The Founding Fathers
19th Century Hemp Production
Factors in Declining Hemp Production
Current Production Status
States Leading in Hemp Production
When Congress passed the Farm Bill, the section authorizing state-regulated research pilot programs included hemp. That program provided plenty of licensed growers with considerable success, leading to over 77,000 acres of crops in 2018. The U.S. hemp market also grew to over $800 million, making hemp one of the country’s most valuable agricultural commodities.
Now, new changes to the Farm Bill are poised to revolutionize the hemp market in 2019, providing many farmers with new opportunities and creating significant demand for professional agricultural services.
Industrial Hemp as an Agricultural Commodity
Industrial hemp is a valuable agricultural commodity cultivated for the manufacture of many products on a global scale, including cosmetics, beverages, food, nutritional supplements, spun fibers and more. It is commonly grown as a seed, fiber or other crop type.
Hemp is derived from Cannabis sativa, which is the same plant that produces marijuana. Because of this association, production in the U.S. has historically been restricted, with many of the products in the U.S. imported as finished hemp products or as single ingredients for further processing.
The Farm Bill had several changes to the federal policies regulating hemp. Certain institutions and state departments of agriculture are permitted to cultivate hemp, provided that it fit the statutory definition for industrial hemp as “the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a dry weight basis.” Delta-9 tetrahydrocannabinol is the predominant psychotropic ingredient. This prevented the U.S. Drug Enforcement Administration and federal law enforcement from interfering with agricultural research and hemp farmers.
The 2018 Farm Bill changed this by signing hemp legalization into law and removing it from the Controlled Substances Act. This change also applies to extracts of hemp, such as CBD and other cannabinoids.
Federal authorities will now treat hemp like any other agricultural commodity, such as tobacco or wheat, and industrial hemp farmers will no longer face regulatory or legal burdens of growing an illegal drug. In the past, this has included crop insurance or loan barriers.
For instance, the Small Business Administration (SBA) prohibited banks from issuing SBA-backed loans to any business that grows, produces, processes, distributes or sells products purportedly made from hemp, unless the business can show that its activities and products are legal under federal and state law. This is challenging to prove, so it restricts hemp businesses from obtaining these loans.
As a result, a seismic shift in the industry will occur, creating a demand unlike anything that could’ve been predicted, as the law is implemented.
Industrial Hemp Farming Act
The Industrial Hemp Farming Act of 2018 is intended to facilitate the commercial cultivation of industrial hemp in the U.S. This would amend the exclusion of industrial hemp from the statutory definition of marijuana. Instead, industrial hemp would be defined based on its THC content and set at a threshold of 0.3 percent. This bill could grant authority to any state permitting industrial hemp production and processing to determine whether the cannabis plants met the limit on THC concentration.
The federal crop insurance program will also include hemp as eligible for research funding under the Supplemental and Alternative Crops Act and Critical Agricultural Materials Act. It has been problematic to secure crop insurance for hemp prior to the bill, which left farmers vulnerable to severe weather and natural disasters that could devastate crops or entire farms.
Another challenge addressed by this bill is the inability to legally travel across state lines. The new bill allows growers to transport crops to other states. While states can regulate hemp crops as they please, no state will be able to prohibit the transport of hemp across state lines.
The bill will also lift restrictions on farmers seeking banking services, which increases their likelihood of getting low-interest loans and investments. As a result, more operations will be able to scale their production to meet the demand.
Demand for Cultivation Land and Banking Services
Though the true impact of the legalization of hemp remains to be seen, the projections are significant. In addition to a demand for the crop itself, a surge in demand for cultivation land is likely to impact the real estate market.
Hemp requires half as much land as cotton to produce, and Future Farm estimates its value at roughly $90,000 per acre. It can also grow quickly in different soils and temperatures, so it’s a flexible resource that doesn’t require precise soil to thrive. On top of that, hemp is a drought-tolerant crop, so growers may be able to make use of farmland that’s undesirable otherwise.
Banking will also change, since hemp farmers will now be able to secure competitive crop insurance, apply for business loans and land grants, and write off their business expenses like any other farmer. Approval at the national level means that credit card processors may be getting involved as well.
