Political Breakthrough Heralds the End of the Prohibition on Hemp

PsychedelicNewsWire Editorial Coverage: With federal legalization of hemp expected in the United States by Christmas, the farming and cannabidiol product industries are anticipating great changes in their future.

  • Hemp farming, which has been illegal in the United States since 1970, is about to be made legal under the newest Farm Bill legislation.
  • Pilot projects and work in Canada have allowed companies to prepare for U.S. hemp farming by developing their techniques, science and crop strains.
  • With legalization promising great growth, companies are seeking paths to investment opportunities.

Marijuana Company of America, Inc. (OTC: MCOA) (MCOA Profile) is among the innovating companies carrying out cultivation, research and development projects on sites in the United States and Canada. Canopy Growth Corp. (NYSE: CGC) (TSX: WEED) has been expanding its operations through partnerships with other companies, covering investment, supply and research. Cronos Group, Inc. (NASDAQ: CRON) (TSX: CRON) has expanded its cultivation and markets while negotiating for fresh investment. Aphria, Inc. (NYSE: APHA) (TSX: APHA) has partnered with a company specializing in branding to develop new consumer-driven brands and products for the cannabis market. Aurora Cannabis, Inc. (NYSE: ACB) (TSX: ACB) is putting out new products in the United States and looking to export those products abroad, following the successful export of medical cannabis into Europe.

The End of an Era?

For decades, hemp has been locked out of agricultural development in the United States. Once a vital crop used to produce the rope and canvas on which the American naval and merchant shipping forces relied, it was made illegal in 1970 under legislation designed to reduce drug addiction. For nearly half a century, farmers have been unable to cultivate this crop despite growing evidence of its usefulness.

Now that is set to change. After months of haggling, politicians in Washington have finally brokered a deal to pass the legislation that will make hemp legal. For the past four years, a small band of farmers and university researchers have been involved in pilot projects, testing the potential of the hemp market. The profitable outlook, together with growing demand for health and wellness products derived from hemp, have led politicians to change their stance.

Could 2019 be the year that hemp’s cannabidiol (CBD) derivatives become household commodities?

Legalization Legislation

The past decade has produced considerable growth for companies working in the hemp sector, such as Marijuana Company of America, Inc. (OTC: MCOA). Hemp is a form of the cannabis plant with very low levels of tetrahydrocannabinol (THC), the psychoactive ingredient in the marijuana strains of cannabis. Despite hemp’s essentially innocuous nature, it was made illegal under sweeping federal regulations that classified all forms of cannabis as Schedule I substances, among the most dangerous and least medicinally helpful of drugs.

Since 1996, the legal landscape has been changing as states have introduced pro-cannabis legislation in defiance of federal drug policy. This allowed companies such as MCOA to emerge and start looking at the potential of industrial hemp. However, these companies were caught in a no-man’s-land industry sector between conflicting state and federal legislation. Under those circumstances, building a commercial hemp industry had limited practicality.

A change at the federal level began four years ago, when the 2014 Farm Bill made it legal for companies to carry out pilot projects to grow hemp. Companies moved quickly to make the most of the opportunity, setting up facilities such as the farm MCOA established in Oregon. From 9,650 acres in 15 states in 2015, hemp production grew to 77,000 acres under 3,500 licenses in 23 states in 2018.

During the course of that change, the hemp industry has gained widespread acceptance in Washington and throughout the country, leading to cross-party support for hemp’s inclusion in the new Farm Bill as an agricultural commodity. But conflict over other aspects of the bill held the legislation up until late November. Then, in the waning days of a lame-duck Republican House, an agreement in principle was finally reached.

Once the farm legislation is passed as expected, growing hemp could become fully legal in the United States as early as January. That would be huge news for farmers and a great start to the new year for the fast-growing industry.

Farming Hemp

The anticipated legislative changes may lead to a new agricultural phenomenon for United States farmers, but it will be far from the first hemp crop in North America. Aside from the pilot projects in the United States, more liberal legislation in Canada has allowed farmers to get a head start on hemp production. For MCOA, this has meant pursuing profitable crops and supporting farmers on both sides of the border.

