The speed at which the newly legalized hemp industry has taken off is mind-boggling. This meteoric rise has even prompted some people to suggest that the hemp boom is just a passing fad, but the numerous applications of this versatile plant defies the classic definition of fads. While no one can accurately predict what sort of future awaits the hemp industry right now, the following three factors are likely to play an instrumental role in determining how far the industry will go.
The USDA Regulations
The Agriculture Improvement Act of 2018 (aka the Farm Bill) transferred the supervision or regulation of hemp from the Department of Justice (DOJ) to the Department of Agriculture (USDA). That same law also mandated the USDA to formulate rules under which different states could design their own hemp cultivation programs.
The USDA has been working to release its interim final rules amidst mounting pressure from lawmakers and the hemp industry. The latest reports indicate that those interim final rules are now ready and are only awaiting the nod from the White House.
The industry is eager to know those rules for good reason. The rules are likely to either put the brakes on the industry or allow it to soar even farther.
For example, what testing standards will the USDA impose? Some states require the top inch or two of the hemp flower to be tested while other states test a mixed sample of different parts of the hemp flower.
What is tested is significant because the top portions of the hemp flower contain the highest amount of THC, so a requirement to test this upper segment means that farmers will walk a tightrope and losses (due to “hot” plants) will be huge each season.
The FDA CBD Rules
CBD oil is by far the most expensive hemp product, and the U.S. Food and Drug Administration (FDA) is thinking about how to regulate this compound and other similar cannabinoids. If the FDA decides to treat CBD as a pharmaceutical ingredient (and therefore ban its use in food, drinks, supplements and cosmetics), then the industry may take a huge knock and slow down. If, on the other hand, the FDA decides to permit CBD to be used in foods, cosmetics, beverages, and supplements, then the industry will really take off.
Risks of Oversupply
It is estimated that by 2022, about one million acres of land will be devoted to hemp cultivation in the U.S. The current statistics indicate that more than half a million acres of hemp may be cultivated this year. The question is, what is the ceiling of the demand for CBD and other hemp derivatives? No one knows the answer to that question, and once supply exceeds demand, then the price of hemp dry matter may plummet and affect further growth in the industry.
Experts believe industry actors like Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP) and Marijuana Company of America Inc. (OTCQB: MCOAD) are closely watching the developments in the three areas above.
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