Brian Webster / brian.cahemp@gmail.com 415-243-8900 / BrianWebster.com California Hemp Industry Consulting Business Development & Marketing --------------------------------------------------------------------------------------------------------------------------------------

Hemp is now a completely legal crop in the USA! Under the new Farm Bill laws, hemp will be managed by Department of Agriculture as a crop rather than by the Justice Department as an illegal substance. Hemp is now legal coast-to-coast! This means:

Banks and payment processors/credit card companies can service the hemp industry

Investment and capital infusion is allowed in both the oil and fibrous hemp businesses

Interstate commerce of hemp and hemp products is allowed

Convicted felons can join the industry 10 years after the bill passed

Hemp farmers will be allowed to buy crop insurance for the first time.

Hemp futures can be traded for the first time, locking in prices for farmers

CALIFORNIA HEMP INDUSTRY 101 California is positioned grow into the USA's largest hemp growing, production and consumption market. It is the largest state by population, the third largest state by area, the largest agricultural state, and has no snow or frost in its prime growing areas. While states like Colorado, Oregon and Kentucky have been growing hemp for many years, California will surpass them all in hemp production and sales in the next few years. "CBD hemp" is now being grown all over California. "Industrial hemp" is only starting to be grown here. Many companies are now entering the California CBD hemp industry because it is both legal and has less tax and regulation than the CBD industry related to medical cannabis. Licensed medical cannabis growers can only grow ¼ acre outdoors. California Hemp Regulation Hemp is legal to grow in California, and in all its 58 counties. However, half of California counties still have temporary bans or restrictions on growing hemp. The counites that are welcoming hemp agriculture are getting a clear jump on the proven economic benefits of hemp. Hemp in California has no special taxes. Farmers can grow as many acres as they wish on land zoned for agricultural purposes. LA county now has a 100-acre hemp farm. The California Department of Food and Agriculture (CDFA) is the state agency responsible for hemp regulation in California. The CDFA works with the counties on hemp agriculture rules and its farming registration process. Hemp farmers need to register with their local County Agricultural Commissioner. County Agricultural Commission offices share a registration fee with CDFA and information from a one-page registration form. The California hemp farming fee is $900. per year. The Industrial Hemp Advisory Board (IHAB) is a voluntary board that advises CDFA on hemp rules and regulation. It has public meetings at the CDFA building in Sacramento. The California Department of Food & Agriculture reports that there are now over 550 Registered Hemp Growers and Seed Breeders in the state, registered to grow over 50,000 acres of land. Applications continue to come in to CDFA from county agriculture commission offices and the numbers continue to increase. As with the national trend, 95% of the hemp being grow in California is CBD hemp rather than industrial hemp. This is due to the US market valuing CBD hemp over 10 times more than industrial hemp.



