By Zach Puznak
CBD – Industrial hemp is emerging as a potential low-cost source of CBD, but faces an uncertain regulatory future. In the past year, we observed that high-CBD varieties of cannabis frequently commanded higher prices due to their relative rarity and the exploding demand from medical patients for CBD-based products.
Since high-CBD plant material is overwhelmingly processed into infused products – many medical patients are unable to smoke for health reasons – the quality and appearance of the flowers themselves is not a high priority.
Hence, farmers of industrial hemp – defined in law as containing 0.3% THC or less – have realized that they could grow acres of a CBD-containing variety for a fraction of the cost of traditional indoor cannabis cultivation and potentially reap large profits.
Despite existing nationwide commerce in CBD products, the non-psychoactive cannabinoid remains a Schedule 1 controlled substance.
The FDA earlier this year stated that CBD could not be sold legally as a dietary supplement, sent warnings to companies making claims that their CBD products could treat specific ailments, and published test results showing that many products did not in fact contain what they claimed.
On a state level, due to the configuration of Colorado’s regulatory systems for cannabis and hemp, high-CBD infused products made from hemp cannot enter the state’s legal cannabis market, as they are not produced within the MED’s licensed system.
However, an opinion from the Office of Legislative Legal Services on the classification of CBD – reported on in the Forward Curve report for November 27th – suggests that state lawmakers may be considering this issue.
Oregon essentially put a hold on its industrial hemp program this year to update regulations to address the unanticipated production target of CBD.
Kentucky, which has perhaps the largest and most advanced industrial hemp program in the nation, passed a bill in 2014 allowing the use of CBD oil by epilepsy patients, but it is considered unworkable due to the omission of any language regarding the production and distribution of the products it authorizes.
This year’s Spending Bill does include continued protections for hemp growers operating under the provisions of the 2014 Farm Bill, and Section 763 of the 2016 Spending Bill prohibits federal funds from being used to prohibit the transportation, processing, and sale of hemp “within or outside” the state in which it was grown.
While this provision apparently authorizes interstate hemp commerce, numerous alterations to existing state law and new rulemaking will likely need to be carried out to truly facilitate the opening of this potentially massive new market.
The threat of federal intervention in the CBD realm persists. Such intervention could eliminate current interstate commerce in CBD products, restricting their production and sale to states with legal medical cannabis systems and driving up prices for CBD-rich plant material drastically.
Despite current uncertainties, some businesses are already moving to establish necessary infrastructure,
specifically the
planned conversion of a former Boeing plant in Pueblo into a processing facility to produce high-CBD hemp oil by CBD Biosciences, a joint venture of Thar Process and O.penVape, a Denver-based manufacturer of vaporizer pens and infused products that already serves the state’s recreational and medical cannabis markets.
Notably, the project is being partially subsidized with public money in the form of a nearly $5 million grant from the Pueblo Economic Development Corporation, which will be drawn from the city’s sales tax fund.
The Cannabis Benchmarks™ weekly prices index report is generated from data collected by New Leaf Data Services & Signal Bay Research.
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