Hemp

The FDA Is Stunting the Growth of America's Nascent Legal Hemp Industry

The hemp boom has failed to materialize, and regulatory uncertainty is to blame.

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Wither hemp? Earlier this month, the editors of the cannabis investment news site Technical420 lamented that a predicted hemp boom had failed to materialize. "[T]he sector has not lived up to expectations," the site declared. Likewise, Hemp Industry Daily reported this week that hemp farmers found "production costs far outpaced profits" last year.

Others outside the industry have also taken note of hemp's struggles. Earlier this week, Politico reported that laws passed in Washington, D.C., that were intended to propagate a domestic hemp industry have instead proven to be "a flop." Why? One explanation is that hemp producers and investors didn't account for the Food and Drug Administration (FDA) when they made their bets.  

Growing hemp, which is used around the world for food, fuel, and fiber, was long illegal in the United States. The federal ban was thanks entirely to the hemp plant's psychoactive sister, marijuana, and the paranoia that crop causes among people who like to ban things. The 2014 farm bill loosened the federal ban on growing hemp ever so slightly by allowing state governments (rather than private farmers) to grow it. But it was the broad federal decriminalization of hemp instituted by the 2018 farm bill that spurred farmers across the U.S. to plant hundreds of thousands of acres of the crop.

I was optimistic that the 2018 farm bill—which was otherwise awful—could foster a "homegrown hemp renaissance." But while some in Washington saw the farm bill as reason enough to get out of the way of hemp farmers and those who make products derived from hemp, others in Washington saw an opportunity to meddle. Politico suggests a lack of FDA regulations governing hemp-derived cannabidiol (CBD) is partly to blame for hemp's struggles. But that's misleading.

In reality, the FDA has effectively banned CBD foods. "It is currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement," the agency declared, also noting it would study the matter indefinitely.

In other words, soon after Congress legalized growing hemp, the FDA banned the single most profitable use of hemp.

States responded to the FDA's stance by banning CBD food sales. Farmers growing hemp were suddenly stuck between a rock and hard place. While the ubiquity of CBD food products is one indication that businesses of all types—from groceries to convenience stores to gas stations, and the CBD food producers that market their products to those sellers—are ignoring the FDA ban, bans are bad for business. "The agency's indecisiveness trickles down," I wrote. "States that have banned CBD products typically 'cit[e] the FDA's stance' as the basis for their actions." 

The impact of the FDA's stance has been dramatic. Politico notes it's harming even non-CBD hemp sales.

"[R]etailers are interested, but the lack of FDA rules are scaring them away from hemp products even when they don't contain any CBD," the publication reports, noting that one hemp farmer who'd thought he'd found a buyer for his cold-pressed hemp seed oil instead saw the buyer back out, citing company lawyers nervous over the FDA's stance.

In 2014, much like the FDA today, it was the DEA that stood in hemp's way. After passage of the farm bill that year, I wrote, the DEA "held up a shipment of seeds destined for Kentucky, and forced the state to sue the federal government in order to seek their release." Senate Majority Leader Mitch McConnell (R–Ky.) was instrumental in forcing the DEA to back down.

Though McConnell pressured the FDA to act on hemp this past fall, the agency has mostly sat on its hands. And, as this week's Politico report notes, so-called "Marijuana Mitch" appears to have been "missing from the debate in recent months."

Hemp farmers are in limbo—yet again—because of Washington.

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  1. Or maybe there is just not much demand for hemp, and it is the latest manifestation of raising ostriches and not a Miracle Product.

    1. Demand for hemp has been high and growing. Farmers are still going to lose money when they assume prices will remain stable while supply grows 300 to 400% per year. The FDA risk still discourages investors, so operators are usually paying a higher cost of capital than is typical to other industries. A lot of growing pains that are just operational inexperience, too. It’s a new crop and product, and people are learning expensive lessons.

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  2. That looks like some pretty dank hemp.

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  3. “The FDA has seen only limited data about CBD safety and these data point to real risks that need to be considered before taking CBD for any reason.”

    “Unfortunately, as we study the matter indefinitely, somehow we can’t find additional data.”

    1. Sounds like indefinite job security and POWAH to me! They are PROTECTING us from nearly everything, except for death and (most especially) taxes!

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  4. You know, back ten years ago when people were telling me about all the marvelous uses for of hemp, sometimes in the pages of this very magazine, they talked about the old film Hemp for Victory, and industrial uses like paper, textiles, paint, biofuel, lubricant, animal feed, etc. They didn’t say anything along the lines of the single most profitable use of hemp being its use as a reputedly psychoactive drug/supplement for pain and anxiety.

    Apparently, they were vastly overselling the economic value of industrial hemp for the purposes they mentioned. But why would they have done that?

    (Yes, yes, hemp, CBD oil, and marijuana should all be outright legal. But bullshit should be called out for being bullshit, too.)

    1. Some of them were/are eco-nuts, hoping society would/will take up to a much greater degree agricultural substitutes for petroleum. Remember when biofuels generally were a thing? Fracking knocked that train off the track.

      Substituting hemp for wood for paper was always a vain hope. There are many available sources for cellulose: flax and cotton, among others. Hemp clothing doesn’t feel as nice as cotton. There are always those touting the farming for hemp as less destructive or consumptive as that for cotton and other linen materials, but the differences aren’t valuable enough to farmers to get them to switch.

      Meanwhile dietary opinion on lipids has shifted from being big on polyunsaturated fatty acids (a plus for hemp oils) to disfavoring them in favor of monounsaturated ones, chiefly the oleic acid in olive and peanut oil.