Regardless of what the future may bring, the legalization of agricultural hemp is set to disrupt many industries, creating significant demand for everything from cropland to insurance services.
With the Farm Bill of 2018 passed, 420 Property is ready to assist in meeting these demands. This collection of hemp properties and businesses for sale as well as “420-friendly” professionals offers services ranging from real estate to insurance quotes are all aimed at helping hemp farmers reap the benefits of this hot agricultural commodity.
For years, hemp and marijuana have been lumped together legally and also in the minds of many individuals. The two substances are different, however, and are now being treated as such under United States law. In December, the US Congress passed legislation legalizing hemp and hemp products. While some restrictions may still be enforced by the FDA, the new law opens up the market for hemp expansion and promises an increase in the production of CBD oil, a substance that is used to treat seizures and is said to be effective for a number of health conditions. Marijuana has also been increasingly legalized across the country, greatly reducing any lingering stigma, but now hemp has an acceptance that cannabis has yet to achieve. Hemp is no longer the crop of the future but rather takes its place firmly in the present.
People sometimes confuse hemp and marijuana, but they are two distinctive plants – both with a number of varieties. Hemp does look similar to marijuana, but its leaves are narrower and the plant itself is skinnier with a lack of branches beneath its upper portion. Hemp plants are usually between 6 to 15 feet high and require little care to thrive. Depending on the soil and climate conditions, the growing cycle is somewhere between 70 to 140 days. Hemp is also an abundant crop. Just one acre of hemp may produce 700 pounds of grain. Some people still think you can get high on hemp, but that is rarely the case. Legal hemp contains much less THC than marijuana – approximately .03% compared to 15 – 40%. That means that hemp CBD oil contains little of the psychotropic qualities caused by THC. It gives patients the benefits of marijuana but without the mood-altering effects.
In addition to CBD oil, hemp can be used for a number of products, including rope, clothing, soap, paper and protein powder. Many people consume food and beverages that contain hemp seed or simply snack on them alone. For years hemp production was limited by legal issues and negative public perception. The change in US law promises to remedy these problems and encourage greater hemp production and use.
While hemp offers excellent profit opportunities for farmers, it also comes with challenges. Even with the new legislation, government regulation will still be present. For instance, hemp has to be tested to make certain that it does not contain more than the 0.3% legally allowed. Currently, there is no standard way to test crops for THC, which causes problems for some farmers. Experts also warn that differing state laws could still impose limitations on hemp production. Confusion around CBD production and sales is still being resolved. Users of the oil claim that it can cure or mitigate almost any condition, including cancer, but those claims have not been confirmed by the FDA. State policies toward CBD oil also widely vary, which means farmers have to do careful research on their particular state’s law. Like any crop, hemp fields can be damaged or even wiped out by weather events such as drought, wind storms and fires. California hemp and marijuana crops suffered huge losses in 2018 due to devastating wildfires. Hemp can also be damaged by a number of pests, including the hemp borer. The future for hemp growers looks bright, but farmers need to protect their investment with crop insurance, just as they would their corn and soybean crops.
The new legislation makes it much easier for hemp farmers to protect their crops. The legalization of hemp removes many of the difficulties that marijuana farmers still have when trying to buy crop coverage. Hemp farmers may be new to the world of crop insurance, so they need to understand the basics. Buying insurance means that their crops have a level of protection against weather and other threats. Some farmers forgo purchasing this insurance, preferring to gamble that their crops will thrive – a risky choice that can have severe financial repercussions. Crop insurance may provide coverage only for hail damage or it may be multiple peril crop insurance (MPCI) that protects against weather, disease, drought, flooding, etc. Now that hemp is legal, farmers will have more choices for crop insurance, including both government-supported and privately-issued policies. Certainly, more companies will get into the hemp specialty insurance market since the demand is bound to explode. For years, hemp production was limited by the crop’s legal status and its association with marijuana. Now hemp has been accepted as a legitimate agricultural product and given legal status in the United States. In addition, much of the stigma of marijuana has disappeared as well. Hemp is poised to become a standard crop raised by farmers all over the country. Hemp products are already in great demand, with CBD oil being of particular interest to the healthcare industry. Since farmers can now openly grow hemp just as they would their other crops, they need to treat it like their wheat or corn, which includes buying crop insurance. No farmer can afford to invest in a crop and then lose it to pests or severe weather.
