Hemp

The fledgling hemp business faces multiple issues as the USDA extends the regulations’ discussion time. Deadline for comments on the October rules release have been extended to Jan. 31.

A year ago the Colorado Department of Agriculture was processing applications for hemp growing permits in Colorado. At least Colorado had a licensing process and some regulations. A lot of states were just going by the hastily thrown together rules from the USDA, based on the 2018 Farm Bill. Local hemp processor Matt Miles called the new industry a quasi-legal business. There were way more questions than there were answers.

But the genie was out of the bottle. The hemp boom had begun. It has to be dealt with.

So, playing catch up over the past year, the USDA has cobbled together a set of regulations that would govern the green rush that converted 30,000 acres of Colorado farmland from corn, beans, onions, animal feeds and other crops to sprawling fields of low THC cannabis plants. Montrose, Delta and Mesa counties pretty much led the movement. Now, those regulations look like Bonnie and Clyde’s last car. Shot full of holes, the regs have not been received well. And the problem is, for the USDA, the FDA, and the rest of the industry, the methods for solving the regulation issues could be likened to swatting flies with chicken wire.

The USDA released the new interim rules in October, leaving the door open for comments from the public and industry, until the end of 2019. That deadline was two days ago. But that end date was changed in the past week. The USDA has extended the deadline to the end of January 2020. Through the last day of December, the agency had received something in excess of 1400 comments from farmers, legislators, processors, state agencies and the general population. Almost no one is happy.

The biggest single issue is the “hot crop.” A hot crop is one where the Tetrahydrocannabinol (THC) level exceeds the (currently used) .03% level that has been pretty much adopted by states and the fed as the safe, read that, non-psycho-reactive level. When a hot crop is found, the grower takes the hit, the whole batch is destroyed, because it has been deemed a controlled substance. Two major problems are connected to the THC level ruling.

First, what the rule makers are hearing from the people on the ground, is that the THC limit number is too low. The USDA’s new reg’s suggested .05%, but hemp stakeholders and legislators around the country think the number ought to be 1%. Keeping hemp out of the marijuana class means keeping the THC well below the “kick-ass weed” level. A typical Mary Jane plant will have a THC level of 5-20%, while some chemistry comes in at 25-30%. Even the suggested 1% is agreed to be anything but wacky-backy.

The second broken leg on the stool is that, while the THC level is a bone of contention, perhaps the biggest matter is the testing time frame prior to harvest and the question of who does the testing.The timing issue rose to the forefront this past season in Colorado. Growers almost immediately began having problems with the Colorado Department of Agriculture meeting all the testing needs on time. The USDA exacerbated the matter when they added the need for the tester to be a DEA drug testing facility. Typically, in the rural states, there might be only one DEA facility or DEA-blessed lab in the state.

Here is the problem with testing timing. There is no strain of hemp that stops its development of THC and CBD automatically at a certain time. According to the chemists who deal with the industrial hemp plant, CBD develops ahead of THC. The CBD reaches a useful point, while the THC is well behind it. However, if the plant is not tested and harvested while the CBD is high and the THC is still racing to catch up, the THC will catch up and the crop goes hot. Drug laws demand it be destroyed.The 15-day notification of harvest and request for testing is too short, (1) for the manpower available, and (2) we simply don’t have enough data on all growing conditions to predict that magic date of harvest.

The only way the USDA and the CDA are going to meet the need for changes in the regulations that will allow the industry to function is for all the stakeholders and others in the hemp business to respond to the USDA call for comments. Submit comments on the Establishment of a Domestic Hemp Production Program interim final rule at Regulations.gov. Comments may be submitted until Jan. 31, 2020.

District 6 State Senator Don Coram would like to hear from interested parties as well. You can email him at don@doncoram.com

Somebody finally said it

New Frontier Data is a company whose specialty is crunching numbers from the hemp industry. In a far ranging report written by William Sumners, that they published in December, they offered the conclusion that the U.S. domestic hemp market is in oversupply. In the often applied Gold Rush parlance, that is too many prospectors for too little gold. According to New Frontier, there were 112,163 acres under hemp in the U.S. in 2018. There were 480,334 in 2019 — that’s a 328 percent bump. The jump was, without any doubt, driven by the hype. Screaming headlines about the world demand for CBD oil and huge returns on acreage planted, led a lot of players to dash for the cash.

The problems associated with the increased production include the lack of coherent regulation as indicated by the disapproval of the USDA efforts. According to Sumner there is also the matter of not enough processors to keep up with the crop load. It takes a lot of machinery and technology to take a raw hemp plant out of the field and remove that tiny percentage of useful material.

A plant like General Processing, Montrose and Delta county’s only processor, can handle about 10,000 pounds or five tons of hemp in a day, producing up to 1000 pounds of oil. A typical hemp field yields are around 2.5 to 3 tons per acre. That means the operation can handle the yield from less than three acres of production in a day. This indicates it would take almost two weeks to handle a 40 acre patch. That’s about 1000 acres a year.

While there is undoubtedly a demand for CBD, the massive influx of producers has driven the price of the supplement down. Comparing the 2012 price of hemp oil with this year’s returns indicate that a milligram of CDB in 2012 was 90 cents. The 2019 price is 11 cents. That’s minus 88%. That doesn’t translate directly to the grower, but let’s say half of it does, that puts the yield income somewhere near half of that touted $50,000 or $60,000 per acre number that we heard a year or two ago. Still not bad, but the price drop may not be finished.

If the production of hemp and CBD has been the wild west, the sales of CBD related products may approach the insanity of the prohibition days. Enter the Federal Drug Administration, which is way behind, even behind the USDA in dealing with what the regulators perceive to be a very serious matter. Sumner offered this synopsis in his New Frontiers piece:

“With the growing popularity and marketing ubiquity of CBD products, federal regulators are challenged to perform research and establish policy about the cannabinoid. Questions of health and public safety abound, especially as manufacturers and retailers make far-flung claims about the range and efficacy of such applications.”

One lawyer type suggested this week that an efficient body of regulations from the FDA will most likely be months or years away, rather then weeks, which is what the situation demands.

Michael A. Cox is a Montrose-based content provider. He may be reached at michaelc@agwriter.us

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