Industrial hemp stalks grow similar to bamboo. 25,000 PRODUCTS CAN BE MADE FROM INDUSTRIAL HEMP Hemp is used by the automobile industry as reinforcement fiber in "biocomposites" - press-molded or injection molded parts used in doors panels, boot liners etc., where they are replacing fiberglass composites or more expensive plastics. Hemp is used in foods such as bread, energy bars, waffles, granola, coffee, beer, veggie burgers, pretzels, salad dressings, and many food products. Hemp seed oil is an excellent replacement for unhealthy fats in foods due to its excellent balance of the essential fatty acids linoleic acid (omega-6) and alpha-linolenic acid (omega-3). Consuming the right balance of essential fatty acids found in hemp seed oil offers significant health benefits, including an improved HDL/LDL cholesterol ratio, reducing the symptoms of dermatitis, of rheumatoid arthritis and other inflammatory diseases, as well as improving and optimizing development in infants. Hemp is used in body care products such as lotions, lip balms, conditioners, shampoos, and soaps. It also may be used as biofuel in the production of ethanol, a plant based gasoline additive and replacement. INDUSTRIAL HEMP IN CALIFORNIA Hemp is already a market commodity. According to a study commissioned by the Hemp Industries Association, the annual United States retail market for hemp products has grown steadily since 1990 to approximately $400 million in 2009, increasing at a rate of about $26 million annually. The hemp products industry is particularly strong in the Golden State, where 77 percent of U.S. sales of hemp food and personal care products are earned by California companies. Dr. Bronner's Magic Soaps, for instance, is a California business based in Escondido that is the number one producer of natural soap in the world, selling about $20 million worth of soap annually. In the last five years Dr. Bronner's spent $800,000 importing hemp oil from Canada. Dr. Bronners is just one of the many California businesses that could support local farmers in growing hemp with the passage of this bill by purchasing from Californian rather than Canadian farmers. Consumers are benefiting from healthy industrial hemp products and manufacturers are enjoying a rapidly growing market. The only ones not benefiting from industrial hemp are California farmers. The Canadian industrial hemp crop is limited by a short growing season, dependency on rainfall, and cooler temperatures. California's warm climate and use of irrigation would enable hemp farmers to achieve significantly higher seed and fiber yields than in Canada. GOOD FOR AGRICULTURE & GOOD FOR THE ENVIRONMENT In addition to economic benefits, hemp has strong agricultural benefits as well. It requires little or no pesticides and herbicides and improves soil conditions making it an excellent rotational crop of particular interest to organic farmers. Hemp's dense growth smothers out competing plants and delivers a field ready for the next rotation that is virtually free of weeds. This is particularly helpful in rotation with weeding-intensive crops like strawberries. The positive role hemp plays in sustainable crop rotations reduces chemical use and saves farmers money. Industrial hemp has many environmental benefits. It is a source for paper, building insulation, and fiber board. As our demand for wood products grows we could save our trees for higher-end uses such as lumber, and supplement paper and fiber board production with hemp. An acre of hemp produces 2 to 4 times more fiber than an acre of timber and it grows from seeding to maturity in just 90 days. Hemp also can be used as a raw material for ethanol fuel and is particularly promising for emerging cellulostic ethanol technologies due to its rapid growth. HEMP NOT NEW TO THE UNITED STATES OR CALIFORNIA Industrial hemp has a long history of commercial use and cultivation in California and the United States. In colonial Virginia and Connecticut the cultivation of hemp was mandatory for farmers. Both Thomas Jefferson and George Washington grew hemp on their plantations. As recently as World War II the U.S. government encouraged farmers to grow hemp in the "Hemp for Victory" campaign to supply cordage for the war effort.

World War II era U.S. government poster From around 1900 to 1920 hemp was grown as a commercial crop in California. Some areas known for hemp cultivation were Gridley in Butte County, Courtland in the lower Sacramento Valley, Rio Vista in Solano County, and Lerdo near Bakersfield.

The 1903 USDA Yearbook shows industrial hemp grown

in Gridley, CA that was well over 10 feet tall. HEMP AND THE FEDERAL GOVERNMENT The 1937 Marijuana Tax Act was passed in the U.S. Congress with promises in the floor debates that it would not prohibit the production of non-psychoactive industrial hemp. The crop continued to be grown in the United States until the mid-1950s when soft markets and increasing government harassment made other crops more desirable. Today, the 1970 Controlled Substances Act is the federal statute that regulates industrial hemp. The 1937 definition for marijuana was lifted from the existing statute and adopted with no debate on the language excluding sterilized hemp seed, hemp fiber, and hemp seed oil from regulation. Therefore, the U.S. Congress never voted to make the cultivation of industrial hemp illegal. In 1970 there were imported hemp products in the marketplace such as canvas and rope, but no hemp farmers left to ensure that cultivation was appropriately addressed. Processed hemp is now sold in the United States for paper, cloth, canvas, rope, food products, soaps, body care products, biocomposite materials and many industrial commercial uses. However, all hemp used in the United States is imported. CONTROLLED SUBSTANCE? The federal DEA tried to classified industrial hemp as a controlled substance by regulation. However, in 2004 the 9th Circuit Court of Appeals ruled that the DEA did not have the authority to regulate hemp under the 1970 Controlled Substances Act since hemp seed, fiber, and oil are excluded. The DEA dropped its appeal of that decision and the 9th Circuit Court ruling now stands as U.S. law on the issue. NO CONFLICT WITH FEDERAL LAW Under SB 767 only the excluded, non-federally-regulated parts of the plant would enter commerce of any kind, whether in-state or interstate, except for an in-state market for viable hemp planting seed for which there is no national market. For that reason, the U.S. Supreme Court's medical marijuana decision in Gonzales v. Raich, 545 U.S. 1 (2005) does not in any way suggest a pre-emption problem with SB 676. In Raich the Court reasoned that the interstate market for marijuana would exert a "pull" on in-state medical marijuana because the commodities were fungible. However, this reasoning cannot be applied to the cultivation of industrial hemp authorized by SB 676 because: 1. Only non-regulated parts of the plant would enter interstate commerce, and

