Understanding the Economic Impact of Industrial Hemp

By Sam Gunnells

After decades stuck in legal limbo, America’s homegrown hemp industry is seeing an astonishing rebirth. Thanks to changing laws and a rising wave of grassroots and political support, hemp looks to finally be coming in from the wilderness and again making a place for itself in the lives of everyday Americans.

That resurgence, naturally, has people talking about how to unleash the plant’s full economic potential. And for the first time in decades, it’s looking like America’s leaders might be on the verge of embracing a hemp revolution–one that could grow jobs and open up new markets for states and businesses across the nation.

Wait…isn’t industrial hemp the same thing as marijuana?

Though hemp and marijuana belong to the same plant species, Cannabis sativa L., the two strains are as different from one another as a beagle from a doberman pinscher, also breeds of the same species, Canis familiaris. Hemp has long been engineered for its tough fibers, nutritious value, and medicinal properties, not for any mind-altering effects associated with high doses of tetrahydrocannabinol (THC), the main chemical behind the marijuana high.

In fact, since the production of THC-rich cannabis crops requires selective cultivation techniques that undermine the plants’ fitness for industry, hemp and marijuana have naturally retained their separate identities over the centuries. And modern legal definitions for industrial hemp generally hinge on its intended use in industry and its low concentrations of THC. In other words, industrializing hemp is a matter of growing jobs and competing for global markets, not legalizing a recreational drug.

So, if it doesn’t get you buzzed, what does hemp do?

A lot, actually. According to a June 2018 report from the Congressional Research Service, the global market for hemp products is vast: “more than 25,000 products in nine submarkets: agriculture, textiles, recycling, automotive, furniture, food and beverages, paper, construction materials, and personal care.” Like a Swiss Army Knife with its means to tackle any job thrown its way, hemp has proved itself fit for countless roles:

  • Historically, hemp was hailed for its versatility in filling a wide range of everyday needs. In fact, the plant’s suitability for fabrics, rope, and canvas made it a life-saving staple during the Age of Sail, when the voyages of far-ranging explorers opened new trade routes, settled new lands, and shaped the globally connected world we know today.
  • In our modern world, where the unique properties of hemp fibers make them ideal for many applications in today’s textile, construction, and paper industries, hemp has retained its status as a crop of many uses. Hemp plants are mostly comprised of bast fibers–the long fibers found just beneath the bark on a stalk of hemp–and these fibers are stronger than those of competing crops like cotton. Hemp plants are also cheaper to produce than cotton, and require fewer pesticides to maintain. These advantages make hemp a durable, cost-effective option for everything from multi-purpose matting and composite fiberboards, to high-quality paper products and concrete substitutes.
  • Even ultra-modern industries like automotive engineering stand to benefit from hemp’s innovations. The success of experimental cars with chassis woven primarily from hemp, like the cutting-edge Eco Cannabis Car, have proven that so-called “hemp-mobiles” can provide stronger, lighter alternatives to traditional fiberglass frames. And hemp’s carbon-neutral profile would offer environmentally conscious consumers a greener choice for their daily commute.  
  • Hemp’s most promising avenues to new growth might just spring from its recent inroads into the health and wellness industries. Products containing cannabidiol (CBD), an important compound derived from hemp oil, have been hailed as a miracle remedy for everything from inflammation to anxious thoughts–and their popularity is only gaining steam.
  • And hemp seeds, with an essential fatty acid content over 80 percent, boast a higher ratio of these “good fats” than soy alternatives, while offering lower levels of harmful saturated fats. This wholesome consistency makes hemp food products a promising source of healthy, sustainable plant proteins for people and animals alike.

Hemp sounds like quite the economic powerhouse…but how are America’s hemp muscles actually shaping up?

The truth is, America’s newly refurbished hemp industry is still in its infancy. It’s only been since 2014, when Congress passed measures allowing states to begin making some of their own rules on industrial hemp, that cultivation of the crop has taken off in earnest. That means the landscape has changed rapidly in just a few years, making the latest numbers hard to come by (the Congressional Research Service and profitability reports published by various state agencies openly admit as much).

With that in mind, here’s what we can say about America’s burgeoning hemp industry:

  • According to research conducted by the National Conference of State Legislatures, as of August 2018 at least forty state assemblies have passed bills addressing industrial hemp, including “defining hemp and removing barriers.” And at least thirty-eight of those states actually allow for the cultivation of hemp in some capacity.
  • Hemp production looks to be off to an exponential start. Crop reports for 2017 show that American hemp farmers cultivated 25,713 acres of the plant across nineteen different states. That was up from the 9,770 acres grown in 2016. And way up from the 3,933 acres planted in 2015–the first year large-scale hemp cultivation went into effect. In addition, nearly 1,500 hemp licenses were issued to farmers across the country, while thirty-two universities had a hand in hemp research.
  • Total U.S. sales of hemp products have climbed sharply, soaring to $820 million in 2017. And with those sales projected to top the billion-dollar mark in 2018, the retail market for domestic hemp looks poised for continued growth.

