Farm Bill Extension Offers Mixed Blessings for US Hemp

High-quality data remains a challenge for the hemp industry.

When Congress moved the next farm bill into 2024 as part of a congressional resolution to avert a government shutdown, many viewed it as a setback. But, according Beau Whitney of Whitney Economics, it could provide a boon for the American hemp industry instead.

For one, the bought time (through September 2024) could allow regulators to carve out clearer rules regarding hemp-derived products. But the extension also occurs against a backdrop of declining farm-level value in the hemp industry, from $824 million in 2021 to $238.4 million in 2022, according to recent numbers from the U.S. Department of Agriculture.

Dearth of Data

In a Wednesday memo, Whitney noted that the hemp industry in general suffers from a lack of comprehensive data.

“There have been several attempts to allow the federal government to track hemp at a granular level, via NAICS Codes,” he said. “These attempts have failed, and so current, high-quality data is tough to come by.”

That creates a critical barrier to informed decision-making at both the federal and state levels due to the “lack of transparency and patchwork of data regarding hemp.” According to the memo, less than half of U.S. states currently provide publicly available data on hemp, a gap that the extension could help bridge.

“Many states did not respond, despite multiple inquiries,” the firm stated.

Cannabinoids Overshadow Opportunity

The analysis also highlighted the current microscope on hemp-derived cannabinoids, which overshadows the potential of hemp fiber and grain markets. Whitney pointed out that “hemp fiber and grain represent a significantly larger opportunity than cannabinoids,” suggesting that the extension could redirect attention and resources towards these less-explored segments of the market.

Policy debates within the industry, particularly around THC thresholds and regulatory clarifications, are also highlighted as areas of concern.

“If the threshold for THC is increased to 1% (from 0.3%, where it is currently), as some have proposed, this may have unintended consequences, such as inviting a flood of cheap imported hemp with which U.S. farmers cannot compete,” the firm wrote.

The debate also extends to whether hemp should be tested pre- or post-harvest, a decision with significant implications for both domestic market dynamics and international export opportunities.

“Given the recent focus on hemp-derived cannabinoids, federal regulatory clarifications are needed at the product level, and not at the farm gate,” Whitney said.

However, the extension is not without its downsides. For example, state legislatures might continue to pass restrictive policies on cannabinoids, potentially stifling industry growth.

According to the firm, such interventions have already led to substantial losses in potential revenue for both hemp fiber and grain, as well as cannabinoids. Between 2021 and 2022, the industry reportedly lost $20 billion-$25 billion in potential revenue from hemp fiber and grains, and an additional $7.1 billion in cannabinoid sales in 2022-2023.

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.


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