Demand for Land and Professional Services Surges in Newly Legalized Hemp Industry

Demand for Land and Professional Services Surges in Newly Legalized Hemp Industry

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.

Moving Forward

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.

February 2, 2019Comments Off

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