Hemp Industry’s First Year Blues – And The China Question

News the ‘Don’ in the White House has secured a deal for China to buy U.S. hemp has been given an industry thumbs-up.

But, the question now being asked is whether there will be enough supply to fulfill any oriental exports. The passing of the Farm Bill in 2018 saw a massive increase in hemp farming with total acreage under cultivation rising five-fold. Licences issued for hemp cultivation increased to more than 400,000 acres in 2019, from 80,000 acres in 2018.

“As Bad As It Can Get”

However, recent estimates suggest just over the half of the licensed areas where planted, and figures from advocate group says Vote Hemp seem to back this up.

It estimates 2019’s U.S. hemp harvest will come in between 115,000 to 138,000 acres – well up on the to 78,126 acres of hemp harvested in 2018. And, whilst still a U.S. record, an increase of 50% it is hardly of the same magnitude as the licensing round indicated.

It’s been a tough year for this industry, with a combination of depressed prices, bad weather, seed issues, a lack of processing facilities and punitive rules on THC-content combining to depress even the most optimistic spirits.

One Illinois official told the wvik.org that ‘2019 was as bad as it can get’.

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Seed Sex Issues

With most farmers looking to grow hemp to supply the booming CBD market  there was a move away from the seeds familiar to the industrial hemp industry. Some farmers claim these new seeds just simply failed, while others have seen them produce ‘hot’ crops.

The Department of Agriculture (USDA) Interim Final Rules, published in October, last year, state that crops with a THC (delta-9 tetrahydrocannabinol) level of 0.3% are illegal and must be destroyed.

Over in Europe the THC content is restricted to 0.2% and this means most hemp plants are monocieous – both sexes on the same plant – producing CBD levels of around 3%. Seeds with a 0.3% THC bring opportunities to breed dioecious, or female plants, with much higher levels of CBD – up to 15%.

However, U.S. industry ‘Bible’ Hemp Benchmarks carries reports from dozens of farmers who are in dispute with seed companies over poor  genetics; ‘for providing non-feminized seed sold as feminized, as well as for seeds with low germination rates’, it says. 

Hot Crop

One large Kentucky business is suing an Oregon seed company for $44 million after purchasing millions of ‘feminised’ seeds – to discover ‘70% were male’. The Kentucky crop was destroyed to avoid pollinating other area hemp crops, resulting in losses for farmers and processors, say reports.

These difficulties are compounded by the USDA’s Interim Final Rules released on October 31 which takes a harsh approach to THC levels. This is a major irritant for U.S. farmers as they include in their calculations not just THC, but THC’s non psychoactive cannabinoid cousin THC-A (the acidic form of THC).

New USDA Rules Spell Problems For Smokable Hemp Flower Industry

With this included in total THC levels – on a dry weight basis –  this can boost total THC content to well over 0.3%. Recent reports from Arizona have demonstrated the extent of this problem with nearly 40% of its farmers’ plants failing the THC test.

The Arizona Department of Agriculture’s Plant Services Division, say that since early December, 53 of the 130 hemp crops tested failed, on a total of nearly 700 acres, equating to $13 million in losses.

“The failure rate is not unexpected based on anecdotal information from around the country regarding variable seed quality and genetic expression, for THC content, between the varieties planted,” said John Caravetta, associate director of the Plant Services Division.

Buyers’ Retreat

Arizona, Colorado, Oregon, Montana, Tennessee and Kentucky are amongst the largest hemp growing states in the U.S. The Hemp Benchmark Alliance monthly reports on the state of the growing industry makes for interesting reading.

In the last report of 2019 its summary of the year discusses the oversupply of CBD biomass, depressed prices and the concerns of anxious farmers looking for buyers.

It highlights the frustration of one Oregon cultivator who says that along with depressed hemp prices one of the biggest concerns is the growing number of slated buyers backing out of contracts. “These buyers are hedging on the fact that these farmers aren’t set up properly.”

