The U.S. Department of Agriculture released its mandated national regulatory framework for hemp production in the U.S. USDA established the U.S. Domestic Hemp Production Program through an interim final rule released on Tuesday and set for publication in the Federal Register on Oct. 31.
Previously, hemp production was regulated under the 2014 farm bill and the 46 states that chose to have programs established thereunder. The 2018 farm bill removed hemp from the controlled substances list. Federal regulation of hemp moved from the Drug Enforcement Administration to USDA, and new regulations the agency released on Tuesday offer to set a framework for states moving forward.
Under the proposed new regulations, USDA will begin approving state regulatory plans. Each state will have the option to either submit its own plan to be approved by USDA, opt in to the federal plan or prohibit hemp production.
The interim final rule goes into effect immediately and provides much-needed clarity and direction for producers looking to step into the new industry. USDA has 60 days to approve state plans after their submission.
U.S. hemp acreage has increased exponentially, jumping almost 70,000 acres (680%) between 2016 and 2018. With the market for hemp-derived cannabidiol (CBD) in the U.S. set to top $23 billion in revenue by 2023, hemp cultivation is expected to surge, according to recent research from Brightfield Group. The firm also expects hemp acres to grow at an annual rate of more than 75% per year through 2023, yielding up to 2.7 million planted acres.
Brightfield projects that hemp for CBD use could potentially lead to revenue of more than $40,000 per acre, compared to less than $1,000 per acre for corn.
The National Association of State Departments of Agriculture (NASDA) praised USDA's work to generate a federal framework that allows state agriculture departments to submit plans to regulate the crop and, after approval, begin to direct hemp production in their states.
“Hemp is currently legal to grow in 46 states, and all of those states have indicated they will submit a plan to the USDA,” NASDA chief executive officer Barb Glenn said. “USDA's presentation of the guidelines means farmers can plant hemp for the 2020 growing season, and states can develop regulations that are uniform and consistent to encourage interstate commerce.”
Iowa secretary of agriculture Mike Naig said Iowa will use USDA's proposed hemp program rules to refine a draft hemp plan before the states submits it to USDA for approval. “USDA will have 60 days to review and respond to our plan. We are working hard to have Iowa's hemp program implemented in time for the 2020 growing season,” Naig said.
The Iowa Department of Agriculture & Land Stewardship is also drafting administrative rules that will be released for public comment in the coming weeks.
“In the meantime, we want to caution people that it is not legal to cultivate, grow or distribute hemp in Iowa until the USDA approves our state plan,” Naig said. “We also encourage growers to make sure they have quality seed and a buyer identified before they invest in hemp production.”
The pressure now turns to the Food & Drug Administration to enact regulations for hemp-derived CBD products, but the agency said it needs congressional action to speed up the process.
Looking ahead, NASDA is advising FDA to establish a well-defined regulatory framework for CBD products, since most of the interest in this emerging crop currently is due to CBD production. Last year, hemp acreage quadrupled. Understanding this, it can be expected that an incredible volume will be ready for processing at the end of the 2020 growing season.
“Regulations that chart pathways for nationwide market development and interstate commerce will be critical for this industry to become economically viable,” Glenn said. “Assurance that producers will have a market to sell to, locally or elsewhere, is necessary before harvest time.”
Michael Weiner, partner at international law firm Dorsey & Whitney and chair of its Cannabis Practice Group, said CBD has not really taken off yet at the same time that cannabis is really flattening out.
“I think a big part of it has to do with the regulatory uncertainty,” Weiner said in a statement. “I also think the vaping issues are giving the FDA an opportunity to take a longer look before issuing stronger regulations than once thought. The FDA was concerned that CBD producers did not have safety data, and the vaping issues lend credence to their concerns.”
Weiner added, “Folks thought weak regulations were going to fly through the FDA and then they could start introducing CBD products almost immediately that complied with regulations. It does not currently appear that it will happen, and as a result, we are not seeing the market take off yet. I still think hemp-[derived] CBD is going to be a huge market for health and wellness and food and beverage -- not to mention quasi-therapeutic ointments that promise some vague benefits. Consumers can avoid the stigma of cannabis and buy products they are familiar with, now infused with CBD."