What the legalization of industrial hemp means in dollars and sense

January 25, 2019 by administrator
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The end-of-year Farm Bill passed in December of 2018 brought with it the re-legalization of a crop that has not been on the U.S. Government’s approved list since 1937. Hemp, the non-intoxicating cousin of the oft-maligned marijuana, has returned to the country’s list of approved substances. The lumping of hemp with marijuana was not an uninformed accident; it was a calculated smear campaign by a number of industries struggling to compete with the hemp market. As we return to using hemp close to a century later, there are potentials for profit estimated to be in the tens of billions by 2025. The first clues on where these profits will lie can be found at this story’s beginning.

Hemp versus Marijuana: What is the Difference?

A bit of an explanation must preface the tale, as the difference between these plants is a major part of the story. Both hemp and marijuana are in the Cannabis family. For those who like Latin names, hemp is Cannabis sativa, while marijuana is Cannabis indica. These species are still considered larger classification groups and are often broken down into further subspecies; anyone who goes to a marijuana dispensary or recreational shop like Euflora will get a variety of subspecies options.

For non-scientists, these are different species that are closely related (close enough to be cross-bred. They look similar, and it has not been uncommon to refer to hear someone refer to marijuana as hemp. Hemp and marijuana have some growth differences, as one is valued for its leaves and the other the fibers in its woody stalks. The key difference to note here is the lack of THC in hemp. Though not an intoxicant, it does contain other compounds in common with its sister species, like CBD.

The 1937 Marihuana Tax Act and Why it Matters Now

Both hemp and marijuana were originally banned during the 1937 Marihuana Tax Act. This bill was prepared in secret and passed through a series of misinformation campaigns. This bill has been considered to be racist, scientifically baseless, and a power grab to knock hemp competition from several markets. The key players in the tale give us some clues as to the real motivations behind the story.

Prior to the illegal status on the crop, hemp was one of the most important cash crops for U.S. farmers. Today, it is estimated to have over 50,000 uses. Even at the turn of last century, hemp was an incredibly powerful product. The fibers in hemp are stronger than any plant-based material and were stronger than anything else known at the time. It made superior paper that didn’t yellow, rope, and better fabric than cotton (with less labor and maintenance required). The oil in hemp was edible, burnable, and medicinal. It was a staple in diets, pharmacies, and early attempts at combustion engines. The original diesel engine made by Rudolf Diesel burned hemp oil.

The beginning of industrialization also saw the beginning of big business and the attempt to control competition and supply chains to maximize profit streams. In the late years of the Great Depression, these companies needed a competitive advantage to stay solvent. Removing hemp from the marketplace became that win.

There were several key players in this act, all of whom saw to profit from the banning of hemp from the marketplace. A group of business interests that were led by DuPont petrochemical company teamed up with Andrew Mellon, the Secretary of the Treasury under Harding and a major interest in Gulf Oil. The final player was Randolph Hearst, who owned a newspaper empire and a timber company that competed against hemp for paper production.

Though Hearst’s papers, a smear campaign was created. What was then called yellow journalism (named, ironically, for the yellow wood-based paper that was considered substandard to hemp paper) and is now called fake news was sent out to demonize the party drug, marihuana. The name was simply the Spanish word for hemp, and was intentionally used to make it seem foreign and scary as well as to prevent people from understanding the staple crop they would be opposing. No distinction was made between the two products. The ban was successful until its repeal at the end of 2018.

The Return of Hemp: Where are the Profits?

Whether you are a homesteader or an investor, there are savings and investment opportunities available in the hemp market. Here are some of the places where hemp will have a strong showing in the marketplace:

Petrochemical Products

DuPont had good reason to want hemp out of production. At the time of the ban, they were just about to take their patent for Nylon public. Fabric made from hemp was a stronger fiber that was cheaper to produce. It was also biodegradable. They also made a number of chemical additives for petroleum gasoline, which was competing with biomass and plant-oil fuels in the newly created automobile industry.

Hemp will likely have a strong future in biofuel technologies. Compostable bioplastics will also be likely to incorporate hemp. Of course, hemp fabric is another thing that has already returned to specialty markets and is likely to become a more mainstream option in the coming years.

Paper

The paper industry is hurting some thanks to the advent of electronic reading, but a specialty market still exists. However, the surge of online purchases has also made the paper market for packaging materials (think Amazon boxes) make up for some of the profit loss. In addition to creating stronger paper that requires fewer processing chemicals, hemp can be grown on the same plot of land year after year. This requires a smaller land use footprint than that of timber pulp. This is a plus for eco-conscious buyers and wild land advocates alike.

