The collapse of the American hemp industry is one of the strangest consequences of cannabis prohibition. For most of U.S. history, hemp, a non-psychoactive variety of cannabis sativa, was regarded as a versatile crop. During World War II, farmers were, in fact, encouraged to grow it as part of the war effort.
However, cultivation has been functionally illegal under federal law since 1957. (In theory, it can be grown when permitted by the Drug Enforcement Agency, but the DEA has issued only one permit in the last forty years, according to NORML.) Domestic manufacturers have imported hemp fiber, sterilized seeds, and ingestible hemp-based products containing no THC from China, Canada and the EU since 1998 to make textiles, food and fuel. Retail sales of these products may exceed $300 million per year, but much of the profit is lost to the American economy.
This may be about to change. The Agricultural Act of 2014, otherwise known as the farm bill, authorized state agriculture departments to designate hemp pilot projects for research in the 18 states that permit hemp cultivation. In 2014, research crops were grown in Colorado, Kentucky and Vermont. California, New York and Oregon may see 2015 crops. For investors, however, it may difficult to get excited about something most people associate with rope.
Three Reasons for Hemp Investing
Versatile Uses in Existing Legal Industry
Although cultivating hemp has been illegal, using hemp products in the manufacture of other things has not. It can be used in the manufacture of:
- building materials, such as insulation or fiberboard,
- paper and cardboard,
- animal food and bedding,
- soaps, lotions and nutritional supplements,
- non-toxic diesel fuel, paint, varnish, detergent, ink and lubricating oil and
- as a substitute for other vegetable proteins, like soybeans.
If domestic production can bring the cost of raw materials down, those industries capable of using hemp should stand to prosper.
Easy to Grow, Environmentally Friendly & Profitable
It grows wild in many parts of the country and where cultivated takes half the water of wheat. Hemp reportedly requires no pesticides, no herbicides, and only moderate amounts of fertilizer.
In 2013, Canadian farmers cleared $250 per acre of hemp. By way of comparison, based on 10-year averages covering the same period of time, the National Agricultural Statistics Service estimates that net profit on an acre of wheat in Oklahoma is approximately $29.50 to $37. Sadly, much of the American seed stock and cultivation expertise has been lost in the last 60 years, but the federally authorized research projects should rebuild much of this. Yields should be expected to increase, as they have with the Canadian hemp industry, which has been rebuilding only since 1998.
Potential for Biomedical Uses
Legally, hemp is defined as a cannabis sativa cultivar with a THC level of three-tenths of a percent or less. That, however, leaves much of the rest of chemical composition the same, including cannabidiol (CBD) and other cannabinoids. There is considerable scientific interest in studying hemp’s potential in medicine. Hemp/marijuana hybrids, the best known of which is probably Charlotte’s Web, may also hold out promise for the treatment of a variety of conditions.
Hemp may be an investment whose time has come, gone and then come again. Federally authorized research projects seem to bode well for a change in legal and commercial status.