Beginning earlier this decade, legislation on the federal level as well as in Kentucky has helped a longstanding industry in the commonwealth – hemp production – enjoy a rebirth. According to the Kentucky Department of Agriculture, 978 licensed hemp growers were approved in the state this year, up nearly 500% from 210 in 2018. The KDA has also licensed 202 hemp processors in Kentucky this year, up from 72 in 2018. Those processors reported $57.75 million in gross product sales in 2018, rising from $16.7 million in sales in 2017.
Four hemp advocates discussed its growing importance to the commonwealth’s agriculture economy on Kentucky Tonight. The guests were Jim Higdon, author and co-founder of Cornbread Hemp; Katelyn Wiard of the U.S. Hemp Roundtable; Jana Groda, co-owner of One Love Hemp Dispensary; and Alyssa Erickson, founder and president of Kentucky Hemp Heritage Alliance and co-founder of Kentucky Hempsters.
The 2018 Farm Bill empowers states to craft their own hemp monitoring and regulatory policy and submit it to the USDA for approval. Kaitlyn Wiard of the U.S. Hemp Roundtable says that the public comment for this USDA Interim Final Rule ends on Dec. 30, and that the new framework should be in place by spring 2020.
Kentucky’s Department of Agriculture is currently reviewing its own licensing program, and will also hold a public comment period after the review is complete before it submits its final proposed regulatory plan to the USDA in compliance with its Interim Final Rule.
Here are five takeaways from the discussion:
1) The current upsurge in Kentucky’s hemp economy is based on the state’s traditional connection to the plant as well as creative thinking.
Hemp was crucial to Kentucky’s economy for nearly 200 years, says Alyssa Erickson of Kentucky Hempsters. Much of the commerce in past decades involved using hemp fibers, but thanks to scientific innovation and entrepreneurial ingenuity, the market for hemp has expanded to include nutritional products made from its seeds and medicinal supplements using the active ingredient cannabidiol (CBD). While consuming CBD does not provide the “high” associated with marijuana, research has shown that it does offer relief for a variety of medical conditions, including epilepsy, anxiety, and insomnia.
Higdon describes his own business at Cornbread Hemp as one that uses distilling practices drawn from Kentucky’s bourbon industry to improve on the original CBD extraction method introduced several years back in Colorado.
“When it came to Kentucky, we had this whole tradition of bourbon making sort of applied to the CBD making process, and when we do that at Cornbread Hemp we end up with a superior product, and it’s really helped our business grow,” he says.
A KET clip visiting Ag-Tech Scientific in Bourbon County showcases how the company, which shifted its focus from bedding plants to industrial hemp, uses practices from sources not often relied on in the business world to improve its production operations.
“This is all uncharted territory,” says Mark Gifford, special projects manager for Ag-Tech Scientific. “A lot of the information that we get on how to do a lot of this stuff comes from marijuana growers, because if we always said that marijuana killed the hemp industry, (now) it’s marijuana that’s bringing it back.”
Higdon points out that there is a current federal restriction with a 10-year look-back window that denies a hemp production license to anyone convicted of a felony involving a controlled substance. However, he notes that a licensed hemp farmer can hire employees with felony convictions involving controlled substances to work for them.
“Some of these first-time farmers working out in the field next year, what they really need is someone with that criminal conviction who knows how to grow this crop to help them along,” he says.
2) For hemp to truly become a pillar of the state’s economy, more regulatory changes need to be made to distinguish it from marijuana.
Hemp and marijuana both come from the cannabis plant, and marijuana is still listed as a Schedule 1 drug under the Controlled Substances Act. Language in the 2014 Federal Farm Bill deemed that any hemp produced must contain no more than 0.3% of tetrahydrocannabinol (THC), the psychoactive compound in the cannabis plant that produces the “high” in marijuana.
That 0.3% threshold was maintained in the 2018 federal Farm Bill and current USDA Interim Rule, and it is a major concern for businesses created to produce industrial hemp, says Higdon. Each cannabis plant can contain different levels of THC depending on where it was grown, how it was grown, whether it is heated or not, what part of it is being used, and other qualities.