The Passage of the federal 2018 Farm Bill is poised to change things for the better in the hemp industry. The new law removes the Cannabis sativa L plant from the Controlled Substances Act and from oversight by the U.S. Justice Department and places it under the purview of the Department of Agriculture. While still heavily regulated, hemp farming and the manufacture and sale of hemp-based products will now be lawful activities. This opens the door to massive growth and expansion in the hemp industry. It also means the demand for hemp real estate will soon be on an immense upswing.
Recent and Current Status of the Hemp Industry
Subsequent to the 2014 Farm Bill, agriculture state departments and research institutions were permitted to cultivate industrial hemp. This production owas limited to research and study purposes, though part of this research included learning about the marketing potential of this crop. Many states initiated agricultural pilot programs to move forward with this production.
In 2017, the hemp market generated $291 million. In the U.S., more than 3,500 licensed cultivators produced between 23,000 and 26,000 acres of hemp in 19 states. This represented a 163 percent boost over 2016, with 9,770 acres. By this year, the acreage had increased to 77,000 acres.
Due to the prohibition on the commercial growth of hemp in the U.S., many companies had to rely on imports from Canada, China, Romania, India, Chile, the Dominican Republic and a few scattered European countries. The bulk of U.S. hemp imports – 90 percent – were supplied by Canada. The Federation of American Scientists numbers reveal a 2015 import market of $78.1 million. By last year, that number had dropped to $67.3 million. But with the passage of the 2018 Farm Bill, the amount of hemp imports should decrease substantially. American farmers will be growing their own with the loosened commercial hemp production laws.
The U.S. hemp product retail sales market in 2017 was estimated at $553 million. This includes a wide range of goods, like personal care products, supplements and food. When clothing, textiles, building materials, auto parts and other miscellaneous products are added, the total is closer to $820 million.
Projections for the Future of the Hemp Industry
Hemp farming has great potential. It’s a hardy crop and needs less water, fertilizer, pesticides and herbicides than corn. It succeeds in most environments, making it suitable for farmers across the nation. It also lends itself to organic farming due to its minimal input requirements, fast growth, weed resistance, and endurance against diseases and pests. And with more than 25,000 recognized uses, hemp is the definition of a super crop.
There are numerous projections on the future of the hemp market. The Brightfield Group is predicting a boom upwards of 450 percent growth by 2021, surging to $6.5 billion. By 2022, the group predicts an increase 40 times over, generating a $22 billion market.
A driving factor in the projected growth of the hemp market is increased consumer demand for goods infused with Cannabidiol (CBD) oil. Consumer awareness about the potential therapeutic benefits of CBD has recently exploded, and it doesn’t appear that it will be dying down anytime soon. As part of the wellness industry — a powerhouse sector, already – the production of CBD-infused goods is expected to increase in profitability. Forbes estimates that the CBD consumer market will hit $2.1 billion in within two years. This will require the increased production of CBD-producing hemp crops.
Real Estate Demand
The full impact of the new Farm Bill on hemp cultivation, CBD-products, the real estate market and other sectors won’t be fully realized for some time. But it’s obvious that changes are coming. With the move to lawful production, there will be an increased demand for hemp and hemp-derived goods. Farmers will soon need more land to cultivate larger amounts of hemp crops.
Farmers have been noticing the profitability of hemp. For example, one Kentucky farmer explained the disparity in growing soybeans versus hemp. One acre of soybeans would yield about $500 on today’s market. In stark comparison, that same acre of hemp with CBD-rich flowers might sell for up to $30,000. It’s a lucrative cash crop and the new law makes commercial production a reality for a growing number of farmers.
This year, the top five states with the most hemp acreage are:
- Montana – 13,141 acres
- Colorado – 5,562 acres
- Kentucky – 4,615 acres
- North Carolina – 3,263 acres
- North Dakota – 2,669 acres
Hemp-planted land in the remaining hemp-producing states ranges from 12 acres to 726 acres. While this hemp acreage has grown since the passage of the 2014 Farm Bill, that growth will pale in comparison to the boom coming due to the new Farm Bill law. But even small family farms, of no more than 7 acres, will be able to realize a profit from hemp crops.
