Hemp needs more Regulatory Certainty

It wasn't that long ago that advocates were promoting hemp as the crop that would save agriculture, promising unprecedented profits.

On paper the prospects are bright. CBD, processed from hemp, is seen by many as a magic elixir for health and beauty aids. A variety of products can be manufactured from the plant's fibers.

But in just four years the crop has gone from boon to bust, thanks to overproduction and a federal regulatory scheme that has made processors wary of developing new hemp-related products.

Oregon growers can attest to the crop's change in fortune.

Acreage in the state soared after Congress legalized hemp in 2018. Growers planted nearly 64,000 acres in 2019, a more than fivefold increase from 2018.

Farmers accustomed to earning a few hundred dollars per acre were inspired to switch to hemp after hearing about others earning $50,000 per acre in revenues from hemp.

Investors with more money than agricultural experience came to stake their claim, promising landowners cash rents that pushed veteran farmers out of the market. Hucksters quickly moved in to sell novice growers useless seed and to take payment for services they never provided.

The economic problems facing hemp production became apparent that autumn, when many farmers weren't able to access enough harvesting and processing equipment. Many of the would-be hemp barons had failed to line up buyers.

To make matters worse, the weather was wet at harvest time.

More than half the crop failed to make it to harvest, but the amount that was harvested tanked the market.

In a dynamic that's not uncommon in agriculture, hemp production has overshot demand, which was once thought to be expansive.

"Show a farmer a profit, and he'll show you a surplus," Ken Iverson, a grower in Woodburn, said.

The industry is in the process of trying to right-size the crop. Only 1 in 7 of the original growers remain. About 3,250 acres of hemp were licensed for planting across the state in 2022, down 95% from 64,000 acres in 2019.

But overproduction is not the only problem.

Hemp is a cousin of marijuana. Usually it contains extremely low levels of THC, the compound that produces pot's high. Until changed by the 2018 Farm Bill, it was classified under federal law with marijuana as a Schedule I controlled substance.

The similarities have led to regulatory fits. While Congress gave the U.S. Department of Agriculture authority over the cultivation of hemp, other agencies maintain jurisdiction.

During processing, THC levels in hemp can briefly increase to more than 0.3%. That meets the federal Drug Enforcement Administration's definition of marijuana, making it illegal. Processors beware.

The Food and Drug Administration has authority over food and cosmetics containing CBD, and uncertainty has constrained new product development.

Congress should create greater certainty in the next farm bill. Hemp will probably never live up to the hype of the 2019 heydays, but it will remain a niche if processors and product developers fear heavy-handed regulators.