Farm Bill signed into law, paving the way for an explosion in hemp farming to supply the booming CBD cannabis sector – a sector set to explode 10x’s higher in 2019.
Legal hemp just entered the U.S. market in a big way.
Late last week, President Trump signed the Agriculture Improvement Act of 2018, better known as the 2018 Farm Bill, removing hemp from the Controlled Substances Act entirely, making industrial hemp a lawful agricultural commodity in the process.
Hemp plants serve three primary uses: fiber (paper and cloth), seeds (for hemp oil and food), and cannabinoid oils, primarily CBD.
For investors, it’s this last category that stands to be the most profitable, especially if you hitch yourself to the wagon early.
Now that there is clarity in the market, our NICI analysts expect this market to explode in the New Year.
In fact, the CBD market could triple from $600 million to nearly $1.8 billion, with more growth to follow, thanks to this landmark bill.
Frankly, ours isn’t even the most optimistic estimate out there… One analyst estimates that the CBD market will grow to nearly 10 times its current size in just one year thanks to this singular market move.
Now, this isn’t the first time we’ve seen hemp-based reform come out of the White House.
Back in 2014, former President Barack Obama signed a previous version of the Farm Bill, which partially legalized hemp under state-based research programs.
As a result, 19 states grew a total of 25,713 acres of hemp in the U.S in 2017. But a dark cloud still hovered over the industry because of varying state laws and unclear federal ones.
Going forward, the Regulation of hemp will fall under the U.S. Department of Agriculture (USDA), which will set national policies for the crop.
That removes the cloud, so you can expect to see big retailers like drug stores, groceries, and even big-box discounters start to carry CBD oil just as they currently sell hemp seed oil.
One of the most significant benefits from the bill, however, is that it allows hemp to be covered under the Federal Crop Insurance Act.
Farmers can now insure hemp crops against crop losses just like farmers can insure corn or soybeans.
There are still strict regulations in place, as prospective growers must submit cultivation plans to the USDA, but states have been working on hemp programs for quite some time.
Pennsylvania, at one-time home to “the hemp capital of America”, has had a hemp program in place and announced just a few weeks ago that it would be expanding the program significantly.
The program has several approved programs already underway and expects to approve twice as many next year.
And Kentucky was waiting right there at the signing to submit its application.
Senate Majority Leader Mitch McConnell (R-KY) has backed hemp legalization since 2013 so it’s no surprise that Kentucky was the first state to apply to the USDA for approval.
The crop insurance and these state programs are incredibly important because it will require a massive amount of hemp to be grown to meet the demand the Institute sees coming.
Imports will continue to cover some of the hemp shortfall but the Farm Bill has essentially created a new, massive cash crop for American farmers.
For investors, the normalization of hemp will be a massive boon for companies with a heavy focus on CBD.
Unfortunately, the FDA seems to be trying to pour cold water on the change, and said that because CBD was an active ingredient in an approved drug (Epidiolex, which we’ve discussed here many times), it was not legal to put into food or nutritional supplements without the Agency’s approval.
However, the FDA wrote its own way out of the conundrum it created.
The FDA will soon hold public hearings about the safety and efficacy of CBD as a food ingredient and health supplement. And it said it would consider granting a waiver to CBD that allows it to be used in foods or dietary ingredients, something it has done for other approved drugs in the past.
At those hearings, the FDA will learn what we already know. CBD in small doses is a safe and effective treatment for a variety of ills, like aches and pains, anxiety, sleeplessness, and other conditions. In large doses, CBD has stronger effects, including reducing or eliminating seizures in some epileptic patients.
The obvious solution – allowing CBD in amounts up to a certain dose and without specific health claims and requiring clinical trials and a drug approval process for larger doses – is also the obvious outcome.
Over the next couple of months, expect to see a flurry of companies, both in cannabis and outside markets, to be making large investments into the CBD space while the FDA’s process is under way.
Frankly, this is going to be one of the great storylines unfolding in cannabis today, and in 2019, so you can rest assured that we’ll be keeping close tabs on this evolving market.
Executive Director, National Institute for Cannabis Investors
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December 26 2018