Cannabis Cash From High-Less Hemp Beckons to Ailing U.S. Farmers
(Bloomberg) -- Where tobacco once flourished on Gator Williams’ North Carolina farm, he now plants 1,380 acres of cannabis.
Williams isn’t growing marijuana but hemp, a kind of cannabis plant that offers the medicinal benefits of pot without the high. At his Lazy Gator’s Hemp Farm in Kinston, he’s breeding seed lines, experimenting with cultivation techniques and making products such as skin creams and gummy candies.
Like a growing number of struggling U.S. farmers, Williams is betting on hemp as an entirely new cash crop. Lumped in with its intoxicating cousin for decades under federal laws restricting controlled substances, Congress is on the verge of fully legalizing hemp under a new farm-bill agreement struck Thursday.
“We want the tobacco belt to become the hemp belt,’’ Williams said. After nearly losing his farm when he couldn’t squeeze enough profit from his row crops, he sees limitless potential in cannabis. “We use everything from the roots all the way down to the base fibers. The bark on it. There’s nothing wasted from this plant.”
While American hemp was once a common material for everything from rope to paper -– even George Washington grew it –-institutional knowledge was lost as the law clamped down on cannabis beginning in the 1930s.
Williams, 41, is among more than 3,500 farmers in 23 states attempting to resurrect that knowledge under a trial program Congress created with the 2014 farm bill.
Companies including Walmart Inc. and Coca Cola Co. have already shown interest in hemp-related products. If legal barriers to banking and interstate commerce are removed, advocates foresee a market that could reach as much as $3 billion in sales by 2022.
“This is going to be another major crop, but it’s going to take time because we’re starting from scratch,’’ said Eric Steenstra, president of the lobbying group Vote Hemp.
Driving demand is a hemp extract called CBD, short for cannabidiol. CBD is one of the substances in cannabis, but in hemp, it comes with no mind-altering effect from tetrahydrocannabinol, or THC, the main psychoactive component in marijuana.
Proponents say CBD helps relieve pain, anxiety, nausea and inflammation. Currently sold mostly online and in specialty shops, CBD can be found in oils, candies, capsules and even sparkling water. The Food and Drug Administration in June approved the first CBD-based medicine, Epidiolex, made by GW Pharmaceuticals Plc to treat childhood epilepsy.
But hemp has a multitude of other uses. Its fiber is made into paper, textiles, plastics and plywood. The seeds, rich in protein and Omega-3 fatty acids, are increasingly popular in cereals and salads, or ground into flour.Many farmers are looking to hemp as their best hope. Particularly in tobacco country, growers have faced hard times as demand for their crops dwindle. Corn and soybean prices are down by half from early this decade.
"I was your normal row crop farmer," said Williams of Lazy Gators. But, “there wasn’t enough profit to keep going. I lost my whole farm and operation and had to restart from scratch.”
The hemp business has limped along in a quasi-legal status, with carve-outs in the law allowing some imported products from Canada and elsewhere to be sold in the U.S. The trial program has made the U.S. more of a player, with 77,731 acres of hemp planted this year, triple last year’s 25,713 acres, according to Vote Hemp data. Legalization could push that to 150,000 acres next year, with the potential for annual acreage to eventually reach into the millions, he said.
Even with its current constraints, the U.S. hemp market was worth about $820 million in 2017, expanding to about $1 billion this year, said Sean Murphy, who leads hemp research at New Frontier Data. If the plant is fully legal by June, the market should more than double to nearly $2 billion by 2022, and possibly as high as $3 billion depending on how quickly banks, big retailers and the agriculture industry respond.
“This is now a whole new commodity crop,’’ Murphy said. “You just don’t get a new crop every day.’’
Hemp seedlings jumped to 80 percent of revenue this year at Colorado-based Front Range Biosciences in Colorado, far outpacing demand for marijuana sprouts, said Chief Executive Officer Jonathan Vaught. Based on talks with customers, the market “is going to explode” next year if hemp is fully legal, Vaught said.
That will require the U.S. Senate and House to agree on language in pending legislation to renew the Farm Bill. Senate Majority Leader Mitch McConnell of Kentucky – a major tobacco producing state -- has pledged to make it happen as soon as this year, before Congress starts a new session in January.
His provisions in the Senate version would strike hemp from the U.S. list of controlled substances, removing the federal barriers that have scared off banks and major retailers even as many states have legalized marijuana. The bill also would make farm insurance available to hemp growers and free the Department of Agriculture to study the crop.
“I don’t know if it’s going to be the next tobacco or not, but I do think it has a lot of potential,’’ McConnell told reporters Nov 9. “It’s an extraordinary plant.” If the bill doesn’t get passed this year, Vote Hemp’s Steenstra still predicts passage by 2020.
“It’s not a matter of if, it’s a matter of when with the farm bill,” he said.
House and Senate agriculture committee leaders have reached an agreement in principal on the legislation, they said in a statement Thursday.
Canada made cannabis fully legal in October, and companies operating there are ready to jump into the U.S. hemp market as soon as it opens up. Tilray Inc. of British Columbia will devote “massive amounts of capital” to the U.S. if legalization happens, CEO Brendan Kennedy said this month.
Canopy Growth Corp. in October agreed to pay about C$430 million ($330 million) to acquire Ebbu Inc. of Evergreen, Colorado, betting the hemp researcher can cut the cost of CBD production.
In North Carolina, Williams is optimistic enough that he’s planning to nearly triple his crop to 3,500 acres next year. He’s learning to process his plants from root to stem to create new textiles, animal bedding and other products.
The main hurdle to rapid growth is a lack of infrastructure –- including harvesting equipment, processing plants and seeds bred for specific soils and climates. As barriers are overcome, Williams sees a new cash crop lifting the economies of entire towns and regions, rippling out from farmers to manufacturers to retailers.
“There is no other way we can recoup the farming industry with any crop other than hemp,’’ he said.
©2018 Bloomberg L.P.