Forecasting the 2023 Farm Bill and the Potential Impact on the Hemp IndustryOctober 20, 2022, 09:00 AM
It is hard to believe that almost five years have passed since the 2018 Farm Bill (or The Agricultural Improvement Act of 2018, if you want to be formal) legalized industrial hemp and revolutionized an entire industry. Since that time the legal landscape has developed quickly including changes surrounding the leadup and passage of the Farm Bill itself, various state statutes and pilot programs, agency implications including the FDA and USDA, and the impact on law enforcement investigations and criminal prosecutions. In an industry where the only constant seems to be inconsistency, hemp stakeholders have been forced to be comfortable with change and adapt.
The next major change is expected to be the 2023 Farm Bill. While uncertainty abounds, this Farm Bill has the potential to further shake up the hemp landscape. Proactive planning is recommended in order to be best positioned to respond to any forthcoming regulatory changes.
A federal farm bill is generally passed once every five years and codifies a variety of agricultural issues. Although addressing the agricultural industry as a whole, it is anticipated that contained within the 2023 Farm Bill will be cannabis-specific changes that could reshape the rules for hemp growers, processors, wholesalers, and retailers. With so much at stake and the inherent compliance risks associated with the industry, it’s time to pay attention.
So, as we try to read the crystal ball, some of the biggest potential issues are as follows:
- Intoxicating Cannabinoids
Perhaps the biggest unanticipated change following the legalization of hemp has been the development and evolution of intoxicating cannabinoids other that delta-9 THC. While delta-8 THC has received the most attention, delta-7 THC, delta-10 THC, HHC, and THC-0 acetate have all become increasingly popular synthesized cannabinoids with psychoactive effects. The resulting grey market and conflicting interpretations of DEA rules as they pertain to intoxicating cannabinoids used as an alternative to recreational cannabis are ripe to be addressed as part of the 2023 Farm Bill.
There have been suggestions that the 2023 Farm Bill could also modify the permissible THC threshold. Currently, compliant hemp products contain no more than 0.3% delta-9 THC, however, there have been proposals to raise the allowable percentage to 1.0%. While this increase would relieve the stringent requirements on growers, it also has the potential to allow development of more hemp varieties adaptable for varying geographic regions. If the 2023 Farm Bill amends THC percentage limits, watch carefully for the implementation of percentage limits on delta-8 THC and other intoxicating cannabinoids to reflect the pre-2018 idea that hemp and hemp derivative products were not intended to have psychoactive properties.
- The FDA’s Position on CBD
During this summer’s congressional hearings regarding hemp and cannabidiol (CBD), the FDA was criticized heavily by several interest groups regarding their inaction on CBD. Accordingly, legislators have been encouraged to incorporate language into the 2023 Farm Bill regulating CBD and other non-intoxicating cannabinoids as dietary supplements.
Without clear instruction from the FDA regarding CBD infused products, many leading retailers have opted not to carry hemp products, negatively impacting demand within the market. Additionally, arguments have been made that without a clear regulatory framework, necessary research has not moved forward which has dampened the potential for industry growth. While the FDA has long promised a regulatory pathway for cannabinoid containing food products, the lack of an identifiable timeline has left many frustrated and calling for Congressional action in the forthcoming Farm Bill.
To be sure, the overlap of regulatory oversight between the USDA and FDA creates friction and, as the FDA has pointed out, a “stalemate position” exists as a result of the current statutory framework necessitating a legislative fix. Existing bills currently circulating through Congress, including H.R.841, S.1005, and H.R.6645 provide regulatory pathways aimed at consumer protection and boosting farming opportunities. Although widely called for, regulation of hemp and hemp derivatives as a dietary supplement would force new and stringent FDA compliance requirements on a currently unregulated market.
- Banking and Insurance Regulations for Hemp
Without a mature regulatory framework for the industry, risk adverse insurance companies as well as banking and financial institutions have been wary of doing business with hemp operations. Calls have been made to ease restrictions and clearly defined compliance guidelines in order to encourage banking relationships and insurance coverage including implementation of USDA shipping approval rules to mitigate questions related to interstate transport. All parties stand to benefit from clear requirements to minimize compliance concerns.
While still speculative, the tea leaves seem to indicate that the 2023 Farm Bill will cause more changes for the hemp industry. Some alternations have the potential to disrupt or even eliminate entire product lines or force heavy regulatory requirements where none have previously existed. Forward thinking companies would be wise to consider possible implications to their business models and begin preparing contingency plans and consulting with experienced counsel.