USDA Regulations Risk Slowing the US CBD Market – but Perhaps Not for Long

For quite a while, the global CBD industry was on a massive hot streak. New market entrants were appearing almost every day, new retail outlets were opening at a breakneck pace, and producers were reaping the benefits. All of that translated into a market that’s expected to grow to over $22 billion annually in the US alone by 2026 – for a staggering 125.58 CAGR.

That’s not to say there haven’t been some problems along the way. In the US especially, a complex and outdated regulatory environment and a slow-to-react bureaucracy have called much of that predicted growth into question in recent months. On top of that, the US agricultural sector is struggling to keep up with the new demand for industrial hemp, causing no end to headaches all along the supply chain.

The biggest problem of all, however, may end up coming in the form of some questionable provisions that were tucked away in the USDA rules surrounding hemp farming that went into effect as of the 2020 growing season. Here’s a look at the turmoil they’re creating in the US CBD market, and what’s going to have to change to get it back on track.

A Strict Limit

The specific issue that the new USDA rules have created for hemp farmers in the US has to do with the way in which they’re expected to meet the strict limitations placed on the THC content of the plants they’re growing. That limit, which stipulates that hemp flowers can have no more than 0.3% THC concentration, requires that all plants be tested 15 days before harvest by Federal, State, or law enforcement officials.

The problem is, the samples must come from at least one plant per acre, from the top 8-10 inches of each plant. That’s an issue because the concentrations of both CBD and THC in hemp plants are at their highest levels within their flowers – right at the top of the plant. With farmers focusing much of their production on high-quality organic CBD buds, which are bred to achieve high CBD levels, there’s a good chance that much of their yields will test above the legal THC limit. Then they’d be forced to destroy them.

States Providing a Preview

The issue that the USDA’s new testing mandate creates isn’t just theoretical. In fact, the testing regime was patterned on those already used by states like Arkansas. There, the stringent testing for THC compliance has already cut usable crop yields – and the profits they generate – in half.

The only real option that growers have to avert the wholesale destruction of their crops is to rely more heavily on genetically modified crops that have been designed to stay at or below the legal THC limits. That, however, means less CBD production per acre, making the whole market less profitable. It also does nothing to help the booming organic CBD market, who can’t use genetically modified crops.

The Potential Solution

The USDA, for its part, has indicated a willingness to modify the testing rules. So far, though, they’ve given no indication as to when they might do so. Advocates for growers are asking that the USDA shift to a kind of testing that would involve a whole-plant approach. Creating composite samples in that way would, they claim, create a more realistic estimate of the THC content of the crops.

It’s hard to see how the USDA could adopt such an approach, though, given the rapid growth in sales of whole-flower hemp products. They fear that growers would use the modified testing procedures as a way to skirt the THC limitations on certain products while remaining compliant overall. That would create immense pressure to either increase the legal limits for certain classes of CBD products or to create a far more complex per-product testing requirement. Neither option is seen as palatable to the USDA – or the growers themselves.

The Bottom Line

Right now, it seems that the impasse regarding THC testing procedures is going to lead to a CBD production slowdown in the US in the near term. Until the USDA either reverses course or modifies its requirements, there are few options for growers to avert the risk of mandated crop destructions while still maximizing yields. In the end, however, something’s going to have to give.

That’s because it’s already clear that the market for CBD products in the US isn’t going away. The current FDA commissioner, Stephen Hahn, admitted as much when he said “People are using these products [CBD]. We’re not going to be able to say you can’t use these products. It’s a fool’s game to try to even approach that.” The comments came after years of stubborn resistance to CBD by the agency he now heads.

So, there’s every reason to believe that the USDA will eventually relent in one way or another. The only real question is how they’re going to address testing going forward. If they move swiftly, they may yet avoid slamming the breaks on one of the biggest growth industries within the whole of the US economy. If not, they’ll do unnecessary damage to an agricultural sector already under pressure from an ongoing international trade war.

Time will tell – but the eventual outcome seems like a foregone conclusion.

from Feedster https://www.feedster.com/markets/usda-regulations-risk-slowing-the-us-cbd-market-but-perhaps-not-for-long/