2. No part of the non-psychoactive industrial hemp plant, including the flowers and seeds, is fungible in the interstate market for psychoactive marijuana. Because industrial hemp can't get you high, there is no interstate "pull" that could divert non-psychoactive industrial hemp plants, flowers, or seeds as they are useless in the illegal interstate market for marijuana. HEMP CAN'T BE USED TO DISGUISE MARIJUANA Hemp cannot be used to disguise marijuana for many reasons. Hemp grows densely and the shade works effectively as a smother crop not only for weeds, but marijuana, which needs lots of sunlight. Marijuana plants grow, flower and mature later than hemp and would be overtaken and shaded out if planted in a field of hemp. Cross pollination by industrial hemp pollen would result in seed production in the marijuana flowers. This makes them not sellable as an illegal drug. The flowering tops are the harvested part of the marijuana plant and flowering is reduced once the plant has been pollinated. To avoid seeding, reduced flowering, and less THC production, illegal marijuana growers destroy male plants before they can pollinate the females and render their product not smokable. Blowing hemp pollen would result in particularly heavy seed production in a marijuana grove. Finally, if marijuana plants have been cross-pollinated by hemp, the resulting seeds would produce, in the next generation, plants of uncertain and generally lower THC drug potency. Thus, there is no logical reason for growing hemp alongside marijuana. The pollination of marijuana plants by male hemp plants reduces the amount of flowers, the amount of THC containing resin produced per flower, and results in the production of undesirable seeds - all of which impairs the commercial value of a marijuana plant. The last thing a clandestine marijuana grower wants is a field of industrial hemp shading out and smothering marijuana plants, blowing pollen that will produce seeds in marijuana flowers, and reducing the potency of their next crop. MOVEMENT TO BRING BACK INDUSTRIAL HEMP FARMING Industrial Hemp is currently legal to grow in more than 30 countries including Canada, Germany, England, France, Spain, Australia, New Zealand, the Russian Federation, China, Hungary and Romania. California is one of fifteen states (the others are Arkansas, Hawaii, Illinois, Kentucky, Maine, Maryland, Minnesota, Montana, New Mexico, North Dakota, North Carolina, Vermont, Virginia, and West Virginia) that have passed pro-hemp laws or resolutions. An additional thirteen states have considered pro-hemp legislation or resolutions. The Farm Bureaus in Ohio and Pennsylvania have advocated for a return to industrial hemp farming. However, North Dakota is in the lead among U.S. states with a law and regulations in place that puts them on track to become the first U.S. state to grow industrial hemp. INDUSTRIAL HEMP PRODUCTION MAKES SENSE FOR CALIFORNIA Among the more than 1,000 member companies of the Hemp Industries Association, 150 of them are based right here in California. These companies are importing or buying a Canadian product that can be easily grown in California. Nutiva, an organic food company based in Sebastopol, CA believes they can save more than $100,000 per year in transportation costs if they could buy hemp seeds from California farmers. With so many hemp product manufacturers based in California and with a large number of acres planted in crops that could benefit in rotation with hemp, this region is particularly well-suited industrial hemp cultivation. The California Industrial Hemp Farming Act makes sense for California farmers, businesses, and consumers. Credit to The Hemp Industries Association:

www.thehia.org