“Many of the plants, many of the cultivars that are being grown as hemp this growing season will be non-compliant next growing season because of the strictness of the THC testing standards in these interim rules,” he says.
The panelists all agree that there needs to be flexibility in the testing of cannabis plants used in industrial hemp production for THC levels. A protocol should be established that includes follow-up testing if a plant does not meet the restrictions, Erickson says, but overall industrial hemp producers and processors should be recognized as participants in the broader agricultural economy rather than as illicit drug growers.
“People don’t understand that after you harvest and go through that drying process, the THC level goes down,” Erickson says. “So if you’re tested at 0.4%, there’s a high chance that after it’s processed and dried that it’s going to be down to the compliant level.”
“The heart of the industry is the farmer,” says Jana Groda of One Love Hemp Dispensary. “And we have to give that wiggle room to them, because if a field tests over that 0.3%, they destroy that field. And a farmer does not have insurance, our crops don’t have insurance at this point.”
“We’re talking about a fraction of a percentage point,” Higdon says, “that can make something turn from a profitable commodity to a controlled substance, and the farmer becomes a criminal if he doesn’t destroy the crop that he spent his whole summer trying to grow. It’s the arbitrary decimal points that’s going to make the long-term viability of this crop difficult if we don’t give the farmer some flexibility.”
3) Hemp businesses still have trouble getting financial support and insurance, but regulatory help may be on the way.
Groda’s dispensary only sells “verified” CBD products (analyzed by a third-party lab and deemed safe for use). Despite this, she and most other hemp businesses find it very difficult to secure business loans or even gain access to credit card processing online.
“Last year, from December through July, was one of the most stressful times in my life,” Groda says. “Every (business) was welcomed by a company, and then, I think it was March, they pulled the plug on everybody.”
This uncertainty from financial institutions is based on marijuana’s ongoing status as a federally banned Schedule 1 drug, which understandably makes banks leery of forming long-term business agreements with cannabis-based entities. This puts legitimate CBD stores such as Groda’s in a state of limbo where they have to work on a cash basis and are unable to implement a modern accounting system.
“It’s treating us like we’re doing some criminal act, and we’re not” she says. “It’s federally legal, but the banks are treating us like we’re criminals.”
Recently, the U.S. House of Representatives passed the bipartisan SAFE (Secure and Fair Enforcement) Banking Act, which will help cannabis-based businesses, including those in states that have legalized marijuana, gain access to banking and insurance services. U.S. Rep Andy Barr (R-KY6) introduced an amendment before the final vote that added hemp farmers and processors into the bill, which will now go to the U.S. Senate for consideration.
“Hemp growers, and people selling hemp in retail, they are having issues with banking and card processing,” Wiard says. “And so the language that Rep. Barr included into that bill will provide a safe harbor, so that the banks and card processors would no longer have to be afraid of federal regulatory action… What it would also do is require that federal financial regulators issue formal guidance to banks and card processors, encouraging them to do business with hemp companies.”
As for insurance, Wiard and Higdon explain that the U.S. Department of Agriculture is currently collecting data on a three-year schedule in order to build a crop insurance plan. Wiard encourages viewers working in the hemp industry to contact the U.S. Hemp Roundtable and provide information about their businesses that will be sent to the USDA in order to build a comprehensive and effective insurance program for hemp.
The panelists all agree, however, that even if a USDA plan is established, further federal action is also needed to help hemp businesses navigate the 0.3% THC threshold before insurers will be willing to offer policies to cover their crops.
4) How the hemp industry will benefit if and when marijuana is legalized in Kentucky is an open question. But the various other uses for hemp should ensure its economic viability in the years to come.
Higdon believes that the 2018 Farm Bill was the “tipping point” for what he predicts will be eventual federal legalization for marijuana, and he also feels that the Kentucky legislature is moving in that direction through its embrace of hemp production. But even if that doesn’t occur anytime soon, the panelists agree that hemp offers many benefits as a cash crop in Kentucky’s agriculture marketplace, and that continuing innovation should create even more of them in the future.
