Hemp production in the U.S. has seen a resurgence in the last five years; however, it remains unclear whether consumer demand will meet the supply. High prices for hemp, driven primarily by demand for use in producing CBD, relative to other crops, have driven increases in planting. Producer interest in hemp production is largely driven by the potential for high returns from sales of hemp flowers to be processed into CBD oil.

The 2018 Farm Bill directed USDA to establish a national regulatory framework for hemp production in the United States. USDA established the U.S. Domestic Hemp Production Program through an interim final rule. This rule outlines provisions for the USDA to approve plans submitted by States and Indian Tribes for the domestic production of hemp. It also establishes a Federal plan for producers in States or territories of Indian tribes that do not have their own USDA-approved plan.

After extensive consultation with the Attorney General, USDA is issuing this interim final rule to establish the domestic hemp production program and to facilitate the production of hemp, as set forth in the 2018 Farm Bill. This interim rule will help expand production and sales of domestic hemp, benefiting both U.S. producers and consumers. 

The program includes provisions for maintaining information on the land where hemp is produced, testing the levels of delta-9 tetrahydrocannabinol, disposing of plants not meeting necessary requirements, licensing requirements, and ensuring compliance with the requirements of the new part.

Hemp farmers will also become eligible for a number of USDA programs, including loans, some whole-farm crop insurance policies, disaster assistance and conservation programs. All of these various programs will be available starting in the 2020 crop year.

However, Farmers who choose to grow hemp under USDA rules will have to face the risk that their crop could test “hot” (hemp testing over 0.3% THC) and lead to the destruction of their crop without a crop insurance indemnity even if they have a license to grow hemp.

Under the hemp pilot program, various States developed seed certification programs to help producers identify hemp seed that would work well in their specific geographical areas. USDA will not include a seed certification program in this rule because the same seeds grown in different geographical locations and growing conditions can react differently. For example, the same seed used in one State to produce hemp plants with THC concentrations less than 0.3%, can produce hemp plants with THC concentrations of more than 0.3% when planted in a different State. USDA also found that the technology necessary to determine seed planting results in different locations is not advanced enough at this time to make a seed-certification scheme feasible.

Diversified producers will be able to buy whole-farm revenue protection if they have a five-year crop history, though veterans and beginning farmers can buy the insurance with three years of crop history. Hemp farmers will also be eligible to buy Noninsured Crop Disaster Assistance Program (NAP) policies as well. This will give them essentially insurance coverage in an adverse weather event.

To tap into USDA programs, farmers will need licenses through their growing state or tribe to grow the crop and will need to file acreage reports at local Farm Service Agency offices with details on where the crop is being grown, including greenhouses. USDA also wants to know the intended use for the hemp in those reports, whether it’s for fiber, grain, seed or cannabidiol (CBD) products.

The FSA acreage submissions will also provide better detail for actual production of hemp by state. Right now, USDA only has estimates from private sources. The group Vote Hemp issued a report earlier this year that more than 510,000 hemp acres were licensed this year in 34 states, but actual planted acres may have been closer to 230,000 acres.

Some of the key questions sent to USDA involve testing. USDA will require testing by labs registered with the U.S. Drug Enforcement Agency. Sampling will be one within 15 days before harvest by a USDA-approved sampling agent, or a federal or state law-enforcement agent. USDA will provide details for sampling, including how to collect a statistically valid sample from a field.

USDA will approve state plans with slightly different sampling protocols if officials think they will create comparable testing results.

Under the farm bill, the chemical Delta-9 tetrahydrocannabinol (THC) must be limited to 0.3% on a dry weight basis. USDA said measurement will take into account uncertainty and variations in sampling or testing procedures. Still, a test above 0.5% THC will translate into a negligent violation that will cause the crop to be destroyed.

While USDA now has its rules out, other agencies are moving slower at the moment. The big challenge lies with the Food and Drug Administration and how it treats the broad range of CBD oil products now on the market without FDA approval. The Grocery Manufacturers Association just Monday issued a report citing that consumers are confused about CBD products and whether they are safe. The trade association cited that one-in-three Americans have used a CBD product and the overwhelming majority, 76%, believe CBD products are already subject to federal regulations. GMA called on FDA to bring some clarity to the growth in cannabidiol products.

“It is the role of federal agencies to ensure a safe and transparent consumer marketplace — but the CBD market is currently the Wild West,” said GMA President and CEO Geoff Freeman. “Without a uniform federal regulatory framework in place, consumers lack the basic information they need to make informed decisions about CBD.”

CBD is the big market for hemp in the U.S. right now with sales at just under $2 billion last year and a forecast that sales could top $20 billion in less than a decade, according to the Colorado firm BDS Analytics. It is the CBD market that is generating revenue for at least some farmers of $50,000 an acre or more to produce CBD oil in their plants.

EPA also closed a public comment period in September on 10 different pesticides that could be used on hemp and the agency is working through a pathway for pesticide registration.

More details on USDA’s hemp program, including the interim final rule, can be found at https://www.ams.usda.gov/rules-regulations/hemp or contact the Nevada Department of Agriculture.

Sources:

USDA Details Hemp Rules. Chris Clayton, DTN Ag Policy Editor

Establishment of a Domestic Hemp Production Program, A Rule by the Agricultural Marketing Service