The demand for hemp currently exceeds the available supply in the U.S. Established farmers are eager to meet this demand. And with the money to be made in this industry, newcomers are likely to try their hand, as well. This influx of new hemp farmers is sure to have an impact on real estate – specifically, an increased demand for agricultural land.
These projected changes won’t happen overnight. But industry pros need to be prepared in order to benefit from the expected growth. Education and awareness about the possibilities in the hemp and CBD industry are key.
CDB is being added to an increasing number of goods. Some examples include lotions, pain creams, bath products, dog treats, supplements, beverages, baked goods, lip balms, candles, massage oils, olive oil, honey, candy and a broadening variety of foods. The list is virtually endless. As the popularity of these and other CBD-infused items grows, cultivators and manufacturers will need to find more space for production to meet the growing demand, impacting the real estate industry.
Popularity of CBD-infused Goods
Cannabinoidol (CBD) is derived from the Cannabis stevia plant. Though it’s related to the marijuana plant, CBD contains no tetrahydrocannabinol; popularly known as THC, this is the psychoactive component in marijuana that delivers the “high” effect. Instead, CBD’s reputed beneficial effects rely on molecular pathways and interactions that are free of the mind-altering effects associated with marijuana.
Both scientific and anecdotal evidence tout the benefits of CBD, said to have a positive impact on health, wellness, mood, sleep habits, and pain control. It’s no wonder than, that consumer demand for this “miracle” product is high and continues to grow. New Frontier projects that hemp-derived CBD sales may grow to more than $1.15 billion over the next four years. The Cannabis market data firm predicts that changes in legislation under the 2018 Farm Bill will encourage mass market retailers to join the CBD goods industry.
The Legality of CBD
The 2018 Farm Bill was signed into law on December 20, 2018. This new $867 billion law makes the commercial cultivation and sale of hemp lawful. It also allows interstate hemp commerce. The law limits the production of hemp to cannabis plants that contain no more than 0.3 percent THC. This directly impacts CBD that’s harvested from industrial hemp, removing it from the controlled substances list and protecting is as an agricultural hemp-derived product.
The Food and Drug Administration still offers a bit of roadblock. It doesn’t differentiate between marijuana-derived and hemp-derived CBD. Instead it prohibits the addition of CBD to any foods. The FDA also claims that CBD isn’t a dietary supplement, but a drug, and requires FDA approval for use in food, drinks and supplements. This stance is one that bears watching. But, thus far, the FDA hasn’t been aggressive in enforcement of this CBD prohibition. It typically acts only when interstate commerce and online health claims are involved.
Production of CBD Items
With the passage of the new farm bill, CBD advocates are predicting a monumental shift in how CBD-infused products are marketed and sold. The legality of making CBD-infused products means large retailers will be eager to add these items to their shelves. This change in the law is likely to impact the entire supply chain, from cultivation and packaging to sales and marketing. Mainstream manufacturers, suppliers and distributors won’t want to miss out on a market as lucrative as CBD products.
Real Estate Needs for Hemp Cultivation and CBD Goods Production
To meet demand for CDB products, farmers need to grow more hemp crops. This means a need for more acreage. Once the hemp is grown and sold, manufacturing companies take over production of the CBD oil and CBD-derived products. An increased need for space and manufacturing facilities is anticipated.
This new law will encourage financial institutions to provide services to professionals in the hemp industry and offer loans to farmers and small businesses involved in the production of hemp and hemp-derived products. This will free up more operating capital and give these businesses and entrepreneurs the funds to lease and purchase necessary land and other real property.
Consumers are demanding CBD products. Smart business owners are eager to meet that demand and realize the profits associated with this booming market. Real estate needs are poised to increase in this industry in order to support this growth. It’s a fast-developing industry that will gradually impact a number of other sectors.