Another said: “People want to make deals but the buyers are coming in far too low.” This report bleakly continued: “With many farmers experiencing difficulties and taking losses growing hemp this year, along with the perception that the USDA’s regulations will make it more difficult to bring in a compliant harvest, how much acreage will be planted in the coming year is also an open question.”

Many hemp farmers are experiencing difficulties and taking losses

New Trade Group

Associated Press reports the USDA estimating that 20% of the country’s hemp crop will fail under the proposed regulations. The problems facing the industry may explain why the USDA extended the comment period on its Interim Final Rules for the industry for 30 days, until January 29.

One agricultural commentator told the Associated Press: “There are 46 states where hemp is legal, and I’m going to say that every single state has raised concerns to us about something within the rule.”

In an effort to help the industry speak as one voice more than 300 farmers, the U.S. Hemp Farming Alliance, First Crop, HiLo Seed, GeoCanna and Farm Journal have come together to form the U.S. Hemp Growers Association

Former Hershey, USDA and Organic Trade Association official Cara Wilcox will be its first executive director. One of its first issues will be to deal with are the hemp testing rules which mandate that a crop must be harvested within 15 days of its THC test, which, itself, must be conducted at a lab certified by the U.S. Drug Enforcement Administration.

THC-Free Hemp Seed

Farmers are lobbying for a 1% THC limit and a 30-day harvest window to give them more flexibility, along with calls for improved crop insurance cover. There is also the issue of seed genetics and the need to overcome hot crops.

On the latter point a Spanish hemp seed known by Panakeia is one of the first THC-free ones of its kind to come to market. Developed by Hemp Trading and the Universidad Politècnica de Valencia reports are emerging of U.S. suppliers sourcing seeds for future growing seasons.

Such a move may eventually see the U.S. overcome its existing hemp hurdles and allow it to become an exporting powerhouse – to China – and elsewhere.

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CBD Warnings From FDA Spook Major Consumer Brands

The United States Food & Drug Administration has started 2020 as it ended 2019 – with a shot across the bows of the booming CBD industry.

And, the FDA’s on-going irritation with the unregulated, low-THC cannabis market is spooking the blue-chip brands once poised to enter it. Reports have surfaced, since the turn of the year, of many major brands recoiling from CBD as a result of the FDA’s position.

Late last year the FDA set out its stall saying CBD posed ‘real risks’ to health, and earlier this month it said it expects CBD-infused product developers to pursue a drug-trials’ validation route.

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Enforcement Cash Boost

At the end of last year the Federal Spending Bill provided the FDA with $2 million of firepower to undertake enforcement. This money will allow it to pursue rogue CBD companies making contentious medical claims, as well as an in-depth analysis of CBD product content – both, to be completed by the summer.

However, the FDA’s proclamations have not gone down well in the commercial CBD world. The Wall Street Journal reports on the uncertainty it has caused, saying the likes of PepsiCo, Starbucks, Kellogg and Red Bull have all put CBD plans on hold.

It quotes Mike Luce, co-founder of consultancy High Yield Insights, as saying it has gone from ‘all gas on, one foot from the consumers’ to ‘now there’s a very strong foot on the brakes from the FDA’.

FDA Says CBD ’Not Safe’

The WSJ says it approached Kellogg and was told that it doesn’t have any plans to use CBD in its food ‘because the FDA doesn’t recognize it as safe’.While it also quoted a spokeswoman for Ben & Jerry’s saying the company would work on a CBD ice cream, ‘only if the FDA approved the compound’.

This uncertainty is spreading north of the border, too. In its most recent earnings call in on January 14, Irwin Simon, CEO of Canadian cannabis firm Aphria, said its plans to expand into the the U.S., for now, ‘would not include CBD’.

Fellow Canadian firms Tilray and Canopy Growth have said retailers have been reluctant to sell CBD in the U.S. as they await firmer guidelines from the FDA.

Former Head Of The FDA Says CBD Is ‘Not Safe’

Fightback Underway

However, a fightback, of sorts, against the FDA’s tin-eared stance is underway . Just last week a cross-party bill was brought before Congress by Republican  Collin Peterson, chairman of the House Agriculture Committee. This calls for the Federal Food, Drug and Cosmetic Act to include CBD in its definition of dietary supplements.