Despite this healthy start, however, hemp’s potential is being held in check. Why, you ask? Because America’s hemp farmers are largely limited to growing the plant for research purposes. And the Drug Enforcement Administration levies strict constraints on the commercialization of these crops. In this tightly controlled legal climate, hemp processing and manufacturing jobs that might otherwise go to hard-working Americans are instead staying with international competitors that can boast more established commercial hemp industries–like China.

But let’s say the barriers to commercialized hemp suddenly collapsed overnight. Would we know what to expect if the total economic potential of America’s hemp crop was unleashed tomorrow? In a word, no. The same Congressional Research Service report cited earlier claims that, “It is not possible to predict with any degree of confidence the potential market and employment effects of relaxing current restrictions on U.S. hemp production.” Just as most official sources remain a step behind this fast-growing industry, they can only offer speculation about hemp’s future profitability.

What we can do, however, is look at some current trends and make some intelligent guesses of our own:

  • Canada, for instance, is among the global leaders in hemp production and one of the main sources of imported hemp products for American markets. Though total hemp acreage there has fluctuated year to year–it fell to a mere 33,000 acres in 2016 before skyrocketing to 140,000 the following year–annual retail sales for Canadian-derived hemp products have consistently netted between $20 million and $40 million. And many Canadian hemp companies have reported their businesses growing between 20 percent and 40 percent in recent years.With the U.S. heartland offering large tracts of the same prairies where hemp has thrived in Canada, the only things really keeping domestic crops from rivaling acreages there are a lack of commercial opportunities and a shortage of capital investments. If these hurdles could be overcome, America’s hemp industry would be well primed to reclaim some of its own captive import market from its northern neighbor.
  • Profits from hemp processing and manufacturing are another major consideration. Though U.S. sales of hemp-derived products reached record levels in 2017, the vast majority of those sales relied on hemp materials imported from competing countries. That meant American companies missed out on nearly the entire chain of production. But now, with some estimates projecting that domestic sales of CBD products alone will surpass $2 billion in just the next two years, the commercialization of the American hemp industry might be arriving at the best possible time. It’s not too late for the U.S. economy to capitalize on the full spectrum of CBD production and distribution and reap the massive profits that will accompany this massive growth.
  • Finally, let’s talk some hard job numbers: Kentucky, with the second-most productive hemp industry in the nation, has found itself at the forefront of states flirting with the commercial aspects of hemp production.In January of 2018, it was reported that a newly finished hemp processing facility associated with Kentucky’s hemp research program would bring 271 new jobs to nearby communities. If that’s the jobs footprint from a single plant, can you imagine the thousands of new jobs that would be created to flesh out a nationwide network of processing and manufacturing facilities powering a fully functioning American hemp industry?

Who’s talking about American hemp?

  • Senate Majority Leader Mitch McConnell, in a statement focusing on his home state of Kentucky–but with implications that echo around the country–said in 2018, “Although it was a foundational part of Kentucky’s heritage and today you can buy products made with hemp at stores across the country, most farmers have been barred from planting it in their fields. I have heard from many Kentucky farmers who agree it’s time to…give our state the opportunity to seize its full potential and once again become the national leader in hemp production…By legalizing hemp…we can continue to see growth in new and innovative products made with Kentucky-grown hemp across our state and the nation.”
  • Cynthia Salarizadeh, CEO of SALAR Media Group, a PR firm specializing in the cannabis industry, was even more emphatic when she stated, “What will change the world out of the cannabis plant is industrial hemp. Period…The fact that hemp remains largely illegal in the United States and that we still do not have but a few processing plants that are functioning here is just shocking; it’s bizarre. What it will require is exposure in the media so that we can get investments into the space…Industrial hemp needs capital.
  • Congressman Thomas Massie seemed no less enthused about hemp’s latent potential when he said back in 2015 that, “People used to downplay the number of jobs industrial hemp might create and say, ‘Well, it’s a few thousand jobs and a couple million in commerce.’ But all told, legalizing the crop has the potential to create ten times as many jobs as the XL Pipeline will create ten years from now.”
  • And Eric Wang, CEO of Ananda Hemp, whose parent company owns the world’s largest private cannabis seed bank, has stated, “The amount of uses for hemp are limitless. In 15 years’ time, hemp will make up at least eighty-five percent of the products in your home, from food to building materials to paper…Products are going to make a splash when created and are going to bring a lot of jobs to America. It will bring a lot of manufacturing jobs into the country as well as farming jobs.”

So, what does the future hold for hemp in America?

That’s not an easy question for even the most seasoned students of global economics to answer. A truly modernized hemp industry would be a first for America, and there are still a lot of moving parts in play. One thing is certain, however: until further action is taken to relax restrictions on hemp, the U.S. economy will only continue to fall further behind the competition in harnessing the full job-creating, profit-generating promise of this industrious plant.

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