Search or hemp properties for sale or lease and hemp/ CBD businesses for sale on 420Property.com
Just one week after the 2018 Farm Bill passed through the U.S. Senate and House of Representatives, President Trump signed the landmark bill into law on December 20, 2018. The Farm Bill is the first piece of federal legislation which unambiguously removes hemp-derived cannabinoids including Cannabidiol (CBD) and tetrahydrocannabinol (THC), the active ingredient that produces the psychoactive effect from Cannabis, from the Controlled Substances Act and moreover, expressly prohibits States from the interfering with interstate sale and transport of such products.
There’s no question that 2018 has been a landmark year for the hemp and CBD industries. With the approval of the Farm Bill presented by Senate Majority Mitch McConnell, hemp has now been taken off the list of federally controlled substances.
This isn’t a new bill, in fact it is one that has been around since 2014, when a bill was passed to distinguish hemp from marijuana based on the THC content. In 2014, the passing of that bill made it legal to grow and study hemp through various universities and agricultural programs.
Industrial hemp is defined as any part of a cannabis plant that has no more than 0.3 percent THC based on the dry weight.
The Growing Hemp Industry
Thanks to the passing of the Farm Bill, the provision from 2014 will be repealed, which means that now it is possible to expand who and where industrial hemp is grown. In 2017, more than 25,000 acres of hemp were grown across 19 states, which represented an increase of 126 percent since 2016. It is expected that this growth is going to continue with the new legislation that is in place.
While both chemicals are derived from hemp, CBD is the element that doesn’t produce a psychoactive effect, unlike THC. This means there is no “high” sensation experienced with hemp, especially considering the many uses it has, such as for rope, fabric, paper and more.
The Growing Rate of CBD Sales
Thanks to the passing of the Farm Bill, it is expected that the CBD market will grow by more than 40 times what it is now by the year 2022. While federal legalization is great news for CBD companies, the question that many have is how do they prepare for this change, and what are they really hoping to see?
This is a question that is still being pondered by many in the industry, and for most, it is a “wait and see” situation.
The Increase in Demand for Hemp Acreage
With the original bill for limited hemp growing rights the expansion of hemp was significant. While it was still considered a minor crop in 2016, it was rapidly expanding. In fact, in 2017, there were approximately 26,000 acres of hemp being grown in the US (almost double the previous year) and was produced by approximately 1,500 farmers.
With the amendment to the 2014 bill, which was approved on December 12, 2018, the federal ban on hemp cultivation was lifted with broad and bipartisan support.
Upon passing, the American hemp industry is projected to balloon in short order and create a huge demand for farmers and land for this crop.
There are some who believe that in rural areas, the demand for more farm acreage may impact the real estate market. This is another factor that is unknown since the new bill has been passed. While the increase in demand will likely result in a surge of prices for available farmland, no significant change in this particular industry is expected.
The Establishment of Quality Standards
While this isn’t a topic that has been breached in the U.S. yet, it is something that Canada (the neighbors to the north) have already done. The fact is, with hemp now being legal, more people are going to be growing it. As a result, eventually there will have to be industry-wide standards regarding the growing process and selling requirements.
While managing the crops grown by 1,500 farmers may have be manageable, with the new Farm Bill this may not be as possible. With the increase of product that’s projected to come to the market offer the course of the next few years, the need for quality standards is high and something that will have to be considered at some point.
A Better Understanding of the Farm Bill
For many, the Farm Bill contains a lot of information that isn’t exactly clear – after all, this bill alone is more than 1,700 pages long. Within those pages, things like pesticides, the SNAP program and other factors – even tariffs – are discussed.
While the actual impact of this bill on farm land, real estate and farmers in general is yet to be seen, there are many experts and government officials who believe that the bill will be beneficial in the long run. With the increase in demand of CBD oil, hemp products and other related items, the ability to make these in states where it is legal is a huge advantage. Not only that, but hemp is considered a cash crop, which is going to lead to farmers being able to make up the deficit that some of the newly appointed tariffs have created in the recent past.
So, is it positive for the country, citizens and individual farmers? This is a question that time will answer. Currently, there are many who support what the bill offers and the ability to grow hemp, which is a commodity that is in high demand both in the United States, as well as in other countries.