In a letter to Congress last month some major trade bodies, including the American Herbal Products Association, Consumer Healthcare Products Association, and United Natural Products Alliance all pressed for intervention.

They called on Senators ‘to pass legislation to clarify that CBD derived from the hemp plant is a lawful dietary ingredient if the dietary supplement containing the CBD meets established product safety and quality criteria’. 

2018 Farm Bill

The Farm Bill has set many things in motion for the hemp and cannabis industries

This whole furore over the sale of CBD products follows the passing of the Farm Bill in late 2018. This removed cannabis, with less than 0.3% THC, from Schedule 1 of the 1970 Controlled Substances Act, effectively turbo-charging the U.S. CBD market.

The law change is acknowledged in this month’s FDA announcement, which also goes on to suggest it is exploring alternative routes to market approval for CBD food supplements. This FDA statement says it is committed to encouraging the development of cannabis-related drug products, including CBD. 

‘Streamlined ‘Approval

Then a few paragraphs later – referring to the Farm Bill – it states: “This change in the law may result in a more streamlined process for researchers to study cannabis and its derivatives, including CBD, that fall under the definition of hemp, a result which could speed the development of new drugs containing hemp.”  

In a Congress hearing earlier this month Dr. Douglas Throckmorton, deputy director for regulatory programs at the FDA’s Center for Drug Evaluation of Research, said it was currently evaluating research to determine CBD’s safety and efficacy.

And he went on to say it was considering ‘non-drug pathways for compounds derived from federally legal hemp, and creating avenues for new drug development involving cannabis compounds’, reports CNN.

This three-and-half-hour hearing is, in itself is noteworthy, as it is the first time the Health Subcommittee of the US House Committee on Energy and Commerce has delved into cannabis and highlights its growing acceptance in the political sphere.

It is important to mention at this point that the FDA’s deliberations are generally concerned with the addition of CBD to food and drinks, it should have little impact on other CBD-containing products such as oils and  topicals.

And, it’s also correct to say consumer-facing businesses want CBD to be treated as a food supplement, and not as a drug.

It’s Time The FDA Regulated CBD As A Food – Not As A Drug

Massive Growth

Over the last year the CBD industry has recorded phenomenal growth in the U.S. as the Farm Bill provided some legal clarity for investors and businesses – something the federally-illegal THC cannabis business lacks.

The CBD industry had an estimated worth of $ 1 billion in 2019, and prior to the FDA warning, some analysts saw CBD market as set to grow to $20 billion in five years. However, analysts are now are now saying the FDA’s warnings could curtail activity.

Nic Balzer, co-founder of Cincinnati-based Queen City Hemp beverages, sees ‘big brands’ hesitation with CBD consumer products as an opening for his start-up to capture more of the nascent market’, reports the Wall Street Journal.

Corporate Coyness

The market in North America is mainly one for the independent start-ups, such as Queen City Hemp, and small and medium-sized companies in the process of building their reputations and profits.

That is certainly not the case for the major brands concerned with reputational longevity and shareholder value. And, it is this corporate caution that is deterring the major brands and Big Box retailers from engaging with the massive opportunities in the U.S. CBD sector.

At least for now, this corporate coyness is a welcome boon for the industry’s  ‘little guys’.

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Trade Groups Fire Warnings To FDA Over Its ‘Alarming’ CBD Edict

Leading American trade groups have joined forces to press Congress for speedy recognition of the safety of CBD products.

And one of the four – the Council for Responsible Nutrition (CRN) – has rebuked the U.S .Food and Drug Administration for its tardy approach to regulation following its warnings on the safety of CBD, this week.

In what it described as a ‘Consumer Update’ the FDA said it was concerned that people who believe ‘CBD can’t hurt’ are ‘mistaken’ and that it has concerns over the ‘real risk’ of CBD use. Its announcement comes almost six months after a round of Public Hearings in to the safety of CBD, and, as calls for regulatory clarity in the industry grow.