Pharmaceuticals

The use of medical marijuana has been well-documented. Retail stores like Euflora will offer a number of different product options made from marijuana to deal with pain, anxiety, nausea and other ailments. Unfortunately, because marijuana is classified as a Schedule 1 drug federally, these products have so far only been available to those who lived in states with recreational or medical marijuana laws in place. Even then, the cost of these medications are not legally allowed to be covered by insurance, even when they are more effective, less harmful and less expensive overall than other prescription options on the market.

The legalization of hemp, in this industry, will open the door to the use of non-THC compounds shared in both plants. CBD oil, a compound called cannabidiol that has had a lot of press in the years leading up to the return of hemp, is one product found in both plants that will likely see a surge in use. The removal of CBD from the Schedule 1 drug list will also make it possible for distribution across state lines and use in non-dispensary locations like coffee shops, restaurants and health food stores.

The final, and perhaps largest, benefit for the legalization to the pharmaceutical industries is that it opens up the full gamut of funding opportunities for research. Until now, the gray area of being legal in a state but illegal federally has closed the door on grant funding and many business loan opportunities. Businesses looking to create innovative products have had to rely on private, and often expensive, loan sources. Access to the free market of money lending and the lower, more competitive rates that come with it can only help to drive innovation here.

Textiles and Fiberboards

Two of the largest growth opportunities for hemp that are already in process include the textile and fiberboard markets. Auto industries are looking for an alternative to fiberglass, and prototype hemp panels have been found to be strong, durable, and easy to manufacture. Hemp-based fabrics have been shown to be UV-resistant (unlike cotton) and hypoallergenic. As consumers learn more about the unintended consequences of microplastics from plastic clothing breakdowns and the effect of sunscreen chemicals on critical habitats like coral, these fabrics will have even more appeal.

Personal Care Products

Hemp oils have been a staple of natural beauty products for some time. Prior to legalization, it was possible to import sterilized seeds, oils, and processed hemp products in the U.S. as manufacturing products but not to grow them domestically or process anything on U.S. soil using stems, leaves, or non-sterilized seeds. The repeal of the rule means that the import cost of hemp oils has disappeared, and the market for small cottage industries will grow. Expect a large farm-to-beauty upswing in farmer’s markets and buy-local venues nationwide when it comes to hemp-based beauty markets.

Agriculture

With tariffs on corn and soybeans hurting the U.S. Agricultural market, the boon to farmers was one of the main reasons that hemp legalization was given bipartisan support in congress, even from those who still oppose legal marijuana use. As a plant that doesn’t have tariffs and that requires fewer resources to grow compared to other products, there is a lot of upside for the farmer.

Hemp has a high product-to-acreage ratio, which means that you get a large crop compared to the amount of land that you farm. Cotton requires about twice the land, for example, as hemp to produce the same amount of textile product. Cotton takes twice the water to grow compared to hemp, which needs 20-30 inches of rain during the growing season to forego irrigation completely. When you factor in the water requirements of processing, hemp’s advantage over cotton only increases. You can go from seed to shirt with a mere quarter of the water consumption. Similar studies are sure to come soon when comparing it to corn and soybean products.

Homesteading and Hemp: Saving through DIY

A lot was said about the investor marketplace and production side of hemp as the bill gained popularity. There is, however, another money-saving reason that this plant will be a cost-saver. For the DIY and homesteader sets, hemp is a triple threat. It is easy to grow, it has multiple uses, and many of the products are simple to manufacture yourself. This is one of the major reasons why it was a staple crop on farms nationwide prior to the ban.

Fibers

Fibers from the woody hemp stems can be dried and pounded. Wool and hemp clothing were more common than cotton in pre-manufacturing days because neither required a factory to produce with some efficiency. A return to hemp fiber processing will likely bring with it some innovative new products for home fiber extraction and weaving and a slew of DIY tutorials.

Food

In addition to the manufacturing and medicinal advantages of hemp seed and hemp seed oil, both are edible sources of Omega-3. This allows for a nutrient-rich diet source that is easy to grow and use. While the levels of beneficial alkaloids like CBD are not distilled and purified, there is an underlying level of the chemical in any hemp food product. Hemp milk, a favorite newcomer to the latte shops, is also easy to make at home with some cheesecloth and a YouTube video.

Energy

For those who want to live electrically off the grid, hemp oil continues to be a good way to generate your own electricity. Diesel generators can be fitted to run off hemp oils grown in your own backyard. They can also be burned as candles or in oil lamps for light. This not only offers a home-grown fuel source, it means cleaner air with fewer combustion byproducts.

Just the Beginning

Now that hemp has the green light for product development, manufacturing and distribution, there is little doubt that markets for hemp products will explode. In addition to the places where hemp once dominated the market and likely will again, there are a lot of promising new technologies that may not have been considered. Best of all, this is a product that has benefits for both big business and small cottage industries. There is no better time for the tragic tale of the hemp ban to get its happy ending.

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