      Meanwhile they didn’t sell CBD benefits because they weren’t known or believed to be there yet. It was thought that once marijuana was legalized, CBD would be a mere niche byproduct whose market would easily be satisfied by those growing bud mainly for the THC. CBD is a recent fad that probably has some minor medical uses in the long run but is not a benefit to the general consumer as a dietary supplement or ingredient.

    2. Hemp is still good for all of the things you mentioned. The only thing that has a chance at profitability is cbd. That is because you need a high price for your hemp when you have tremendous costs associated with getting a state hemp license, which is required still. Then you need to raise capital from alternative sources and pay alternative rates for it, since banks and even many private funds will not go near hemp for fear of government penalties.

      Many of these government penalties are hidden or the result of individual bureaucrats with a moral agenda. I myself was unable to get a va home loan after I became involved in the hemp industry, even though the va has no policy memo they could cite that would prohibit me from using my help industry related income as qualifying income.

      In short hemp does have better economics for paper, fiber, and biofuel. But government added cost and risk is currently hampering hemp.

      1. The reason state hemp license fees are high is that hemp farming still isn’t taken seriously. States think hemp farming will be a very small volume business carried out for a short while by rich people who’ll take an income tax loss on their hobby.

        The trouble is, except when it comes to the CBD or crude hemp extracts business, hemp is seeking to replace large commodity crops. Fiber, etc. isn’t a boutiquey business like raising arugula or alpacas. To be profitable at such a low margin business, hemp farming needs one or both of two things: other facilities in the supply chains (to process the different material into more or less the same output), and/or subsidies. If those were established, all the difficulties with banking and licenses would be quickly swept away. Volume commodity farming in the USA and elsewhere is highly cartelized; get big (quickly), or get out.

        1. The reason state hemp license fees are high is that hemp farming still isn’t taken seriously. FYTW.

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  5. As president, my very first act will be to disband the FDA. There’s not even a close second on my list.

    1. The statements made regarding this government agency have not been evaluated by the Food and Drug Administration.

    2. The president can’t do that, only Congress can. What the president can do is appoint people who’ll make sure all their underlings will look the other way on all violations during that administration. Then outsiders will sue to get enforcement, and sometimes win their cases as they did in the 1980s with automobile passive restraints.

      1. Executive branch can certainly do a lot to reduce the effectiveness of a dept or agency. No question.

        And I will be the FDA’s worst nightmare as President.

        1. First statement, true. Second statement, false for all but a few of them. The great majority of FDA’s (or anybody’s) employees will be very happy to work on their hobbies while appearing to do their jobs.

        2. …until they court shop and find the judge to tell you that you have to do something.

          Now, if I were President, I’d refuse to enforce ANY law Congress passes that is not clear and explicit and doesn’t require the Executive branch to actually come up with the rules.

          And a court would likely shut that down too.

  6. “And, as this week’s Politico report notes, so-called “Marijuana Mitch” appears to have been “missing from the debate in recent months.”

    Cocaine Mitch has been out in the fields seeding this years crop.

    Why is Reason quoting DC Izvestia Politico so heavily in this column anyway?

  7. Bureaucracies gotta bureaucrat. Never changes.

    1. Blame the reforms of the early-to-mid 1990s. In an effort to get FDA to lay off the vitamin business, and prevent vitamins and minerals from becoming prescription-only drugs in the dosages health foodists wanted, the FFDCA was amended by a couple of compromise pieces of legislation. Most of the results seem to have been unarguably pro-freedom.

      However, the problem in the present case was that the new language and resulting regs also made explicit a criterion, “new dietary ingredient” that, had it been left unstated, might today result in such products as hemp-derived foods being legally presumed to be safe and not “adulterated”, just on general principles. (Not guaranteed, but likely that’s how it would’ve come out.) Instead hemp foods have the opposite presumption because they weren’t established on the market 3 decades ago.

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  10. Maybe you should fertilize it by pissing on it.

  11. I would take issue with the statement that the ban on hemp was “entirely” due to its psychoactive cousin.

    I you read Jack Herer’s The Emperor Wears No Clothes, he would argue that hemp, which was excellent for paper making, but extremely labor intensive and therefore expensive, was about to be aided in the mid 1930s by a new threshing machine invented by McKormick Harvesters. The labor saving device would make paper much more cost competitive with trees for paper.

    William Randolph Hearst, the media mogul, owned lots of timber interests which supplied his newspapers with paper. He didn’t want the competition. So he threw in in with Harry Anslinger, the recently appointed head of the federal Bureau of Narcotics and Dangerous Drugs. In fact, he may have been influential in getting Anslinger the job. Together, they used Hearst’s papers to frighten Americans into believing that cannabis hemp, which through history had been one of the most useful crops ever discovered, was an evil plant and needed to be banned.

    Hearst used all sorts of yellow journalism, writing that blacks on MJ would come up and speak to white women, and that it was associated with the jazz scene, which was filled with all sorts of blacks and whites having a good time together, so that couldn’t be good.

    The Marijuana Tax Act was passed in 1937. It required that anyone who wanted to grow hemp had to first get a stamp from the government, and pay a tax. The problem was, the government wasn’t giving out any stamps.

  12. “In reality, the FDA has effectively banned CBD foods. “It is currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement,” the agency declared, also noting it would study the matter indefinitely.”

    It’s cute that you think the FDA is doing this on it’s own instead of at the request of the DEA.

  13. When they tax it, they own it.
    The TaxMyPot crowd ignored that. (Positive effects of decriminalization aside.)
    The latest craze is lawsuits against second-hand pot smoke.

  14. The statements made regarding this government agency have not been evaluated by the Food and Drug Administration.
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