Congress Should Intervene

Fox News reports Steve Mister, the president and CEO of the CRN, saying in a response to the FDA’s ‘update’ that its ‘continued failure to take this action, while raising consumer alarm over the entire market, requires that Congress get involved to direct the regulator to open the supplement lane to CBD and to police these products’.

In a letter to Congress last month the CRN, the  American Herbal Products Association (AHPA), Consumer Healthcare Products Association (CHPA), and United Natural Products Alliance (UNPA) also press Congress to intervene. It called on Senators ‘to pass legislation to clarify that CBD derived from the hemp plant is a lawful dietary ingredient if the dietary supplement containing the CBD meets established product safety and quality criteria’. 

The FDA has repeatedly said CBD cannot be lawfully used in food or dietary supplements, but his has not stopped the growth of the industry following the passing of the 2018 Farm Bill, which de-listed hemp as a controlled drug.

Insufficient Data

Several states have passed legislation allowing the use of CBD in foods and supplements, but others say its use is illegal. The FDA says a lack of sufficient data hampers its ability to regulate the CBD market, saying it may take five years to gather the data it needs to establish a competent regulatory pathway.

The blog reports on a letter to the FDA from a bipartisan group of members of Congress which expressed their concern about this timeline. It suggests the FDA announce a policy of ‘enforcement discretion and consider the path of an interim final rule to establish a clear regulatory framework for CBD as a dietary supplement and food additive’.

It also reports that the CHPA had submitted a citizen petition requesting swift action from FDA regarding CBD. These included calls for the FDA to recognize that hemp-derived CBD is lawful, and increase enforcement action against ‘unscrupulous manufacturers of CBD products making illegal drug claims; hence the newest wave of warnings, or consumer update.

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U.S. CBD Industry Exposed In Damning Compliance Report

Regulatory issues plaguing the U.S. CBD industry have been brought into stark focus with new research from LegitScript showing almost all of 300 recently-reviewed products are non-compliant.

The study of the online CBD merchants by compliance firm LegitScript found that 98% failed to meet existing regulations, reports Bloomberg news. The report highlights how there are almost 13,000 sellers of CBD on the internet, with 45% of these said to be making non-permissible medical claims.

In tests on 30 products, secured from websites that appeared near the top of search engine results, two-thirds of those contained significantly more or less CBD than advertised, with nine containing less than half. One tested product had only 1% of what it claimed.

CBD Clarity Needed

One bottle of ingestible oil had 18.5 times the allowable amount of lead by California standards. As well as the non-permissible medical claims, incorrect labelling some are also selling into jurisdictions that don’t allow it, says the report.

LegitScript founder and Chief Executive Officer John Horton called on the Food and Drug Administration (FDA) to issue more clarity on CBD rules for all retailers, as well as online marketplaces. As things stand, the FDA has said no medical claims can be made on CBD products – as Curaleaf recently discovered to its cost – and it is assessing the best way to allow regulated CBD sales as a food supplement.

In May this year the FDA conducted a public hearing into the CBD industry during which concerns were raised over potential health risks from an unregulated CBD market.

Lab Testing

The FDA says it is now ‘evaluating a regulatory framework for products marketed as foods and dietary supplements’, such as CBD and is ’steadfast in its efforts to ‘obtain research, data, and other safety and public health input to inform our approach to protect public health’.

Meanwhile one Illinois lawmaker has put forward a bill to introduce laboratory testing for all CBD products, reports Leafdesk. Bob Morgan, Democrat representative for Deerfield, has introduced legislation to force all CBD goods sold in the state to meet testing requirements developed by the Illinois Department of Agriculture.

This would allow the department to step in to ‘make sure products that are safe for people to use,’ he said. The surge in sales and manufacture of CBD products is the result of last December’s Farm Bill which legalised the cultivation of industrial hemp, from which CBD is derived.

Cannabis research firm Brightfield Group estimates t U.S. sales of CBD products are expected to reach $5 billion this year.

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