The hemp industry in the United States is growing, but there are factors at work that are significantly limiting its growth potential. While the number of acres of hemp grown in the U.S. nearly tripled between 2016 (9,770 acres were grown) and 2017 (25,541 acres were grown) according to VoteHemp’s 2017 U.S. Hemp Crop Report, that’s just a drop in the bucket compared to what other countries like Canada, China, and France are producing.
While the hemp industry faces a long list of challenges in the United States, there are three critical factors that are crippling it: laws, perception, and capital. Let’s take a closer look at how each of these factors affects the industry.
The United States is overflowing with regulations that limit the growth of the hemp industry. Of course, the most obvious and crippling law is the one that classifies hemp as a Schedule 1 drug. Clearly, hemp must be reclassified in order for the industry to flourish as it should. Bottom-line, hemp should be treated like any other commodity.
The 2014 U.S. Farm Bill made it federally permissible for state agencies and universities to grow hemp for research purposes in states that allowed it, but commercial growth is still not legal federally.
The fact that hemp is illegal at the federal level causes problems across the supply chain – problems that competitors in other countries don’t necessarily face. As a result, U.S. hemp growers, processors, and distributors aren’t able to compete in a free and open market. They’re at a disadvantage from day one that will significantly limit their ability to thrive in the hemp industry.
For example, since hemp is illegal at the federal level in the United States, growers are strictly limited in terms of what they can grow, how they can grow it, and more. Consider the problems hemp growers in the western part of the U.S. have faced related to watering their crops. In many states in the western part of the country where the climate tends to be more arid, water rights are highly regulated. Since hemp is a Schedule 1 drug, hemp growers are not allowed to use water to irrigate their crops that has been touched by the federal government in any way.
Unfortunately, the federal government “touches” the water in western states a lot more than you might think. As an example, in Colorado, if at any time water runs through anything that used any federal funds (e.g., a ditch), it is considered “colored water” and cannot be used on industrial hemp crops. Bottom-line, hemp farmers are fortunate that industrial hemp doesn’t require a large amount of water to grow or more of them could end up losing their entire crops like a Montana hemp farmer did last year.
Farmers are also lucky that hemp crops don’t require a lot of pesticides, insecticides, fungicides, or other chemicals because the Environmental Protection Agency hasn’t approved any for use on industrial hemp. Today, hemp farmers’ options for these products are very limited.
While demand for hemp products is increasing in the United States, there is still a negative perception of hemp. Many consumers still believe that hemp is the same as or very similar to marijuana. Today, a small number of universities and companies use hemp, and many still import from Canada and other countries where systems are in place and have been proven to be reliable over the years.
Education and media attention are both required to change the public’s perception of hemp. If the Industrial Hemp Farming Act is passed and hemp is taken off the list of Schedule 1 drugs and legalized, the perception of it will change more quickly. However, until more people hear the true story about hemp, how many different kinds of products it can be used to make, and how it can help people, the negative misperception will continue, and demand will be more limited than it could be with full legalization.
Everything goes back to the laws related to hemp and its mistaken placement on the list of Schedule 1 drugs in the United States. Here we go again. Since hemp is still illegal at the federal level, many banks won’t work with hemp-related businesses.
No matter how much the hemp industry could positively affect the economy of individual states or the entire country, it’s hard to attract a lot of investors and big companies with deep pockets to an industry where businesses can’t even get bank accounts. For example, how does a California hemp grower get the money it needs to operate if it can’t get a bank account and can’t even be sure if it will have the water it needs to irrigate its hemp crops?
Furthermore, capital is needed to acquire the right equipment to cultivate and process hemp economically and efficiently, and a robust supply chain infrastructure must be developed. These things require money, but as long as hemp is illegal, large sums of money from broad groups of investors and companies will be scarce in the hemp industry.
It’s very likely that hemp is the biggest opportunity in the U.S. cannabis market, but that opportunity won’t have a chance to grow to its fullest potential as long as laws prohibit free and open competition. Today, laws cripple hemp-related businesses, negatively affect perception and demand, and limit the amount of capital entering the industry. As a result, countries like Canada are quickly passing the U.S. as global leaders in the hemp industry. The question is whether the U.S. can catch up.
What do you think are the top factors crippling the hemp industry? Leave a comment below and share your thoughts.
Susan Gunelius, Lead Analyst for Cannabiz Media and author of Marijuana Licensing Reference Guide: 2017 Edition, is also President & CEO of KeySplash Creative, Inc., a marketing communications company offering, copywriting, content marketing, email marketing, social media marketing, and strategic branding services. She spent the first half of her 25-year career directing marketing programs for AT&T and HSBC. Today, her clients include household brands like Citigroup, Cox Communications, Intuit, and more as well as small businesses around the world. Susan has written 11 marketing-related books, including the highly popular Content Marketing for Dummies, 30-Minute Social Media Marketing, Kick-ass Copywriting in 10 Easy Steps, The Ultimate Guide to Email Marketing, and she is a popular marketing and branding keynote speaker. She is also a Certified Career Coach and Founder and Editor in Chief of Women on Business, an award-winning blog for business women. Susan holds a B.S. in marketing and an M.B.A in management and strategy.