Hemp’s Impact on the US Economy and How to Capitalize on this New Industry


After over 80 years of prohibition, hemp cultivation and manufacturing has just become legal is now legal in the United States. On December 20th, 2018, President Donald J. Trump signed into law the Agriculture Improvement Act of 2018, also known as the U.S. Farm Bill, that included a provision to allow for the cultivation of industrial hemp. Up until now, the majority of hemp has been imported from other countries like China. U.S. farmers were given permission to grow hemp for pilot programs for research purposes in the 2014 Farm Bill, which created a limited and potentially lucrative market showing the overall potential of federal legalization.

The hemp provision in the U.S. 2018 Farm Bill opens the industrial hemp market to cultivation for profit and treat hemp like any other agricultural commodity. Specifically, the bill gives protection for crops, such as the ability to obtain crop insurance. It extended the 2014 protections for researching hemp, and also set forth guideline for U.S. tribes to cultivate hemp. Each individual state will be allowed to implement their own laws regarding hemp, and it remains to be seen how hemp will be legalized across the country.

What does this mean for the US Economy?

Industrial hemp is a variety of Cannabis known as Cannabis sativa L, and by law in the United States has to contain less than 0.3% THC. Plants with greater than 0.3% THC are used specifically for medical and adult-use (recreational) purposes and produce a psychedelic effect that has been legalized in multiple states across the nation. The economic impact of hemp production is going to be much more far reaching than that of medical and adult use cannabis markets. The legalization of industrial hemp provides a much-needed boost to the United States agriculture industry, especially for farmers cultivating flagging crops such as tobacco. An agricultural commodity, hemp has the potential to inject billions of dollars back into farming and manufacturing.

In 2017, hemp generated $820 million in sales and the global hemp market is predicted to reach $10.6 billion by 2025 according to Grand View Research and is anticipated to sustain a compound annual growth rate (CAGR) of 14%. By contrast, the adult use cannabis market is predicted by Grand View Research to reach $146.4 billion by 2025 with a CGAR of 34.6%. Adult and medical use cannabis has seen a tremendous amount of market maturity as larger corporations begin to seek new product and brand opportunities. 2018 alone has seen major investment by organizations linked to the alcohol, tobacco and the pharmaceutical industries. Hemp is just being re-born and with lots of possibilities to overtake other markets in providing resources to meet many of today’s global needs.

What are the opportunities in hemp?

Hemp provides a seemingly endless amount of possibilities and opportunity for those interested in becoming a part of this booming billion-dollar industry. It has a myriad of uses that can replace or support other industries. Cultivating industrial hemp also opens the door to manufacturing hemp, which is what create the endless possibilities. One does not have to be a farmer to profit from this new economic boom.

Agriculture

Hemp will significantly help struggling farmers and provide a new commodity with a variety of uses. Hemp is relatively easy to grow and can be grown in many different climates. It is drought tolerant and uses very little fertilizer and little to no pesticides while also reconditioning soil preparing the soil for a different crop and reducing the need for farmers to let fields go fallow. It’s many uses, listed below, underscores the large demand potential.

Processing

Hemp provides a numerous amount of product manufacturing possibilities in the United States. Cannabinoids such as CBD made into isolate or distillate is very popular and used in a variety of cannabis products for topical use. Distillate is a full-spectrum extraction that can be used in multiple products, such as tinctures, in vaporizers, and made into capsule. Isolate, which is further refined from distillate and in crystal form, is typically infused into food, beverages and skincare.

Plastics

Most plastics are made from petroleum from products used during the refining process, making it resource intensive using a finite resource. Hemp cellulose can be used to make plastic, and it’s a renewable resource that is healthy for the soil while using less water. Hemp is already being used to make compressed door panel and dashboards and can also be used to make bottles and other types of packaging.