According to Higdon, Murray State University in western Kentucky is currently conducting research into using hemp as feed stock for egg-laying chickens. And Erickson notes that hemp is a good source of omega-3 fatty acids, making hemp seed oil a good alternative to fish oil in cooking.
Erickson is also excited about developing uses for hemp fiber, such as in construction materials. Hemp is just as sturdy as other materials, she says, and is more environmentally sustainable. “I am working on a project through Kentucky Hempsters to show off more of the building uses and applications through that,” she says, “and of course there are other products, whether it’s seed, or CBD, body products, biofuels, papers – the future’s really unlimited.”
One drawback to how hemp commerce is regulated in Kentucky involves the hemp flower, or bud, according to Higdon. In the commonwealth, farmers can only sell hemp flowers to licensed processors, not directly to consumers. In many other states with industrial hemp production, this restriction does not apply.
“Farmers are able to get much more per pound for hemp flower in states like Tennessee, Oregon, Colorado where they can sell hemp flower as flower – in Kentucky, we’ve disallowed that,” he argues.
Although a hemp bud is indistinguishable in every way from a marijuana bud save for the THC content, Higdon says that law enforcement concerns should not override the needs of businesses and consumers, especially since most Kentucky county police departments do not enforce marijuana possession laws like they used to.
Groda agrees. “If I’m thinking about my customers, a lot of them have conditions where they’d rather just take that raw plant that hasn’t been touched and process it the way they want to process it,” she says, “meaning they could just eat the bud raw, they can smoke it, or they can put it into a brownie, they can do whatever they want to do with it – and it’s still hemp.”
Higdon and the other panelists maintain that the Kentucky legislature and the state Department of Agriculture need to revise current statute and open up the market within the state’s borders. “Why would any farmer want to take less money for the same crop?” asks Erickson. “I’m for anything that’s going to put more money in our farmer’s pockets and allow people to have safe products.”
5) The overall future of the hemp industry in Kentucky is encouraging. But persons seeking to start their own business should do their homework and take it slow.
Modern industrial hemp production in Kentucky only started five years ago, and since then many businesses have operated under the research-model restrictions first granted in the 2014 federal Farm Bill. With U.S. Senate Majority Leader Mitch McConnell’s (R-KY) push, the 2018 Farm Bill loosened many guidelines, Alyssa Erickson says, but there’s still a lot of uncertainty in the sector, and the fast growth in CBD hemp farming may soon taper off.
“Right now, CBD is the most lucrative (business) with the highest demand, but those prices are going to go down the more the market becomes saturated,” she predicts. “The playing field is going to even out, and there’s going to have to be other opportunities to keep this crop going and keep it an industry.”
Overall, the four panelists agree with a statement made by the head of the Kentucky Farm Bureau Association during a recent legislative committee meeting in Frankfort. He advised aspiring industrial hemp businesspersons to “be careful, and go slow.”
“Start with an acre next year, and see what’s going on, but don’t put your eggs in one basket going out and growing 100 acres of hemp without knowing what you’re doing with it,” Higdon says. He adds that the Kentucky Department of Agriculture has been very flexible with farmers who request a certain parcel of land to devote to hemp production and then later decide to expand their business.
Growing hemp “is very different than growing any other plant,” Groda says. “Depending on if you want to grow fiber, food, or CBD, that’s three different ways of growing it. CBD (production) is a different thing, it’s not as easy as you would think it to be. Starting small is imperative – to your sanity.”
“I’ll echo what everyone else has said – you really have to have a plan,” Wiard says. “We’ve heard about farmers who bite off a lot more than they can chew and don’t know what they’re doing, invest all this money and then are left with a crop that’s not viable. And that’s what we don’t want to see happen.”
The Kentucky Department of Agriculture will hold a Hemp Summit on Dec. 4 at the Kentucky Exposition Center in Louisville. For more information, visit https://kyagr.com/marketing/hemp-summit.html.