In Canada, MCOA’s efforts have taken the form of an innovative joint venture in New Brunswick. There, MCOA teamed up with Global Hemp Group, Inc. and four local farmers to experiment with techniques for hemp farming. This has led to practical developments, such as the use of a bean harvester to strip leaves and inflorescence from plants, improving the efficiency of the harvest. It has also led to more academic results, including research on plant nutrition with Dr. Ron Smith at the University of New Brunswick.

The company’s U.S. project at Scio, Ore., is earlier in its development and proportionally smaller. The Oregon cultivation benefited from good weather in 2018, extending growing time and leading to an improved harvest. Here, MCOA is already growing hemp with a higher CBD content — 6 to 12 percent. Large greenhouses were used to dry out these plants, with staff continuing to learn and refine their drying techniques with each batch.

On both sides of the border, partnering with other companies is helping MCOA maintain a high pace of innovation and expansion. The company is currently looking for opportunities to work with a cannabinoid extraction player in the United States to make the most of its crops.

Preparing for a Boom Market

With legalization around the corner, hemp companies are moving to strengthen their positions for market expansion.

For MCOA, this has meant a move into mainstream advertising. The company’s hempSMART™ subsidiary has partnered with asseenontv.pro to launch a television advertising campaign for its Full Spectrum Pet Drops, a pet well-being product using CBD.

CEO Donald Steinberg said, “As our hempSMART brand continues to grow, MCOA will continue to search for and utilize new partnerships that will uniquely market our incredible collection of all-natural CBD product formulations. We feel that our strategic partnership with ASONTV is an important milestone for the Company that will help promote our hempSMART Pet Drops to consumers across the country.”

The company has also filed an application to uplist its shares from OTC Pink to the OTCQB tier on the OTC markets. This strategic move should provide better access to institutional investors to raise funds targeted to help the company grow along with the wider industry. A new CFO and independent director were appointed over the summer to ensure strong leadership during this period of huge potential.

Like MCOA, Canadian cannabis company Canopy Growth Corp. (NYSE: CGC) (TSX: WEED) has been partnering with other companies to support its growth. This includes an investment and supply deal with 48North Cannabis Corp., a strategic supply agreement with MediPharm Labs Corp. and a research and development collaboration with Battelle. One of the factors fueling Canopy Growth’s expansion has been an investment from Constellation Brands, which pumped billions into Canopy Growth earlier this year. This financial move should give the American drinks giant a way into the cannabis and hemp markets, including the production and sale of CBD-infused drinks.

Cronos Group, Inc. (NASDAQ: CRON) (TSX: CRON) has also been pursuing growth, with expansion into Latin America, an increase in the scale of cultivation and a collaboration with Ginkgo Bioworks to develop innovative products for the cannabis market. This has drawn the attention of outside investors, and the company is now in talks with Altria Group, Inc. about potential investments that could provide additional funds at a strategic turning point for the market.

Aphria, Inc. (NYSE: APHA) (TSX: APHA) aims to carve out a distinct space in the market through innovative consumer products. Aphria recently announced the creation of a joint venture with Perennial, Inc. to develop original consumer-driven brands and products for the cannabis market. This will join Perennial’s experience in brand development with Aphria’s expertise in cannabis to explore edibles, beverages and other new lines of products.

Aurora Cannabis, Inc. (NYSE: ACB) (TSX: ACB) is already busy putting new products out. The company has recently announced the release of cannabis softgel capsules for the Canadian market and expects to export them to international markets next year. The company already works on an international scale, having announced its first shipment of medical cannabis to the Czech Republic in November.

Pending hemp legalization in the United States is only the latest in a series of shifts in the wider cannabis sector, shifts that appear to have opened the way for a wave of expansion and innovation.

For more information on Marijuana Company of America, visit Marijuana Company of America, Inc. (OTC: MCOA)

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