Biofuel

Hemp cellulose and hemp oil can be used to make ethanol and biodiesel derivatives, respectively. Ethanol is a fuel made from the alcohol of sugars found in grains like corn. Biodiesel is made from vegetable fats. Hemp can be made into both, either into ethanol using stalks that have been fermented, or biodiesel made from pressed hemp seeds. Ethanol from hemp can replace other crops used for ethanol that drive up food and feed costs, such as soy and corn.

Building Materials

Hemp can be used for a variety of building materials. Hempcrete, which is made with the woody inner core mixed with lime can be used to construct buildings and the fibers can be used to make hemp fiber batt insulation. Hemp oil can be used as a wood stain and finish.

Textiles

Hemp fiber is used to make a variety of products from rope to cloth. Hemp clothing is like cotton, but more durable. Hemp also uses 50% less of the amount of water used to cultivate cotton and also less pesticides.

Food

Hemp seeds and leaves are edible. Hemp seeds are highly nutritious. More than 25% of the calories in hemp are from protein and it has high concentrations of omega-3 and omega-6 fatty acids. The leaves from the hemp plant, which can be juiced or eaten in a salad, are full of vitamins, minerals, phytochemicals, and fiber.

Beauty and Wellness

Until recently, there was a surge in CBD-infused topicals, including massage lotions and balms. Many spas offer CBD facials, and while it is unclear how the FDA or state regulations surrounding CBD, hemp-based products are still very marketable. Hemp oil is very beneficial for the skin. The omega-6 helps reduce inflammation and hemp-oil is also purported to reduce fine-lines and wrinkles.

Imports and Exports

Hemp-based products are growing in demand across the globe. Facilitating imports and exports and brokering hemp deals can be quote lucrative. Hemp can be transported around the globe without the fear of legal ramifications. Furthermore, importing hemp does not always ensure high quality product, and there is a lack of transparency on the origins of the CBD in some of these countries.

Investing

The endless possibilities provided by a hemp economy is a major plus for investors who want to be a part of the new hemp industry and help it to grow. Starting a hemp processing and manufacturing facility is very resource intensive and many people will be seeking out seed money as well as money for capital raises through different stages of growth opening a large opportunity for investors. Those seeking to be passive investors will find that there are many opportunities to be a part of this fast growing new industry.

Equipment Leasing

Harvesting and manufacturing hemp is resource intensive. This means that farmers and manufacturers will need to access expensive equipment to start and run their businesses. Currently, the equipment used to harvest hemp needs to be jury-rigged to accommodate the rough fiber and stalks of the hemp plant. Farmers harvesting hemp will only need that equipment for a certain time of year, whereas a business leasing out equipment can make more value out of the use of the equipment by lending equipment to multiple farmers.

CBD and other Cannabinoids

Shortly after the 2018 Farm Bill was signed, the FDA issued a statement re-iterating that it is illegal to introduce food or dietary supplements making health claims regarding CBD. This is also because CBD has been used in clinical trials and is currently in FDA approved drugs. CBD has passed clinical trials in drug formulations like Epidiolex, made by GW pharmaceuticals and used to treat certain types of epilepsy.

In the aftermath, some hemp-based CBD social media accounts and websites have been either shut down for “selling pharmaceuticals” or received a cease and desist letter from the FDA. It is recommended that people and businesses marketing hemp-based CBD to not make medical claims about their products. Many businesses have stopped advertising CBD and only use the term hemp.

Conclusion

Hemp as an agricultural commodity with so many industrial applications stands to create a new generation of jobs, new wealth, and hope to many farmers. With issues such as climate change, finding a renewable resource is critical. Hemp solves a lot of the issues that society faces while providing new jobs, including highly skilled jobs, and bringing in billions of dollars of sales in a few short years. Getting involved is a matter of finding out where your strengths, talents and interests are best suited.

References:

https://www.congress.gov/bill/115th-congress/senate-bill/3042/text

https://www.brookings.edu/blog/fixgov/2018/12/14/the-farm-bill-hemp-and-cbd-explainer/

https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm628988.htm