By Eric Singular, Director, Hemp Business Journal, New Frontier Data
In the wake of the 2014 Farm Bill’s passage, access to reliable genetics proved to be the first obstacle to American farmers’ sowing the seeds of industrial hemp production after decades of prohibition. While other agricultural crop commodities were bolstered by the expanding study of crop science and the agricultural technological advancements of the Green Revolution – e.g., high yielding seed varieties, chemical fertilizers, the adoption of modern scientific methods, and mechanization – hemp remained largely unmodified. Nevertheless, the Organisation for Economic Development (OECD)’s Seed Schemes maintained an international catalog of nearly 100 recognized industrial hemp cultivars.
The first movers of hemp farming in the United States (i.e., university researchers and farm entrepreneurs) began looking to Canadian and European plant breeders to source OECD-certified hemp varieties. Soon after, plant breeders and maintainers began licensing their genetics for North American distribution. As the U.S. hemp fiber and grain industry strives to attain economies of scale, the aggregation of a domestic seed supply remains a source of doubt that inhibits the deployment of venture capital into the space.
On the hemp-derived cannabinoid side of the coin, genetic technologies had been applied to breed high-THC marijuana strains since the early days of cannabis legalization in Colorado. As such, cannabinoid-rich varieties were more readily available in the wake of industrial hemp’s resurgence in 2014; yet, whether the genetics would comply with the THC threshold set forth in the Farm Bill remained unknown. It took years to acquire the agronomic research sufficient to reveal that the compliance of certain cannabinoid-rich varieties requires rigorous private testing in the final month of production, in order to ensure that the harvest would not exceed the allowable THC threshold of <0.3% THC (i.e., going “hot”). As detailed in the USDA’s Interim Final Rule for domestic hemp production (published in the Federal Register on Jan. 15) the negligence threshold has been raised from 0.5% to 1.0% THC content by dry weight. A crop that tests above 1.0% THC must either be disposed of or destroyed.
While the interim final rule raised the negligence limit, some gray area remains at the state level regarding remediation. USDA defines remediation as “any process by which noncompliant hemp (e.g., THC concentration > 0.3%) is rendered compliant (THC concentration ≤ 0.3%). Remediation can be achieved by separating and destroying noncompliant flowers while retaining stalks, leaves, and seeds; or by shredding the entire hemp plant to create a homogenous ‘biomass’ that can be retested for THC compliance.” That language left some hemp producers hopeful that a measure of leeway may be given for industrial hemp cultivated in row-crop style to produce fiber. It will be noteworthy to see how circumstances play out in the fall, as many growers this year planted genetics from China which have been shown to test at or above the 1.0% THC negligence threshold, but may have superior stalk characteristics for fiber production, particularly for woven applications.
Previously, any hot crop was treated as a controlled substance, requiring that farmers enlist law enforcement for proscribed, offsite disposal. Under USDA’s most recent Interim Final Rule for hemp producers, respective states, territories, or tribes are now permitted to use traditional, on-farm practices (i.e., plowing, tilling, or disking) for the disposal of a hot crop. The USDA estimated a 93% savings from employing such commonly used disposal protocols for a hot hemp crop – e.g., from $200 down to $14.25 per acre.
A long-held belief was that environmental stress (whether due to drought, heat, or poor soil conditions) was the primary factor in a hemp plant’s propensity to go hot. However, recently published research from the University of Cornell’s School of Integrative Plant Science in the College of Agriculture and Life Sciences indicates that a hemp variety’s genetics play a far more influential role.
In field trials conducted in Ithaca and Geneva, NY, Smart’s team found that differences in environmental conditions had no significant influence among 217 hemp plants’ chemical makeups. Yet, when comparing CBD and THC levels of each plant against its genome, they found a significant correlation between the genetics and the chemicals each produced. The finding has been seconded by state agriculture regulators who are recognizing that past certificate of analysis (CoA) results do not guarantee future performance for a variety.
