CBD Is Just the Beginning of the Limitless Opportunities of Legal Hemp
December 20, 2018, is basically hemp’s Fourth of July. That’s when President Trump signed the 2018 Farm Bill, making industrial hemp a lawful agricultural commodity nationwide for the first time in 80 years.
And what is “industrial hemp”? It’s a term for a specific variety of cannabis -- one that, by law, contains less than 0.3 percent of the psychoactive compound tetrahydrocannabinol (THC), which means it won’t get anyone high. At its core, industrial hemp is just a really hardy crop. It thrives in most soils, requires few chemical fertilizers or pesticides, and grows extremely fast, furiously absorbing carbon from the atmosphere from germination to harvest, when its real versatility shines. Its uses range from foods and medicines to textiles, construction materials, biofuels, and bioplastics.
Now it’s legal to grow and sell -- which, in truth, the average consumer might not think sounds like a big deal. After all, they’ve been able to buy hemp rope, seeds, and other related products for years. But that’s because those products were all imported; it was stateside growing that had long been forbidden. The Farm Bill changed all that, and now United States farmers, entrepreneurs, and advocates are all moving quickly to capitalize on what they see as a very promising cash crop -- one that could help the combined cannabis and hemp-CBD industries grow to $42 billion by 2022, according to a study by Brightfield Group last year.
With so much potential, the big question now is: What are the most immediate business opportunities presented by hemp legalization? Here, we break down the biggest five.
Opportunity #1: Wellness products
“In the short term, the nutritional and cosmetic products will be the easiest ways to enter the market,” predicts Samantha Walsh, cofounder and CEO of Tetra Public Affairs, and a strategist and legislative policy expert.
That’s in part because consumers already associate hemp with health, and in multiple ways. Wellness-minded consumers buy plenty of hemp seed, hemp seed oil, hemp milk, and a host of other hemp foods. They’re also increasingly buying CBD products -- and that, too, was made legal with the Farm Bill, because CBD (or cannabidiol) is a by-product of hemp. CBD products have gained popularity as a remedy for anxiety, chronic pain, epilepsy, and other conditions.
With new freedoms, however, there will also likely be new restrictions. Hemp businesses will have to adapt to a regulatory environment that is still taking shape, insiders say -- and that’s especially true for anything that’s sold to be ingested. “The USDA is expected to develop hemp cultivation rules by the end of the year,” Walsh says, “but if it doesn’t, the states will have to submit their own programs, which the USDA will have to approve. Hemp businesses and farmers will have to learn about and operate within a structure that’s not yet determined.”
The FDA will play a major role further down the supply chain. “It will update regulations for processing and manufacturing hemp, but, again, if it doesn’t, or until it does, businesses making and selling hemp products will operate within existing federal and state parameters,” says Walsh.
But while wellness products may start booming immediately, insiders say that the more interesting changes will be quietly happening in the background. That’s because legalization opens financial doors for hemp businesses, Walsh says, and the access to banking and investment capital will make greater innovation possible. She says that even for smaller transactions, hemp retailers’ impending ability to accept debit and credit payments will be “a complete game changer.” And it’ll supercharge all sorts of other hemp-related businesses -- ones that go far beyond what consumers are familiar with today.
Opportunity #2: Processing
When hemp was illegal, few American businesses were developing ways to work with it. That means the country is far behind its international competition -- and opportunities abound to play catch-up. “If anyone can advance processing and manufacturing,” Walsh says, “there will be business opportunities to fill gaps in the supply chain. A lot of the current processing and manufacturing technology is antiquated.”
For example, there’s the problem of waste.
Because of the undeveloped hemp supply chain, a lot of potentially valuable raw material is being discarded, says Carl Lehrburger of PureHemp Technology. “Most of the hemp plant is underutilized in the U.S.,” Lehrburger says. It’s processed for CBD, where the market is booming, but not for what he calls “the real gold,” like valuable raw material to create everything from protein powder to plastic. Most of that gets thrown away.
It doesn’t have to be this way, but the ability to fully process hemp stalks simply is not yet available. That’s why, as cultivation takes off, processing capacity will need to keep up. Hemp has to be dried and processed close to where it’s grown, or else the transportation costs eat into profits. And if local processors can’t keep up, a hemp pileup ensues: Plants will be grown, but they’ll go bad before anyone can turn them into salable products.
“If you’re asking if there’s enough [fiber] processing capacity in the Mid-Atlantic, the answer is no,” says Leighton Rice, co-owner of Humble Hemp Farmers, who first planted hemp for CBD in 2018 under Pennsylvania’s pilot program. Even though his main crop is not fiber, he recognizes that the quantity of stalk left after the flowers are harvested is “not insignificant.” But, he says, “we don’t have an outlet for it.”
Despite all this waste, Rice is optimistic. In November 2018, he was about 15 percent into the harvesting process when he started to get calls every day from buyers offering to pre-buy his flowers for $80 to $100 per pound after testing determined what grade of CBD they would produce. Once people see how valuable the crop can be, he expects processors to scale up fast.
Opportunity #3: CBD
We already talked about wellness products, of which CBD is a part. But in truth, it’s a category all its own.
What exactly does CBD do? Although much of the scientific evidence is preliminary, CBD has been suggested as a treatment for all sorts of conditions. Most commonly found as an oil, CBD can also be infused into food or drink, as well as vaped or applied topically.
