The 2018 Farm Bill, a piece of legislation much anticipated by the hemp sector, is approaching the finish line.
The House and Senate members who comprise the Farm Bill Conference Committee have released a final draft and filed the bill. One major highlight: the legalization of the cultivation of industrial hemp and the reassignment of the United States Department of Agriculture as the overseeing agency.
What's In The Final Version Of The Bill?
Negotiations on the bill took months, as Republicans and Democrats had to reach a compromise on a number of issues.
House Republicans wanted to impose stricter work requirements for participants in the government's Supplemental Nutrition Assistance Program, commonly known as food stamps.Democrats opposed these restrictions, as they would have reduced benefits for more than 2 million people.
The compromise bill leaves out the requirements, but keeps in place some measures aimed at avoiding fraud and duplication that were included in the House version.
Other points in the bill include safety nets for agricultural producers, such as crop insurance — which was expanded to cover fruits, vegetables, hops and barley. It also includes a stronger margin protection program for dairy farmers.
Smaller dairy producers will also benefit from the bill if it's signed by President Donald Trump, as it includes better financial safety nets for them. Dairy producers can also obtain insurance to protect themselves against low margins.
The 2018 Farm Bill is expected to cost $867 billion over a 10-year period, with the bulk of the funding going toward the food stamps program.
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What About Hemp?
A major talking point that surrounded the Farm Bill during negotiations concerned the legalization of hemp.
The previous bill, passed in 2014, relaxed hemp laws more and allowed a number of states to cultivate the plant.
For the 2018 bill, Senate Majority Leader Mitch McConnell introduced hemp laws and pushed for their inclusion in the final bill. As a member of the joint conference committee on the farm bill, McConnell signed the bill Monday. On Tuesday, McConnell said the bill is "locked in."
The provisions introduced by McConnell would make hemp a lawful agricultural commodity, thus allowing hemp farmes to obtain crop insurance. In addition, legalizing hemp also removes any uncertainties surrounding hemp-derived cannabidiol, or CBD, and CBD-based products.
The bill effectively removes hemp from Schedule 1 of the Controlled Substances Act and puts it under the supervision of the Department of Agriculture.
Some regulations will remain, but it's a major step forward for the commercialization of the plant.
The Companies That Would Benefit
The legalization of hemp would have a direct effect on businesses across the U.S.
Many farmers are expected to plant more hemp due to the high demand for CBD products. In 2017, $827 million in legal hemp products were sold in the U.S., most of which were CBD products. The legislation would also help cannabis companies with hemp divisions.
Listing on a major U.S. exchange is difficult for American cannabis companies due to the federal illegality of the plant. The new farm bill would make it possible for cannabis companies that are also engaged in hemp to spinoff their hemp assets into separate public companies.
In turn, more investors could confidently invest in hemp stocks due to the removal of legal uncertainty.
Manufacturers of CBD products will also get a boost not only from investors, but customers.
Companies like New Age Beverages Corp NBEV have already developed lines of CBD-infused beverages. The legality of hemp and CBD on a federal level unlocks a larger market. And big companies like The Coca-Cola Co KO and PepsiCo, Inc. PEP could join the CBD-infused drinks market.
Cannacord Genuity has estimated the American CBD beverage market could reach $260 million by 2022.
Pharmaceutical companies focused on CBD-based drugs such as GW Pharmaceuticals plc GWPH could also benefit from the passage of the farm bill.
Yet despite the imminent descheduling of hemp, the FDA has not changed its position on the plant, even though it approved GW Pharmaceuticals' Epidiolex drug earlier this year.
The vote on the bill received bipartisan support in both the House and Senate. President Donald Trump has applauded the bill, saying it's in "very good shape."
Yet for CBD to become fully legal, the industry must also come to some sort of agreement with the Food and Drug Administration.
The FDA is considering CBD as an ingredient that is not allowed in any food — was added as an active ingredient in a drug product, Epidiolex. It also cannot be sold as a dietary supplement. In its Q&A on marijuana, the FDA states:
"If a substance (such as THC or CBD) is an active ingredient in a drug product ... or has been authorized for investigation as a new drug for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public, then products containing that substance are outside the definition of a dietary supplement."
So far, the FDA has not pursued any significant action against companies selling CBD products. Nevertheless, as the floodgates open and more products enter the market, it's likely the regulator will take a stricter stance. An agreement might be reached that would result in the FDA passing some sort of resolution that would state that it allows CBD to be used as an ingredient. Stay tuned.
Public domain photo via Wikimedia.
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