US Farm Bill set to legalise and commercialise industrial hemp

US Farm Bill industrial hemp
The US Farm Bill, set to legalise industrial hemp, is expected to be finalised as early as next week.

US President Donald Trump is on the verge of signing off on a historic Farm Bill that could see the effective legalisation of industrial hemp across the country and with it, pave the way for federal funding to the tune of US$867 billion in food and agriculture programs for US-based companies.

According to a joint statement from the US Senate and House Agriculture Committee, “we are pleased to announce that we’ve reached an agreement in principle on the 2018 Farm Bill. We are working to finalise legal and report language as well as CBO scores, but we still have more work to do. We are committed to delivering a new farm bill to America as quickly as possible.”

US Congressman Collin Peterson, the top Democrat on the House Agriculture Committee summed up the drafting of the bill by saying that “it isn’t the best possible bill, but it’s the best bill possible.”

Small Caps reported on the initial drafting of the bill back in June, when US legislators principally agreed upon a deal to legalise industrial hemp production – but US lawmakers have been locked in what’s been described as “bitter partisan debate” and tense negotiations ever since.

With various tweaks now in place, the protracted negotiations are now set to conclude with the Bill set to be passed as early as next week.

The Farm Bill would serve as a huge commercial boost for both the US, but also set a leading example for other economies around the world in terms of green lighting the cultivation of one of the most dexterous and commercially-viable plants in human history.

Microeconomic impact

One of the primary knock-on effects of legalising industrial hemp will be to enable hemp companies such as CW Hemp and CV Science – currently America’s largest – to expand their market operations.

Another notable company that stands to benefit from the imminent Farm Bill is Elixinol Global (ASX: EXL), a dual-listed company that with operations in both the US and Australia.

Top 5 hemp derived CBD companies Elixinol

Speaking with Small Caps, Elixinol CEO Paul Benhaim said that his company is one of the best-positioned in the world to take advantage of the new Farm Bill.

“With most of their staff and around 85% of their revenue from hemp derived CBD businesses, the hemp farm bill will support the companies already recent impressive 27% quarter on quarter growth by allowing more mainstream businesses like CVS, Walgreens, Kroger’s and Target to be more likely to work with companies such as Elixinol,” Mr Benhaim said.

In Australia, hemp CBD products can only be sold through the limited medicinal cannabis access scheme, whereas in the US, Elixinol’s hemp CBD products can be sold directly to consumers in a variety of ways including online, over-the-counter (OTC), through doctors’ prescriptions, naturopaths, chiropractors as well as brick and mortar stores on the high-street – a rapidly growing method of distributing medical cannabis and hemp-based products in the US and Canada.

According to Mr Benhaim, improved access to banking, crop insurance and the potential to work with Facebook and Google advertising “are all supporting Elixinol product sales throughout the world’s biggest hemp CBD market,” something that has already been occurring to some extent even before the new Farm Bill has been enacted.

The Farm Bill effectively removes the hurdle CBD companies share with cannabis companies and could trigger a “CBD exploding point,” according to cannabis research firm Brightfield Group, which foresees CBD sales growing significantly in the next 4 years.

Currently, CBD and cannabis companies have to operate in a legal grey area, on a state-by-state basis, but the Farm Bill would help to create a more ‘laissez-faire’ open market that would enable more market entrants, operating under softer federal regulation.

The proposed Farm Bill also includes language from Senator Mitch McConnell’s Hemp Farming Act that would remove CBD from the list of Schedule 1 controlled substances.

If passed, the Farm Bill would make hemp and CBD legal on a federal level, but would still leave CBD at the mercy of the FDA when it comes to being included as an ingredient in certain products including edibles and drinks.

Final steps to market

This week’s agreement is yet to be integrated into the text of the legislation and lawmakers will have to decide whether it will be voted on as a standalone bill or within a bigger package.

According to Reuters, US lawmakers have until the end of the year to finalise the process, but once voted on, the Farm Bill will go to the US President for final signature.

With the final bill now on the cusp of being signed, several companies (including Australian contenders such as Elixinol) are readying to expand their operations and sit in wait of a blooming hemp industry in both the US and Australia.

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