What the 2018 Farm Bill Means for Hemp and Cannabusinesses

With President Trump signing the 2018 farm bill into law on December 20, 2018, the year came to a close on a high note for the hemp industry. Farming income has been steadily declining and, according to the US Department of Agriculture, net farm income is expected to fall in 2018 to $59.5 billion, a 12-year low. This decline in farm income has been the driving force behind the 2018 farm bill, which sought to strengthen the US farming sector and crop insurance program.

Although a large majority of the cost of this $87 billion-a-year legislation is allocated to the food stamps program, a sizable portion is also allocated to crop insurance, commodities, and conservation. Beyond including a five year extension of various areas of agricultural and nutritional policy, this Farm Bill also confirmed the legalization of industrial hemp which, by some people, is thought to be a good alternative to farming tobacco and may stimulate large growth in farm income.

So how does this affect cannabis businesses?

To answer this, a quick history lesson is in order. Two prior pieces of legislation, the Marihuana Tax Act of 1937 and the Controlled Substances Act of 1970, failed to make any distinction between hemp and cannabis plants. By not providing separate definitions of these plants, hemp was banned as a classified Schedule 1 drug along with cannabis. The last section of the 1,120 page 2018 Farm Bill finally provides that distinction and declassifies hemp as a Schedule 1 drug, as long as it meets certain criteria.

Most importantly, to be considered legal, a cultivator must provide a legal description of the land on which hemp is grown, obtain a license or other authorization from the State Department of Agriculture, and hemp plants produced must not have more than 0.3% THC. Violating these requirements may lead to federal penalties and a repeat offender may be ineligible to produce hemp for a period of five years.

States have the authority to develop their own licensing and regulatory plans for hemp but must receive USDA approval. Hemp cultivators in any states that opt not to develop their own legislation can apply for a license with the USDA and must adhere to the federal cultivation program.

Are farmers afforded any protections if growing hemp?

I’m glad you asked! An important aspect of the Farm Bill is the protections it provides to hemp cultivators. Along with the declassification of hemp as a Schedule 1 drug, the act normalizes hemp, granting hemp cultivators protections under the 1980 Federal Crop Insurance Act. Some insurance companies are also making crop insurance accessible to hemp cultivators, and we are likely to see these policies becoming more commonplace as industrial hemp cultivation picks up. Having access to crop insurance is vital to protecting the livelihood of hemp cultivators, especially with the increase in extreme weather expected due to climate change.

Another area expected to see large growth is in hemp research. Industrial hemp pilot programs were added in the 2014 Farm Bill, but this new bill greatly expands upon this area. Researchers can conduct their research more freely and with more peace of mind knowing there are additional protections for them included in the act. Hemp was also added to the Critical Agricultural Materials Act due to its potentially diverse applications. This provides additional funding for hemp research.

Clearing up the CBD myth

Even though the legalization of hemp is a big victory, the legality of CBD is not as clear. It is true that hemp-derived products was removed as a Schedule 1 drug, but the act does not legalize CBD in general and it maintains it’s Schedule 1 status. This act does, however, create exceptions to this rule in certain situations. The Farm Bill ensures that any hemp-derived cannabinoid will be legal, if and only if, that hemp is produced in a manner consistent with The Farm Bill, associated federal regulations, associated state regulations, and by a licensed cultivator. All other cannabinoids produced in any other manner remain a Schedule 1 substance and are thus illegal.

There is one rather large gray area with research though. Currently, cannabis-based research must use research-grade cannabis obtained from the nation’s sole provider of the product; the Marijuana Program at the University of Mississippi School of Pharmacy’s National Center for Natural Products Research. But if hemp-derived CBD is no longer considered a Schedule 1 substance, it may likely raise questions as to whether they are required to get their products from the University of Mississippi. Additional guidance from the FDA, DEA, and NIDA will be needed to ensure researchers are not operating out of compliance.

What is the effect on state-based cannabis programs?

Finally, the Farm Bill has no impact on state-legal cannabis programs. 33 states have legalized medicinal use and 10 states have legalized recreational use, but each of these remain federally illegal with no exceptions. The Farm Bill does nothing to change that, however, many in the advocacy community believe hemp legalization under the Farm Bill is a pivotal first step towards broader cannabis reform.

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