Jeff Wright, vice president for extraction and purification for Thar Process, a Pittsburgh company specializing in cutting-edge CBD extraction technology, compares it to omega-3 fatty acids 20 years ago. “In the ’90s, omega-3s were hot, hot, hot,” he says. “CBD is the next omega-3.” From his perspective in the middle of the CBD supply chain, Wright also sees the business opportunity it presents. “Not too many people are farming hemp right now,” he says, “so there’s a window of time when it’s extremely lucrative to grow. Long-term, it will be a huge commodity.”
Steven Turetsky and Drew Ferguson, managing directors of Shi Farms in Pueblo, Colo., a high-CBD-hemp farm and vertically integrated CBD ingredient supplier, are well aware of the CBD boom. After starting out in the marijuana-infused-product market, Turetsky and Ferguson noted the lack of reliability, transparency, and quality of CBD suppliers and decided to make the switch from marijuana to hemp. “We felt the market lacked enough real businesses, in scale, quality, and ethics,” Turetsky says. “And there was a big opportunity to enter the industry and simply do things the right way.”
In 2018, Shi Farms and its cooperative farms planted 225 acres of high-CBD hemp in both Colorado and New York with plans to scale further this coming season. “Maintaining quality and consistency while scaling quickly has been challenging,” says Ferguson. “We’re pioneers again, trying to grow cannabis like you’d grow corn.”
Opportunity #4: Farming
Aaron Cromer believes hemp can revive his hometown of Elkhart, Kansas (population: 1,896). Like others across the country, local farmers there have struggled to increase revenues. Other enterprises have also harmed the economic outlook of the community. The oil and gas industries once thrived in Western Kansas, employing workers in construction, repair, and drilling. Most of those jobs, Cromer says, have dried up.
“Our infrastructure is in place because of the oil and gas industry, but now we have only production guys, about half what it used to be. We had an 86 percent tax increase in 2016 because of that lost revenue,” he recalls. “There were nearly 100 empty homes in town.” In a place with just more than 942 households, according to 2017 census data, that is a serious problem.
But Cromer believes hemp can change that. He envisions the crop, which just became legal to grow with a license in Kansas, as a key to boosting farm revenues across the breadbasket.
“Imagine you put 20 percent of acreage into hemp across your farm instead of corn,” Cromer says. “For each farm, we’ve got 20 percent less corn, which, if enough farmers across the region buy in as well, drives supply down and the commodity price up. Not to mention it will diversify marketing for farmers because we’re not at the elevator’s mercy,” he adds.
He says farmers are also excited about growing a crop that moves so quickly. His area has very little storage capacity, so farmers need a product that sells. “With hemp, we’ve got an oil market, a potential fiber market, so it diversifies a farmer’s ability to market his crop,” he says. “He’s got a whole marketplace to deal with and can tailor his hemp to suit that market.”
Cromer also sees the labor-intensive aspect of growing for CBD as a plus. Demand is high, and the crop can produce two to four harvests a year, so it creates jobs.
Opportunity #5: Bioplastics
While farmers in Elkhart go after CBD, others are looking toward hemp’s nearly unlimited potential as a raw material for industrial applications. Humans have used hemp fibers to make ropes since 600 BCE. From there clothing, sails, and more followed, and now the industry may be setting up for a big comeback. The Los Angeles–based sustainable clothing company Recreator, for example, is making clothing out of U.S.-grown hemp cloth.
But more dramatic are the opportunities in hemp-based bioplastics, which, instead of being manufactured using fossil-fuel-based carbon, contain carbon from renewable sources such as hemp alone or in combination with other plant sources such as corn. Some bioplastics may even be compostable as well.
By 2020, bioplastics are predicted to control 5 percent of the plastics market, rising to 40 percent by 2030, according to Grand View Research. Thanks to a confluence of consumer demand for more sustainable goods, corporate initiatives, and falling manufacturing costs, production of bioplastics is about to take off.
“We expect market dominance in bioplastic hemp,” says Kevin Tubbs, founder of The Hemp Plastic Company. The Boulder, Colo.-based company specializes in raw bioplastic that’s sold to packaging companies -- think toothpaste and lotion tubes, resealable pouches for trail mix, and jars for face cream. Tubbs says the choice was easy after making eco-friendly packaging for 20 years. “We need plastic,” he says.
Tubbs advises potential investors to think about raw material costs. “Take a pound of raw polymer and compare it to a pound of raw hemp: The hemp is cheaper than the material cost of fossil fuel -- when the price of oil rises, the price of hemp does not. Every ounce of it I add to the other polymers, it makes the resulting polymer greener and less expensive.”
Today, Tubbs is manufacturing about a million pounds of hemp-based bioplastic a week. But he believes that’s just the start. His product, he says, has the potential to overtake raw polymer, its petroleum-based cousin, in coming decades. It’s a lofty vision, but the result would be transformative -- creating business opportunities in hemp that will feed demand for sustainable packaging, and change an industry in the process.
With the potential to become a vital commodity feeding into food, pharmaceutical, nutraceutical, textile, and manufacturing sectors, hemp has the potential to do wonders for rural economies and fuel the growth of a diverse and profitable green industry. Senator Mitch McConnell pushed hard for the legalization of industrial hemp because, he wrote in April 2018, it made Kentucky farmers $16 million in 2016 and could replace tobacco as a major cash crop. “At a time when farm income is down and growers are struggling,” wrote McConnell, “industrial hemp is a bright spot of agriculture’s future.”