The THC sampling and testing methodology for U.S. hemp production has been a fiercely debated topic throughout the seven years since passage of the 2014 Farm Bill. When USDA’s interim final rule was published in October 2019, it opened a period for public comments, with knowledge-sharing from the success of state programs and university research. The Final Rule published in January considered the crowdsourced feedback to establish the THC sampling and testing methodology and negligence allowance.
Despite the Final Rule, the industry has yet to see true uniformity throughout state-by-state THC sampling and testing methodologies. Paired with the fact that some states have either not been keeping records or are unwilling to publicly share their data, determining the accurate amount of U.S. acreage lost as hot during the last three years has proven to be exceedingly difficult.
In 2019, more than 4,000 acres among roughly 243,00 planted in the U.S. were destroyed for going hot. In 2020, despite total U.S. hemp acreage decreasing, hot hemp acres increased to 6,234. Based on those figures, with current projections calling for roughly 108,000 acres of hemp production in 2021, approximately 11,675 acres will expectedly test hot. However, the use of USDA’s finalized sampling and testing methodology by state agricultural officials may greatly mitigate that projection.
The cognitive dissonance surrounding hemp regulations has given significant rise to costly lawsuits over the past seven years: In Arvin, CA, during 2019, nearly 460 acres – i.e., roughly 10 million plants – were seized by law enforcement and destroyed, resulting in a $1 billion claim for damages filed against the law enforcement agencies involved.
The meteoric rise and explosive growth of the global CBD industry have been intrinsically linked to the restored legalization of U.S. hemp production. The farmers who made fast money in the years immediately following passage of 2014 Farm Bill were those growing for CBD. That was only made possible by the grace of lawmakers’ laissez-faire policy with respect to hemp genetics. Unlike farmers in Europe and Canada, U.S. hemp growers have had the freedom to source almost whatever cannabinoid-rich genetics they could get their hands on. That sometimes has meant sourcing low-THC marijuana genetics. In comparison, Health Canada maintains its official List of Approved Cultivars and has a rigorous program for allowing new hemp varieties to be distributed to Canadian farmers.
Consequently, the leniency of the USDA and respective state agriculture departments regarding genetics, and unwillingness to mandate certified seed like their Canadian counterparts, have led to both an excess of hot hemp acreage and an industry that has been almost singularly focused on one cannabinoid which U.S. consumers are otherwise projected to spend $121 billion on between 2020 and 2025.
After seven years, USDA has finally provided a rulebook on the cultivation of industrial hemp. Yet, those rules end at the farm gate. The ball still rests in the FDA’s court on a rulebook for hemp-derived cannabinoid processing, and designations as food or supplement ingredients. If some form of federal decriminalization or legalization of marijuana were to pass – whether it be the MORE Act or the Cannabis Administration and Opportunity Act – that would surely impact the rules for industrial hemp production and nuances for THC allowance.
As New Frontier Data Senior Industry Analyst Josh Adams shares, “the current regulatory scheme is underpinned by the federal prohibition of high-THC cannabis as the rationale for the excessively low THC-threshold for industrial hemp. Should high-THC cannabis be made legal, then there is little remaining justification for continued enforcement of the <0.3% THC threshold.”
He adds, “indeed, even if Senator Paul’s bill were to raise that tolerance to 1.0%, it would effectively be moot in an environment where high-THC cannabis was no longer prohibited. In this scenario, continuing to regulate industrial hemp and cannabis separately based solely on THC content makes little sense. Once high-THC cannabis becomes legal, there will likely need to be some reconciliation of these policies to establish a more consistent regulatory framework for the cannabis plant as a whole.”
To the extent that nearly a decade of work to establish rules for domestic hemp production would be rendered obsolete in the face of federal marijuana reform, the hemp market overall would likely benefit. Even so, that represents cold comfort to disheartened farmers whose hot hemp has been destroyed among thousands of acres’ worth since 2014.