With the release of the U.S. Department of Agriculture’s (USDA) interim final rules for the U.S. Domestic Hemp Production Program in October 2019, interest in the hemp industry has skyrocketed.
Now that industrial hemp is legal at the federal level (thanks to the 2018 Farm Bill) and the USDA is starting to approve state and tribal hemp production plans, crops and retail sales are expected to grow quickly in the coming year. Already, the number of acres of hemp grown in the United States in 2019 was 100 times greater than five years ago, and that was before the USDA approved any state or tribal hemp plans.
So far, the USDA has only approved 13 state and tribal hemp plans from the following states and tribes:
- New Jersey
- Colorado River Indian Tribes
- Flandreau Santee Sioux
- Fort Belknap Indian Community
- La Jolla Band of Luiseno
- Iowa Tribe of Kansas and Nebraska
- Santa Rosa Cahuilla
- Yurok Tribe
The USDA continues to review submitted plans and more approvals will come in the future. The status to date is as follows:
- States and tribes with USDA approved plans: 13
- States and tribes with plans currently under review by the USDA: 23
- States and tribes with plans pending resubmission: 5
- States and tribes still drafting plans: 12
- States and tribes that will continue operating under the 2014 hemp pilot program: 10
- States and tribes where the USDA will issue the hemp producer license: 1
With more plans expected to be approved soon, many investors and businesses are aggressively entering the hemp marketplace. Based on data from the Cannabiz Media License Database, states are rapidly awarding hemp licenses. In fact, by the end of 2019, the number of active hemp licenses was almost more than the number of active cannabis licenses in the United States with states like Oregon, Tennessee, and Colorado issuing thousands of new hemp licenses each throughout the year.
What makes industrial hemp so appealing to investors and businesses? Following are some of the key factors attracting people to the industry.
Supply Chain Development
The hemp market is growing exponentially in the United States, which means companies that get in early will have to build the infrastructure for the supply chain. Yes, this takes time and money, but it’s also a big opportunity to have a voice in building the best supply chain for a business. For investors who want a say in how the hemp supply chain will operate, now is the time to enter the industry.
Until the infrastructure is built, hemp-related businesses will have to bootstrap to survive and thrive in the short-term. However, the up-front cost might be worth it for savvy startups that understand the far-reaching long-term benefits of helping to develop the entire supply chain for a nascent commercial industry.
A Voice in Regulation
The USDA’s interim final rules for the U.S. Domestic Hemp Production Program are subject to change. They’re interim final rules, not final final rules. The USDA is using the 2020 growing season to test the interim final rules, and based on what is learned during 2020, the rules will be re-evaluated.
It’s safe to assume key industry stakeholders will have opportunities to provide their opinions and recommendations during the re-evaluation process. For investors and businesses that want to help shape the industry and its regulatory framework, now is the time to get in and actively participate.
The first to market has a unique opportunity to own that market, and once a brand owns a market, it can be very difficult for later entrants to compete on equal footing. The hemp industry is a perfect example of an industry that is waiting for businesses to be first to market in a wide variety of categories.
While some restrictions and challenges related to commercial activity are still common despite the passing of the 2018 Farm Bill, all signs point to increased commercial activity in the hemp industry. Therefore, it’s time for investors to think about being first to market and owning a space in that market.
Innovation and Expansion
It’s estimated that more than 50,000 products can be made from hemp. In the United States, food products and CBD brands are two of the fastest growing categories within the hemp market. Demand for hemp products is also growing quickly in other parts of the world – in both established hemp markets and untapped markets – and expansion opportunities abound.
Innovation and product development could put a U.S. hemp business in an industry leadership position quickly because there is a significant opportunity for businesses to expand their hemp product lines and footprints through innovation. Already, a variety of innovative hemp technologies have debuted, which will help drive the industry forward.
Demand and Penetration
As sales increase for hemp products in the United States shows, demand for hemp is growing rapidly. However, penetration of hemp products into U.S. households is still quite low. There is still confusion and a negative misperception about hemp among many Americans, which means there is room for savvy businesses to learn about consumer needs, particularly what consumers want from CBD brands, and carve out dominant positions in the marketplace.
Bottom-line, there is a big gap in the hemp market that is waiting to be filled by businesses and strategic investors. Growing demand and limited penetration equals big opportunity for the right people and companies.
Key Takeaways about the Hemp Opportunity
When the 2018 Farm Bill was passed, the doors to the hemp industry opened and the release of the USDA’s interim final rules opened those doors even wider. While there are still rules, restrictions, and challenges at the federal and state levels that keep those doors from opening all the way, the good news is they’re open just wide enough for savvy entrepreneurs and investors to enter and profit.
Originally published 2/20/18. Updated 1/31/20.
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.