As cannabis prices in Oregon continue to decrease due to oversupply, we are seeing more of our clients throw their hat into the industrial hemp arena. The 2014 Farm Bill, which authorized hemp production under certain state research programs, expired on September 30th, but growers and entrepreneurs appear unphased and see hemp as a lucrative alternative to the marijuana market. Both the Senate and the House of Representatives passed their own versions of the 2018 Farm Bill in June of this year. The proposed legislation would take hemp off the Controlled Substances Act and end the federal prohibition on domestic production of hemp and hemp products. Senate Majority Leader Mitch McConnell told reporters in July that he was optimistic that legislators would be able to take the 2018 Farm Bill to the finish line, but the House of Representatives and the Senate have not been able to agree on a uniform version of the bill. While one can only hope that legislators will agree on a proposed bill by the end of the year, growers should keep in mind that under the 2014 Farm Bill the hemp pilot programs will sunset in 2019.
Despite the shroud of legal uncertainty on the federal level, the amount of hemp production in the United States has increased dramatically – increasing from 9,767 acres in 2016 to 26,217 acres in 2017, according to the 2018 Hemp & CBD Industry Factbook. And with good reason – hemp producers can participate in the continuously growing CBD market while maintaining lower production and regulatory costs compared to marijuana. In addition, there is no limit on the number of acres or plants that a licensed industrial hemp producer can grow in Oregon, whereas licensed marijuana growers are limited to about an acre of outdoor grow. By expanding into the hemp market, cannabis companies can diversify their revenue stream and hedge against the overpopulated and hypercompetitive marijuana market.
There is important information that all businesses getting involved in industrial hemp need to know. Although the licensing requirements for industrial hemp are more relaxed than the OLCC licensing requirements for marijuana, the registration requirements for hemp are constantly evolving. Currently, all businesses that wish to grow or handle industrial hemp are required to obtain a license with the Oregon Department of Agriculture (ODA). An additional $120 registration is needed for those who want to produce or handle agricultural hemp seed. It is important to note that businesses dealing with hemp seed are obligated to comply with the ODA’s seed labeling requirements. Another important factor to keep in mind is that all handlers, edible manufacturers and retailers likely need an ODA Food Safety license if the business is making an ingredient to be used in any food or drink, which includes any extracts or concentrates that will be later used in any food, drink or tincture.
The ODA has proposed changes to the current law governing hemp, and we should expect to see the new finalized rule in the near future. The proposed changes include, among other things, clarifying important information about licensing registration, additional reporting and record keeping requirements, and a new requirement that anyone transporting industrial hemp must have a copy of their registration and test results.
Entering the industrial hemp market appears to be a worthwhile endeavor, but the regulations and licensing requirements can be complicated.