing an integral part in the economy. This ended in the twentieth century when hemp was caught up in a broad ban on the cannabis family of plants, despite the fact that hemp itself is not usable as a recreational drug. Now its tentative return depends upon the outcome of a far broader agricultural bill.
Because it doesn’t share the psychoactive properties of marijuana, hemp has potential to be regulated and grown separately. Early tests in restoring this industry have produced significant profits for farmers. If the political will can be found to change its status, it could create great opportunities for businesses and their suppliers.
Hemp Cultivation Project in the United States
Several companies, including Marijuana Company of America (OTC:MCOA), are already growing hemp in the United States with their Scio, Oregon Cultivation Project, in conjunction with their joint venture partner Global Hemp Group Inc.
Under their high-yielding CBD hemp cultivation projects, the two joint venture partners have formed Covered Bridge Acres, LTD. The key to the project was the acquisition of a 109-acre agricultural property in Scio, Oregon, with a history of hemp cultivation over the past few years. In July 2018, 40,000 hemp clones were planted on the property for Cannabidiol (CBD) propagation on approximately 33 acres of the property.
MCOA and GHG are now in the process of evaluating different harvesting, drying, storage and processing strategies in preparation of an early October harvest. The joint venture partners are also in negotiations with guaranteed offtake agreement offers and are considering strategies involved with selling the attained biomass from harvest in bulk. When Is a Drug Not a Drug?
Hemp is one of a range of different cannabis plants. Unlike the versions smoked by recreational users, it doesn’t contain significant quantities of tetrahydrocannabinol (THC), the chemical that gets smokers high. It does contain the active ingredient cannabidiol (CBD), which has been widely reported to have medicinal value – reports that now have been substantiated by the U.S. Food and Drug Administration. Importantly, hemp also contains fibers that can be used for a wide range of purposes.
In the twentieth century, cannabis plants were banned as the U.S. government and others worldwide cracked down on drug use. Though hemp doesn’t get drug users high, the governments apparently banned the cannabis plant because of the difficulty of distinguishing between the plant varieties. The decision to include hemp in a list of banned drugs was based on political expediency rather than science.
Fast forward to the twenty-first century and the rules surrounding hemp have started to change, allowing the creation of companies such as MCOA. Hemp has a huge number of potential uses, including the manufacture of cloth and paper and the processing of food. Under licenses designed to cater to research and the medical market, farmers have begun growing industrial hemp with expectations of earning up to 150 times as much money per acre of land as they would growing alfalfa. The Great Agricultural Debate
Farm bills are an important part of how the U.S. government establishes policy around food and agricultural production and how that policy is enshrined in law. Roughly every five years, Congress creates a bill covering a wide range of agricultural topics. With its huge financial implications and many different political angles, passing the bill can be a messy business.
Following a pilot research program for hemp growers created in the 2014 Farm Bill, the current Farm Bill includes the legalization of industrial hemp. There’s a lot at stake for hemp growers as well as those hoping to enter and establish a foothold in the industry. The U.S. Hemp Roundtable has gone so far as to hire attorney Daniel Cameron, an experienced Washington legal counsel, to lead its advocacy on the bill.
The House and Senate have both passed versions of the 2018 Farm Bill that support the legalization of the hemp industry without drug enforcement oversight. On Sept. 5, the first bicameral conference committee on this Farm Bill began meeting in an attempt to resolve competing elements between the two bills, with a deadline to present the president with an agreed-on final version of the bill by the end of the month. The good news for companies such as MCOA is that the hemp element of the Farm Bill has cross-party support. Hemp’s potential to revive the fortunes of American farmers makes it a potential vote-winner for rural politicians nervously eyeing up the polls. The bad news is that in a bill affecting everything from agricultural subsidies to environmental conservation to food stamps, there’s plenty for politicians to disagree over.
Hemp Products
Sail cloth and rigging were enough to make hemp profitable in the eighteenth century, but the world has changed since then. So what sort of products can the world expect to see from a resurgent hemp market?
Many products will undoubtedly be targeted towards the health and wellness market, using CBD as an active ingredient. A leading example of these types of products is MCOA’s hempSMART line, including hempSMART Brain, which is developed to help with alertness and concentration; hempSMART Pain Capsules and Pain Cream, formulated to be an effective product combination for the temporary relief of minor pain associated with physical activity; hempSMART Full Spectrum Drops; and hempSMART Face, a nourishing facial moisturizer infused with Ayurvedic herbs and botancials.
A Growing Industry
Many companies already engaged in the cannabis market are exploring ways they may be able to benefit from the growing popularity of hemp. Canopy Growth Corp. CGC, -11.77%one of Canada’s foremost cannabis companies, has a hemp division with expertise in this area and acres of hemp production already under way. The company also recently received a $4 billion investment from Constellation Brands, a leading beverage company, to help it expand within the fast-growing cannabis market. With such levels of investment, Canopy Growth will be in a strong position to increase production as the market for hemp products grows.
The medical use of CBD is a major area of interest for Aurora Cannabis, Inc. (otcqx:ACBFF), which is developing different strains of cannabis to benefit from their different medical properties. Like Canopy Growth, Aurora has an eye to expansion while the market is still young. Its recent takeover of MedReleaf appears to be just one step in a far bigger plan. The company has just taken out a $150 million loan with the Bank of Montreal, betting on the power of a short-term financial boost to make it a market leader, more than capable of repaying the debt when the time comes.
Another company exploring the medical potential of CBD is CV Sciences, Inc. (otcqb:CVSI). CV Sciences has a strong focus on research, with a division devoted to developing new drugs that use CBD as an active ingredient. Its consumer products division works through health care providers, health food shops and online sales to market CBD-based wellness products.
The increasing number of growers is good news for supporting companies such as Terra Tech Corp. (otcqx:TRTC). Terra Tech produces growing systems – including moving tables and hydroponics – for cannabis farmers. These products are designed to increase the productivity of indoor cannabis cultivation, which is where a lot of CBD and marijuana plants are grown. The company’s environmentally friendly systems can reduce waste and thereby cut costs while also increasing productivity.
The anticipated changes in the U.S. laws governing hemp cultivation signal implications for a large number of companies in the wider cannabis sector as well. If the Farm Bill gets through Congress as expected this month, it could open up a sea change in agricultural production and U.S. wellness industry products.
