THE USDA JUST THREW A KNOCKOUT PUNCH

Source: Canna Law Blog

On Monday October 28 2019, the U.S. Department of Agriculture (“USDA”) released its interim final rule for the production of hemp under the 2018 Farm Bill. Although these rules are not final, they will go into effect once published in the Federal Register, at which point a 60-day public comment period will begin.

Upon the publication of the rules, our firm provided a broad overview of the provisions found in the rules. Today, we further discuss the THC testing requirements proposed in the rules and how they will impact the hemp industry.

TOTAL THC TESTING PROTOCOL

To the disappointment of many in the hemp industry, the USDA adopted a total THC testing requirement. A total THC is the molar sum of delta-9 THC (“THC”) and delta-9 tetrahydrocannabinolic acid (“THCA”). Using a total THC testing protocol will create additional big problem for hemp farmers who are already engaged in a precarious industry.

Not only does this testing method tend to increase the THC concentration in the hemp sample, and thus, pushes it over the 0.3 percent limit, it also limits the type of strains farmers can work with.

This is because few hemp genetics currently on the market would comply with a total THC testing method. Consequently, this rule will force hemp farmers to carefully select the types of seeds they buy.

To make things worse, the USDA rules also require that hemp be sampled and tested for total THC within 15 days of anticipated harvest. Given that the concentration of THC increases as harvest approaches, the rule will create additional challenges to get at or under the 0.3 percent limit. Although the USDA stated in its rules that it was “requesting comments and information regarding the 15-day sampling and harvest timeline,” the agency also explained that the rule “will yield the truest measurement of THC level at the point of harvest.” In light of these statements, it will be interesting to see whether stakeholders’ input on the matter will convince the USDA to revise this requirement.

MANDITORY DEA REGISTRATION

The USDA testing rules further require that the testing labs be registered with the Drug and Enforcement Administration (“DEA”). The rationale for this rule is that labs could potentially handle hemp that tests above the THC testing limit, and thus, would constitute “marijuana”, a Schedule I drug under the Controlled Substances Act. Because it is unlawful to possess marijuana without a DEA registration, all labs must be registered with the DEA in order to conduct hemp THC testing. However, the current DEA rules limit registration to labs located in jurisdictions in which the prescription, distribution, dispensing, research and handling of marijuana is legal. Accordingly, this USDA rule may reduce the number of labs that will be authorized to engage in this industry, which would be problematic given the fact that there are currently too few labs compared to the amount of hemp being produced.

The Future Of The Hemp Industry Will Likely Not Be CBD in 2020

Hempire Direct interviewed a few people in the hemp industry to ask what they thought of the new regulations and how it will affect business.

﻿Oregon farm, Whole Circle Farms, says, "We don't wanna risk it. We'll be growing several varieties of CBG next season and have already secured the seeds for 4 different strains." When asked if they will be growing any strains of CBD next year they replied with the following statement. "We will not be growing CBD again until someone can produce good seeds that fall under the new .3% Total THC limit"

We also interviewed 39 Hemp, a company that brokers wholesale hemp deals as well as futures.

Hempire: "Where do you believe the CBD market will be in terms of price?"

39 Hemp: "We think CBD prices will rise next year, as there won't be very many farmers with genetics that will produce a totally compliant CBD flower."

39 Hemp also added, "We are seeing many of our farm contracts switching to growing CBG flower. This poses a problem, as we already have buyers for the CBD Flower lined up."

Hempire: Can't you just sell them CBG instead?

39 Hemp: "Possibly, but we don't believe there will be enough education and demand for CBG next season.

Hempire: This should cause CBG to drop in price I assume?

39 Hemp: "Yes we anticipate that CBG will be sold at about the current price that CBD was sold this year, while smokable CBD could skyrocket to $700-$1200 per pound wholesale."

What does all this mean!

For those of you that skip to the end of the article, I'll summarize.

Hemp farmers are having a hard time dealing with new regulations imposed by the USDA and don't want to risk harvesting a "HOT" product, so most will be making the switch to growing CBG strains until new genetics that can produce total THC compliant flower hit the market.