The cannabis industry is in a strong growth phase. By 2027, worldwide spending on cannabis is expect to reach $57 billion, with recreational use making up 67% of the market and medical use making up 33%. Marijuana is gaining more acceptance in the mainstream culture and has become legal in a number of American states. As a result, many investors are interested in acquiring their own operations. The industry offers excellent profit potential, but it does present complications, including legal and property issues. Also, increased competition will eventually cause prices to drop, impacting a company’s profit margin. Those interested in cannabis production and sales need to consider all these factors before entering the industry.
Real Estate Prices
One of the oldest industries on Earth – real estate – is about to join forces with one of the newest – cannabis. The result is Cannabis Real Estate. Take a closer look at one of the most exciting new sectors for investment in the property market today.
The profile of states that have legalized marijuana and its derivatives is changing rapidly. In 2021, The majority of states fall into one of three categories:
- Marijuana is legal for recreational and medical use;
- Marijuana is legal for medical use only;
- Marijuana possession in small amounts has been decriminalized.
In states like West Virginia and Louisiana, the legalization only covers businesses that sell for cannabis-infused products, such as oils or pills. In other states where it has not be legalized, like Virginia, doctors are permitted to write a recommendation, not a prescription, for cannabis-related treatments.
Cannabis-related Property Types and Their Values
While the first type of commercial real estate that comes to mind is customer-facing, either a retail storefront or a medical dispensary, there are many parts of the supply chain that have to come first.
Property types include:
- Cultivation areas, either on a farm or within a greenhouse
- Manufacturing plants that turn the raw materials into Cannabidiol (CBD) oil or other compounds
- Distribution hubs that handle secure storage and manage logistics
- Delivery companies that assure the right packages are delivered to the right destination within tight windows
- Testing facilities that assure quality to meet regulations and the guidelines of oversight bodies
- Micro businesses that sell and support the equipment required to operate the retail and medical locations
- Offices for online companies such as medical staff that review marijuana prescription cases over the web
The values for these properties can run from the thousands for a pre-built medical dispensary to the multi-millions for shovel-ready development parcels.
Once the establishments are built, real estate investments follow the profile of commercial development for any other industry, such as funding for regular tenant improvements of the property and projects to make the business more energy-efficient.
Cannabis Zoning Requirements
Even though cultural views have shifted about marijuana, the Drug Enforcement Agency (DEA) still classifies it as a Schedule I drug, which impacts where marijuana-related businesses can be located. 32 states and the District of Columbia have established “drug free” zones that extent 1,000 feet in every direction from the property lines of elementary and secondary schools.
Many of those states have expanded these zoning laws to protect public parks, churches, daycare centers, and public housing. Map that out and it becomes clear there’s not a lot of options for where these businesses can be located, except far from the city center. In Missouri and West Virginia, the definition of school includes colleges and universities. In Arkansas, the zones include all of those areas plus public recreation centers, skating rinks, Boys’ and Girls’ Clubs, and substance abuse treatment facilities.
In California, the laws are a bit more relaxed. For example, in Los Angeles “blue zones” indicate where dispensaries are permitted inside areas already zoned for retail and industrial uses. The required set-back area is 800 feet in every direction from schools, public parks, libraries, and drug treatment or rehab centers. In addition, dispensaries must be separated from each other by at least 800 feet.
Similarly, in San Francisco “green zones” indicate where cannabis retail locations are permitted, which must be at least 600 feet in every direction from public or private schools, both elementary and secondary. “Purple zones” grant permits based on a conditional use authorization and “brown zones” allow these businesses to be located there only with a special microbusiness license.
Conditional Use Permits and Licensing
Every state and many municipalities within those states have special laws and procedures covering permits and licenses for specific business types. Entrepreneurs would be wise to invest in a legal/government affairs specialist to do all of the necessary research and meet all of the requirements early in the planning process.
In some states, these laws are streamlined to facilitate rapid expansion and revenue generation. In California, there are three state licensing authorities: the Bureau of Cannabis Control, the Manufactured Cannabis Safety Branch, and CalCannabis Cultivation Licensing. The type of license required (such as cultivator, retailer, testing lab, and so one) determines which agency will issue the license.