US Senate gives the green light for industrial hemp legalisation

US Senate industrial hemp legalisation Farm Bill
The Farm Bill was passed by a vote of 86-11, and paves the way for legalisation of the cultivation, processing and sale of industrial hemp.

The sweeping reforms that have facilitated the reintroduction of medicinal cannabis into North America have spilt over into helping its natural sibling: industrial hemp.

The US has just past reforms that could help reinstate industrial hemp’s once-proud status as one of the most ubiquitously useful resources in society.

The wide-ranging agriculture and food policy legislation known as the Farm Bill, passed by a vote of 86-11 on Thursday, and paves the way for legalisation of the cultivation, processing and sale of industrial hemp.

The bipartisan bill is expected to end the outdated ban that has held farmers back from participating in the industrial hemp market for decades.

It would also allow states to decide the best way to regulate this emerging industry and pave the way for farmers to apply for state and federal support measures if required.

Another boost is the likely impact on job creation across the US in states where industrial hemp has a particularly strong impact on local communities such as Virginia and Pennsylvania.

Current industry estimates report US hemp product sales at nearly US$700 million per year which includes severe restrictions for cultivation given that hemp is derived from the same species of plant as cannabis – ‘cannabis sativa’.

In Australia, hemp cultivation was banned in 1937 on the back of drug cultivation fears, but with the growing acceptance of cannabis and its own newly-found legal position – industrial hemp is making a second-coming in both the US and Australia.

Industrial hemp was once the main contributor to creating a large proportion of household items including building materials, plastics, composite materials, clothing, nutritional supplements, food, fibres, rope and even biofuels.

Despite its wide-ranging benefits, the entire industry was mothballed in favour of petrochemical alternatives that relied on oil production in addition to cotton and tobacco farming.

In some places around the US, hemp production continued but at much smaller scales and the industry lost its market-leading position to synthetic alternatives.

Hemp reboot

In March 2018, Senator Mitch McConnell announced his intention to introduce the Hemp Farming Act of 2018, whereby low-THC (<0.3%) strains of cannabis grown for industrial purposes would be excluded from the federal definition of ‘marijuana’ (a controlled substance).

“Consumers across America buy hundreds of millions in retail products every year that contain hemp,” said US Senate Majority Leader Mitch McConnell, a major contributor to the bill and one of its most vocal proponents.

US Senate Majority Leader Mitch McConnell
US Senate Majority Leader Mitch McConnell.

“But due to outdated federal regulations that do not sufficiently distinguish this industrial crop from its illicit cousin, American farmers have been mostly unable to meet that demand themselves. It’s left consumers with little choice but to buy imported hemp products from foreign-produced hemp.”

In April, Senator McConnell introduced standalone legislation to legalise hemp – dubbed as the Hemp Farming Act – the provisions of which were included in a larger and more wide-ranging “Farm Bill” unveiled earlier this month.

The Senate Committee on Agriculture, Nutrition and Forestry approved the bill by a vote of 20-1 two weeks ago.

However, it wasn’t all positive news for the industrial hemp supporters. Senator Charles Grassley, one of Congress’s most ardent opponents of marijuana law reform, threatened to pursue serious changes to the bill’s hemp provisions on the Senate floor.

Namely, he wanted to remove the legalisation of derivatives of the cannabis plant, such as cannabidiol (CBD), which is used by many people for medical purposes. But Senator Grassley did not file any amendments thereby allowing hemp supporters to avoid a contentious debate and potentially devastating changes to the bill.

Australian impact

The passing of Farm Bill in the US immediately creates a knock-on effect for Australian cannabis companies.

One such company is Elixinol Global (ASX: EXL) who put out a statement within hours of the bill being passed saying that it directly impacts its US-based subsidiary, Elixinol USA.

The emergent hemp developer listed on the ASX earlier this year as part of an international assortment of companies under one roof: Elixinol US, Elixinol Australia and Hemp Foods Australia were all amalgamated under the Elixinol Global brand.

The stock listed at $1.00 per share and hasn’t looked back since, reaching $1.80 by February and currently trading at $1.50 per share.

The bill legalises industrial hemp at a federal level and officially removes it from the purview of the Controlled Substances Act which makes it far simpler and more convenient to operate industrial hemp cultivation, production and import/export within the US.

Elixinol USA Gabriel Ettenson Senate Majority Leader Mitch McConnell Farm Bill
Elixinol USA General Manager Gabriel Ettenson (second from right) with Senate Majority Leader Mitch McConnell (fourth from left) who led the supportive changes for hemp in the Farm Bill.

One of Elixinol’s prime target markets will be dietary supplements. The niche has huge potential to grow in the US (and globally) with analyst expectations predicting an annual revenue total of US$278 billion by 2024.

Hemp-derived products are “key drivers of future growth” according to Elixinol USA with the company already planning to work closely with national retail outlets to expedite the process of delivering widespread availability of the company’s portfolio of CBD products.

According to Elixinol, “this Act will remove significant existing barriers to trade, by more widely opening up the ability for hemp growers, processors and product manufacturers to access finance, banking and insurance services without restriction, and provide better access to water rights.”

It is also expected to enable organisations like Elixinol USA to openly advertise and market its products directly to American consumers

“We have spent many years lobbying for legislators to recognise the tremendous value of the hemp industry in transforming and strengthening our country. We have never wavered over that time, so we are extremely excited about this legislation passing the Senate. Elixinol USA’s position as a market leader in the hemp-CBD space gives us the ability to take full advantage of the opportunities it will offer,” said Mr Gabriel Ettenson, general manager of Elixinol USA.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.