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With states like Colorado, Washington D.C., and now California legalizing the sale of marijuana, the overall cannabis market is growing at breakneck speeds. But some segments of the industry are growing faster than others. By 2021 analysts expect the CBD-only industry to be worth over $3 billion. And since almost all extracted CBD comes from industrial hemp, farmers focusing on high CBD hemp stand to make a fortune.
Cannabis plants with less that o.3% THC are considered hemp. Like other forms of cannabis, there is ample genetic diversity within the classification. This means that some industrial hemp strains produce great fiber but are poor for CBD extraction while others produce the inverse. But both forms of hemp are produced in roughly the same manner by traditional farming techniques.
Farming hemp has a significantly lower entry cost than growing THC laden marijuana. This is because hemp is considered an agricultural product like corn or soy beans instead of a controlled substance. Getting all the permits for a commercial THC farm can cost millions. But hemp licensing only costs a few thousand dollars. Hemp also has the benefit of not demanding the same level of scrutiny from state regulatory agencies.
Unlike THC-rich marijuana or extracted CBD, hemp is legal to transport internationally. This has led to domestic distributors importing hemp to process into CBD extracts and distribute within a given state. The process is costly and inefficient but it provides some protection from federal drug trafficking laws. Just make sure to do adequate research before starting a CBD refinery.
Although most CBD is imported to the U.S., American farmers across 19 states grew 23,343 acres in 2017. Those crops were grown by 1,424 permitted farms and 32 universities. Most was sold to the health-food industry or used in medical research. But a growing number of customers are learning the beneficial effects of using CBD because of state sanctioned pilot programs.
“We’ve seen hemp cultivation significantly expand in the U.S. in 2017, with over double the number of acres planted in hemp compared to last year and the addition of 4 more states with hemp pilot programs,” said Eric Steenstra, President of Vote Hemp. “The majority of states have implemented hemp farming laws, in clear support of this crop and its role in diversifying and making more sustainable our agricultural economy."
Steenstra also feels that "It’s imperative that we pass the Industrial Hemp Farming Act in Congress, so that we can grant farmers full federally legal rights to commercially cultivate hemp to supply the growing global market for hemp products.” But legalization also means that domestic retailers have a commercial product looking to make a space for itself on their shelves.
Colorado-based Lucky's Market is on the cutting edge of the legalization movement. While the Kroger-backed grocer doesn't sell marijuana, it announced in October of last year that it would carry a dozen CBD products. The chain's massive distribution network ensures they will be sold alongside herbs and cosmetics nationwide.
But Lucky's Market wasn't the first retailer to announce it would carry CBD products. Although the program was live for less than a week, Target tried adding four CBD-enriched to its online offerings. Unfortunately the products were removed without explanation only days after first appearing.
Although these corporate programs and offerings are small, they are a response to changing attitudes and customer demands. If people will pay, companies like Lucky's Market and Target have no problem offering them CBD. And when the programs become a commercial success, more companies will find out if their bottom line benefits from stocking CBD or hemp products.
As more states join the legalization movement, there are sure to be more retailers looking to distribute CBD. The market is simply too large for them to ignore despite the Drug Enforcement Agency (DEA) publishing new rules explicitly declaring CBD illegal. Partly because customers will pay for it and partly because the new rules are not set in stone.
The move by the DEA was seemingly motivated by personal prejudices and monetary obligations to special interests. This caused the Hemp Industries Association to join forces with RMH Holdings and Centuria Natural Food to challenge the final rule on the grounds that it is arbitrary and unconstitutional. The DEA tried to have it thrown out but the court found reason to proceed with the case.
The court case is currently open and ongoing. If the plaintiffs lose, it would deliver a significant blow to the industry. But until the case is decided, retailers and distributors exist in a legal grey zone. The continuing volatility created by drug-warrior backlash may keep big grocers like Wal-Mart and Costco from jumping in until the waters clear a bit. American hemp farmers and CBD users alike wait with baited breath for the outcome of the case.