Hemp as a Commodity in 2019 and Beyond

Rules and Regulations of a USDA commodity

 Matt Dula | Founder at The Cannabis Green Book

2018 is closing out on a high note for Cannabis. The industry is set to close out the year above the 40 billion dollar mark with no slowdown in sight, and by 2026, estimates range closer to 100 billion as an industry. Those kinds of numbers have put the pressure needed to get Cannabis legalized in Canada and over 29 states in the US. The money generated is also getting the American Federal governments attention as well.

This year marks two extremely important American Cannabis milestones. First, CBD via Epidiolex by GW Pharmaceuticals, was approved by the FDA for medical use and was reclassified by the DEA to a schedule V. This news brings about a change in federal thinking and policy that has been stuck in prohibition for over 40 years. The main concepts to keep in mind with this is that 1. CBD is still a schedule I. Only Epidiolex has received rescheduling by the DEA. 2. The reason for rescheduling to class V instead of dropping it off the schedule altogether is cited as an international treaty issue. 3. The model has been set so be prepared to see more pharmaceutical companies applying for FDA/DEA approved Cannabis based products and patents.

Second, the 2014 Farm Bill has expired. This expiration of the Bill is huge news for our farmers, but thankfully some safe gates have prevented the Hemp provisions from expiring. So, if you are cultivating or processing hemp under a state pilot program you have nothing to worry about for now. (Read about the Safe gates on Kight for Cannabis Blog) We are still waiting on the 2018 Farm Bill to be finalized and be implemented into law. When that happens, some interesting things will happen with Cannabis.

First, Cannabis will be allowed to grow nation wide as Industrial hemp (.3% THC) under State pilot programs with the need for the pilot programs being slowly phased out. This is a major win for Cannabis and our industry as there are over 25,000 commercially viable products we can make from just hemp not to mention the booming CBD business currently rocketing off. Second, Hemp becomes a commodity under the USDA.  When this becomes a reality, it is going to get messy for the industry. Here’s why.

Because hemp has so many cultivation considerations (Flower, fiber, hurd, Stalk, Biomass, Etc.) and there are almost unlimited end uses (Oils, Tinctures, textiles, Single Use Disposables, Eco-materials, Etc.) it will cross path with most of the USDA Rules and Regulations and potentially intertwine with other agencies like the FDA and DEA along the way.

Let’s look at some of the way’s businesses will be affected by commoditization.

·        Organic Regulations– Cannabis currently CAN be organic. It just has to meet some tight rules regarding who can certify your crop. (USDA on organic hemp) This ruling will be adjusted to the size and scope of the end uses under the 2018 Farm Bill and beyond.

·        Perishable Agricultural Commodities Act (PACA)-PACA was created at the request of the fruit and vegetable industry, So PACA might not apply to Cannabis but I wouldn’t rule out sectors within the Cannabis industry duplicating and modeling a new Commodities Act for Cannabis in the future.

·        Research and Promotions Programs– R&P programs will need to be created for Cannabis once it is listed as a commodity. This is great news for companies looking for new funds and sources of marketing.

·        Mandatory Market Reporting– These reports are going to be required by the states and on the federal level.

·        Country of Origin labels– These labels apply to things like pork and other commodities but may become a requirement on certain hemp products.

·        Federal Seed Act– This act regulates interstate shipment of agricultural and vegetable seeds. Expect hemp seeds to fall under this act at some point and enforcement to be taken over by AMS Seed regulatory and testing division.

·        Plant Variety Protection Act– The PVP grants certificate of intellectual property to developers of new plant varieties that are reproduced sexually by seed or are tuber propagated. This protection enables a breeder to market the variety exclusively for 20 years (25 years for trees and vines), which creates an incentive for the development of new varieties. This will be a huge win for cultivators who are first in line for certificates.

·        Transportation of Agricultural Products– This is an impact study on rural areas that are impacted by the transportation of products. As more farmers come online with Cannabis expect to submit data to this project.

·        Grades and Scales– These metrics will need to be drafted into the USDA definitions of Cannabis. Grades will define what levels of products meet certain commodity definitions. Scales will most likely apply by phytochemical percentages. This is something that is coming, and companies should be considering how the language will be written.

·        Bonds– Cultivators, packers, shippers, etc. will need to be bonded to the amount required by the state or the Federal levels as they become written.

·        Interstate Commerce– Shipping and transporting Cannabis will become normal place and allowed under the 2018 Farm Bill. These shipments will need to follow current shipping and packing requirements and laws by state or what is addressed in the federal shipping requirements.

With all the moving parts that are going to come down the pipe in the future it is important to start planning for a Federal integration with Cannabis as a commodity. As our industry moves from the shadows of prohibition into a Federally monitored commodity we have to opportunity to get in front of the potential headaches and red tape we might encounter by looking at how we can solve those issues now.

About the Author

Matt Dula is the founder of the cannabis green Book. The Cannabis Green Book is a cannabis industry directory and vetting portal allowing for companies to verify before they engage in deals. Learn more at: Cannabis Green Book

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