Recreator uses sustainable fibers, including hemp, for apparel. Recreator

A Nebraska-based company signed Thursday the first contract to supply US-grown hemp fiber to a sustainable apparel company, according to an investor close to the deal.

Bastcore, LLC, purchases raw hemp grown by US farmers and has a proprietary process for converting hemp stalks into commercial materials, for textiles, composites, and energy production.

"This fiber supply contract marks a historic milestone in the U.S. Hemp Industry, and particularly for American-made hemp textiles, since the passage of the 2014 Farm Bill," Bastcore CEO John Lupien said in an announcement obtained by Business Insider.

The hemp is sourced from farms in Colorado, Kentucky, and Minnesota, and Bastcore plans to work with farmers in North Carolina and New York also as those states develop the legal framework for growing hemp.

The hemp will be used by Recreator, a Los Angeles-based apparel company that focuses on "bringing regenerative agricultural practices to the American fashion industry," the company said. Recreator will use Bastcore's hemp to make t-shirts and other garments in LA.

"This partnership should encourage rural communities to re-invest in natural fibers and textile production. We are excited to show the pull-through capacity of Recreator by implementing Bastcore’s American-grown and processed hemp fiber into our premium apparel line," Recreator CEO Matt McClain said.

Morgan Paxhia, a co-founder of Poseidon Asset Management, a cannabis-focused hedge fund that invested in Bastcore, told Business Insider in an email that "Bastcore's innovative technology is a cornerstone to revitalizing the US hemp economy."

Volunteers harvest hemp at a farm in Springfield, Colo., during the first known harvest of industrial hemp in the U.S. since the 1950s AP Photo/P. Solomon Banda

"We have been working with Bastcore for almost two years now," Paxhia added. "We have witnessed their technology evolve from concept/R&D to today where we are now entering commercialization."

Growing industrial hemp was outlawed in the US prior to Colorado becoming the first state to legalize cannabis in 2014. Both hemp and marijuana are variants of the same cannabis plant, though hemp, unlike marijuana, doesn't contain any psychoactive chemicals.

The Farm Bill, signed into law by the Obama Administration in 2014, allows states that have legalized cannabis to develop regulations around growing hemp for industrial or research purposes.

Marijuana is considered an illegal drug by the federal government, though 29 states have legalized the plant for commercial, recreational or medicinal uses in various forms.