(CN) — The U.S. Department of Agriculture issued its interim final rule on hemp production in America, clearing the way Thursday for farmers to cultivate what could be a highly lucrative — or highly speculative — new crop.
The 2018 Farm Bill passed in December 2018, but it wasn’t until Thursday’s final interim rule was published in the Federal Register that hemp farmers, bankers and manufacturers could get a sense of direction from the federal government over hemp, which had been listed in the Controlled Substances Act until the farm bill passed.
“This is a necessary step for the full implementation of the 2018 Farm Bill,” Daniel Shortt, a Seattle attorney who specializes in hemp and marijuana laws, said. “This gives farmers boots on the ground” to move ahead with production, he said.
The publication of the final rule Thursday in the Federal Register officially establishes the U.S. Domestic Hemp Production Program. This program “creates a consistent regulatory framework around hemp production throughout the United States,” according to the USDA.
Hemp has three main uses: the grain, the fiber and cannabidiol extract, or CBD, which is said to have certain health benefits. Though hemp is a close cousin to marijuana, hemp has only trace amounts of THC, the psychoactive ingredient in weed.
Even prior to the 2018 Farm Bill passing, hundreds of hemp farms had already popped up around the country, anticipating that President Trump would sign the bill. Those farms operated under the 2014 Farm Bill, which gave states limited rights to develop hemp plans. For states that don’t have their own plans regarding hemp production, the interim final rule governs the production of hemp under the 2018 Farm Bill.
Only three states — Idaho, South Dakota and Missouri — don’t have state-based hemp plans, according to the National Conference of State Legislatures.
John Porterfield, owner of Hemp Holding Company, has been busy the last few weeks harvesting his six acres of organic hemp along the shores of Flathead Lake in Dayton, Montana. He is one of 277 farmers in the state who registered with the Montana Department of Agriculture to grow hemp. Once harvested, his 6.5-acre crop of hemp biomass will be sent to a Las Vegas company, which will extract the CBD oil. The CBD oil will then go to a company in Montana that manufactures and sells medicinal herbs.
In addition to removing the hemp plant from the Controlled Substances Act, the 2018 Farm Bill legalized hemp concentrates and extracts, including hemp CBD. However, the use of hemp CBD in foods is illegal in the United States because it is approved as an active ingredient in Epidiolex, a drug used in the treatment of epilepsy, according to Nathalie Bougenies, an attorney in Seattle.
Thursday’s final rule on hemp could help clear financial obstacles that hemp farmers face, Shortt said. Since marijuana is still illegal under federal law, banks have been slow to embrace hemp businesses largely because it is closely related to marijuana, Shortt said.
“Now, because hemp is distinct legally from marijuana, those same concerns aren’t necessary as pronounced,” he said. “This is another step in normalizing and opening up hemp businesses.”
There were some issues left out of the interim rules, Shortt said, including the transport of hemp oil across state lines, and addressing the THC concentration in hemp oils, which may temporarily increase as a result of extraction. Also, the final rule mandates that hemp farmers must have their hemp tested for THC content no less than 15 days before harvest.
“Cultivators are going to find the 15-day testing period frustrating,” Shortt said. He said most states with their own plans don’t require THC testing that close to the harvest.
Until the final rule was published, most of the hemp being grown in America was done under the 2014 Farm Bill, which did not have adequate detail, Shortt said. That meant states were taking their own approach “and that created a patchwork of different laws and regulations across the country. This is a more uniform system.”
The final rule also didn’t address hemp processing or whether hemp growers could sell smokable hemp. Still, he said, “There’s definitely more clarity. Now that we have rules, now is the time to look for analysis of those questions.”
Montana has the largest hemp crop in the United States, with 51,000 acres planted and 100,000 square feet of indoor growing, according to Andy Gray, the hemp program coordinator for the Montana Department of Agriculture.
While there has been plenty of economic speculation in hemp, with growers and manufacturers eagerly entering the industry, the markets for the CBD oil, hemp grain and hemp fiber are still being established, Gray said.
“Hemp is a very versatile crop. It may take a few years to work out some issues, but both small and large growers have an opportunity to be successful in the hemp industry,” he said.
In Montana, the nation’s largest hemp producer, interest in hemp farming in Montana varies, from small-acreage startups like Porterfield’s, to established large-scale producers.
“There has been a great deal of interest,” Gray said. “Most growers are looking for opportunities to supplement revenue, while many are looking to add to crop rotations and improve soil conditions. Others are simply experimenting with a new potential crop.”
On a recent fall day, Porterfield and a two field workers hand-harvested the last remaining stalks of his hemp while sailboats slipped quietly past his hemp farm on Flathead Lake. Porterfield is optimistic about the opportunity in hemp. He points to hemp as being a likely companion crop for wheat, since wheat planting and harvesting use the same equipment. “You can make money in hemp in ways that you can’t with other crops,” he said. “At least for now. We’re taking an unbelievable leadership role in Montana in hemp.”