BL cover April 2017
In a couple of weeks, farmers taking part in Kentucky’s attempt to resurrect the state’s industrial hemp economy will head into fields to begin planting.
The Commonwealth’s pilot hemp research program — already at the forefront of U.S. state efforts to revive the long-banned plant as a viable cash crop — heads into its fourth season, expanding both in acreage and ambition.
“We think that 2017 will be the biggest year yet,” Kentucky Commissioner of Agriculture Ryan Quarles told Business Lexington. “We’ve approved more than 12,000 acres. We’ve nearly tripled acreage from last year to this year.”
The program’s steady growth and renown back an optimistic view. Nonetheless, Kentucky hemp farmers and processors stand at a crossroads in 2017 as laws, markets and technology are changing.
New legislation, deep history
Among the bills awaiting Kentucky Gov. Matt Bevin’s signature after the busy recent legislative session in Frankfort is Senate Bill 218. Sponsored by state Senate President Robert Stivers and Sen. Damon Thayer, the bill reworks and rewrites the framework underpinning the research program with an eye on the future.
But in many ways, Kentucky’s deep historical ties to hemp remain a driving force, a source of pride and practical inspiration to those involved today. Homesteaders here were growing it to make rope as early as 1775, and a robust trade driven by slave labor thrived from the early 1800s until the Civil War. Efforts to revive the industry, in particular around World War II, were mostly limited in scope. Competition and laws criminalizing hemp’s psychoactive sibling, marijuana, made the industry unviable for a decades.
The path to reviving industrial hemp in Kentucky stretches at least as far back as the mid-1990s, when then-Gov. Brereton Jones convened a task force. Its 1995 “Report to the Governor’s Hemp and Related Fiber Crops Task Force” highlights many issues that remain: a desire to legally decouple hemp from marijuana; bipartisan support; a focus on agriculture and research focus; and efforts to address public and law enforcement concerns.
The enacting legislation wasn’t adopted until 2013, shepherded by former Agriculture Commissioner and current state Rep. James Comer. The 2014 U.S. Farm Bill included an exception to allow the state pilot programs. Quarles said the new legislation aligns the state law with the federal framework and gives his agency more flexibility.
“We wanted to ensure that our research pilot program aligned directly with the [federal] Farm Bill,” he said. “The other thing this legislation does, is as Congress debates the future of industrial hemp, if any changes are made at the federal level about what hemp is or different regulatory schemes, is it allows the [Kentucky] Department of Agriculture to promulgate regulations so we can immediately incorporate changes from the federal level at the state level without having to wait for the General Assembly to come back into session.”
Ag colleges step up
Hemp cover
The new legislation also puts a spotlight on the continuing need for research and development. It gives the University of Kentucky an expanded role, giving it responsibility for testing THC levels, a task that has been contracted out previously. (Federal law mandates that hemp not have more than 0.3 percent TCH by dry weight.)
“We wanted to make sure our researchers, especially at those universities that have colleges of agriculture, are true participants in this research,” Quarles said. “Their scientists are far better equipped than others at determining a research protocol and a testing protocol.”
But innovation at less high-tech levels is also required if the industry is to take off. Andy Graves, chairman of Winchester-based Atalo Holdings Inc. — a major player in the state pilot program that is working out ways to process hemp grain and oils — said hemp remains a difficult crop to cultivate, harvest and process.
“Hemp is a hard plant to fool with. The proper equipment, we’re having to create it on our own,” Graves said. He said expanding use of hemp fiber in particular posed a challenge. “That equipment to handle fiber is very expensive. It’s a first cousin to rock-crushing equipment.”
Early commercial interest shows promise
With only three years of field and research work on industrial hemp, the returns remain largely speculative. But not all. Atalo Holdings, for instance, paid out nearly $2 million to farmers for last year’s crop. Graves said the legal climate has pushed the state to the forefront to the point that he sees efforts by others, especially large pharmacutical companies, trying to influence the market for hemp-derived CBD oil, which is used as a nutritional and health supplement.
“Nobody does a better job than Kentucky does, I promise you, and everyone is trying to emulate what we’re doing in this state,” Graves said. “The biggest threat we see to us as producers and farmers, is that Big Pharma moves into a position through legislation in this state and other states to make themselves the only players in the CBD production and sale side.”
And Kentucky also is attracting increasing interest and investment from outside. Last year, John Roulac, CEO of California-based “superfoods” purveyor Nutiva, said he would purchase every bit of certified organic hemp that the Commonwealth’s farmers could produce.
Josh Hendrix, a Kentucky hemp farmer from Mount Sterling who also serves as director of business development, domestic production, for California-based CV Sciences Inc., said the company currently imports hemp for its products from Europe.
“My role is trying to transition our supply stream over to American sources,” he said. “I’m really proud of our state for continuing to push the industry forward.”
Quarles says the inquiries have continued unabated.
“Every week we have investors and companies contacting us, wanting to know how they can be part of the eventual industrial hemp economy,” he said.
Hemp’s future in a shifting political climate
The state of change for Kentucky’s industrial hemp initiative means farmers, researchers, processors, investors and others will have one eye on the growing fields and another on Washington, where Comer and Kentucky lawmakers are leading efforts to decouple industrial hemp from restrictions based on concerns about marijuana.
And while Kentucky remains on the sidelines of the booming medical and recreational marijuana sales — already a multibillion industry — Quarles and others insist the decision to focus on industrial hemp is the smarter play for the Commonwealth.
“We think that it’s an asset for our state that we have not been commingled in with hemp’s cousin,” said Quarles, noting that marijuana sales remain technically forbidden under federal law and that President Donald Trump’s new attorney general, Jeff Sessions, has spoken out repeatedly against against it. “We’re not putting our R&D at risk because we’re operating under the U.S. Farm Bill.”
Instead, Quarles says, Kentucky is following a path that has paid off for farmers and state coffers in the past.
“Forty years ago, soybeans were an experimental crop in Kentucky,” he said, “and now it’s a $1 billion-a-year business in the state.”
Drew Purcell