Ever since the passage of the 2018 Farm Bill, hemp products began popping up on retail shelves everywhere. As hemp continues to skyrocket in popularity, it is outpacing the ability for policy makers to respond.
There have been some arguments surrounding the 2018 Farm Bill, with some people feeling that hemp-derived cannabinoid products were not the intention of the Farm Bill and others stating that hemp-derived cannabidiol sales are proof of the success. Until now, there has been very little data available on the size and impact of hemp-derived cannabinoids on the U.S. economy — but one report is changing that.
A Better Understanding of Hemp
Whitney Economics just released its 2023 U.S. National Cannabinoid Report examining the impact of hemp-derived cannabinoids on the U.S. economy. It also looks at the impact that a patchwork of state policies has on the national industry.
According to the report, there are actually three markets within the hemp industry that often get overlooked:
Given the rapid ascension of hemp-derived cannabinoids, policy makers tend to forget about the other sectors within the industry. The economic potential of all three hemp sub-sectors is significant, and all together, is actually larger than the adult-use and medical cannabis industry.
An Unregulated Hemp Market
“The demand for hemp-based cannabinoids can be directly tied to the lack of federal legality of marijuana,” says Jeffrey M. Zucker, President and Co-founder of Green Lion Partners. “Marijuana products have long been in use and in demand throughout the country, regardless of legality. Now that companies have started to derive intoxicating cannabinoids within the workaround of hemp’s legality, people are buying as they can due to their accessibility, including being available online, especially in states with no access to legal, regulated marijuana.”
The unfortunate problem with this is that these hemp products are not required to go through the product quality testing required within the state-based marijuana industry, which Zucker says often leads to customers unknowingly not getting the actual cannabinoids concentrate that is listed on the package.
“The ideal solution is for the full descheduling of the cannabis plant as well as eventual federal guidelines for sales over state lines. At the least, it would be great for hemp-derived products to be subject to quality testing, but if the federal government starts more closely regulating them, I am afraid they will be banned or at least become much less accessible, so it’s a tough balance to determine,” notes Zucker.
Hemp’s Total Economic Impact
The policy differences cause a lot of questions to be raised. Whitney Economics conducted a national survey of hemp cultivators, manufacturers, distributors, and retailers in order to assess the economic impact of cannabinoids in the U.S.
Based on survey results, Whitney Economics found that for every dollar spent on hemp-derived cannabinoid products, there is an additional $2.8 of economic activity derived from that state. Based upon its midpoint forecast of $28.4 billion in sales, the total economic impact nationally is nearly $80 billion.
“Hemp demand is strong regardless of it in legal or prohibited states,” Beau Whitney, Business Consultant and Economist at Whitney Economics, and author of the report, says. “In states where hemp products have entered the market first, demand tends to be consistent with post-MJ legalization. However, we forecast that as more states legalize for adult-use, hemp-derived cannabinoid product demand will be flat to down in the long run.”
The 2023 Farm Bill
Lawmakers are currently working on a 2023 Farm Bill that would address hemp. The farm bill, a package of legislation passed roughly every five years, governs a list of agricultural and food programs in the country, including food assistance like SNAP. Lawmakers failed to pass the bill by their end-of-September deadline, which may push the new one until 2024.
“The farm bill is still being negotiated, so any forecasts are mere speculation,” Whitney says. “However, Whitney Economics expects some policy change when it comes to cannabinoids (slightly more regulation), but the biggest changes could come for fiber and grain. Support is fading for a definition change. But look for carve outs in terms of testing and licensing for fiber and grain.”
Without federal standardization and regulatory structures, state legislatures intervened, which has addressed some issues successfully, but also has created distortions in the market, according to the report. No one has been able to realize the impact these policies were having on businesses without the proper data. And these market distortions continue to have unintended consequences that can not effectively be addressed at the state level.
As Zucker stated earlier, the only way to truly help get the industry where it needs to be is through federal guidelines. If this occurs, many of the public safety issues can be addressed and we can also expect better regulation.