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USDA rule offers clarity for hemp program, Arkansans say

by Stephen Steed | October 30, 2019 at 2:01 a.m.

An interim rule on the nation's fledgling hemp-growing industry released Tuesday by the U.S. Department of Agriculture gives considerably more guidance, Arkansans involved in the state hemp program said.

The 161-page rule will take effect when it's published this week in the Federal Register. It will cover the regulations for the 2020 crop and will expire in two years. When the rule is published, the USDA will accept public comment for 60 days as it works toward developing a final rule, the department said.

"We hope the ability to grow hemp will pave the way for new products and markets," U.S. Secretary of Agriculture Sonny Perdue said Tuesday in a written statement and USDA video. "We have had teams operating with all hands on deck to develop a regulatory framework that meets congressional intent while seeking to provide a fair, consistent and science-based process."

"I have a lot of empathy for the USDA and Arkansas Department of Agriculture," Kelly Carney, owner of North Pulaski Farms LLC and a state-licensed hemp grower, said in reference to the 161-page rule and other regulations the state and federal agencies must devise. "But I have a lot more empathy for the farmers."

Carney said he was pleased, overall, with the USDA rule and the Arkansas program, except for a couple of areas that might increase his production costs.

The Arkansas General Assembly in 2017 approved a pilot program for industrial hemp production for research purposes, as allowed by the 2014 Farm Bill passed by Congress. At the time, Arkansas was the 37th state to do so.

The 2018 Farm Bill removed hemp from the federal Controlled Substance Act, allowing commercial production across states, territories and tribal lands. At least 47 states have now adopted industrial hemp programs, according to the National Conference of State Legislatures.

Because of the long process in getting the Arkansas legislation implemented, the state didn't see its first hemp plantings until this year.

Carney planted 2 acres of hemp -- about 2,500 plants -- on a farm largely devoted in the past to organic vegetables. He harvested 1,500 plants. "I'll double down next year," Carney said. He also has a hemp processor's license from the state.

The USDA says industrial hemp -- a cousin to marijuana -- must contain no more than 0.3% tetrahydrocannabinol, or THC, the psychoactive component that gives the "high" from marijuana use. Hemp was made illegal in 1938 and declared a Schedule 1 controlled substance by Congress in 1970, ending commercial production of a crop used for centuries to make rope, paper, food products, construction materials, and other goods.

The state has issued 124 licenses for growers and 33 for processors, according to Mike Stage, agriculture division manager of the Arkansas Department of Agriculture, and Caleb Allen, coordinator of the state's hemp program. About 20 licenses have been granted to hemp-seed dealers.

Stage said the state approved 3,547 acres for hemp this year, while actual planting came in at 1,765 acres. Farmers harvested, and sent to market, 588 acres of hemp, he said.

"We won't have that many changes to make," Stage said. "We were largely compliant already."

Stage said the first year of the state's hemp program went well.

Farmers, he said, were knowledgeable, interested and cooperative. The only problems, he said, arose when postal inspectors would seize hemp packages, wrongly believing them to be marijuana, and when a marijuana-eradication effort mistook a hemp plot for marijuana. Those incidents were resolved, he said.

Interest in commercial hemp production has risen in the past few years primarily because of the lucrative cannabidiol, or CBD, an extract of the hemp flower that's now used in an array of oils, lotions and edibles. The Hemp Business Journal has reported CBD sales of $240 million in 2018, up from $59 million in 2014. It projected a CBD market of $647 million by 2022 in the United States.

"Hemp production in the U.S. has seen a resurgence in the last five years; however, it remains unclear whether consumer demand will meet the supply," the USDA said. "High prices for hemp, driven primarily by demand for use in producing CBD, relative to other crops, have driven increases in planting."

The USDA rule specifically forbids any interference with the interstate shipment of legal hemp.

It also covers licensing of growers and how to test hemp's THC levels at labs registered with the federal Drug Enforcement Administration and recognized by the USDA.

Carney, the Pulaski County farmer, said some of the language in that segment of the rule could increase his costs, if the USDA requires further certification of those labs.

Arkansas law requires farmers like Carney to call officials for "supervised destruction" of hemp plants found containing 1% THC. Farmers can destroy plants with less than 1% THC.

The federal rule, however, says hemp with THC levels of 0.3% to 0.5% must be destroyed by a federal or state official authorized by federal law to handle marijuana.

Carney said the difference between 0.3% and 0.5% is "a very small window."

"We don't control the weather," Carney said. "High temperatures over two weeks can raise the THC." That rule could add costs to a farmer's operations, he said.

However, the USDA also said hemp producers "do not commit a negligent violation" of their licenses if their plants have up to 0.5% THC and if they "use reasonable efforts" to stay within the legal limit.

"USDA recognizes that hemp producers may take the necessary steps and precautions to produce hemp, such as using certified seed, using other seed that has reliably grown compliant plants in other parts of the country, or engaging in other best practices, yet still produce plants that exceed the acceptable hemp THC level," the agency said.

Still, the plants exceeding 0.3% THC must be destroyed, the USDA said.

The USDA also clarified whether individuals with previous felony drug convictions can work in the hemp industry. A 10-year ban for someone with those convictions applies only to "key participants," such as top officers with direct financial interest in the business.

The department also said hemp producers will be eligible for USDA programs, including loans, grants and crop insurance, but won't get payments for crops destroyed because their THC levels are above 0.3%.

Business on 10/30/2019

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