Kentucky’s growing hemp industry has its challenges, lawmakers told

Senate Majority Floor Leader Damon Thayer, R-Georgetown, asked Quarles if any legislative changes regarding hemp are needed at the state level. | Photo courtesy of LRC

FRANKFORT — Six years ago, the Kentucky General Assembly created a framework for production of industrial hemp. Now the state is a hemp production leader, with around 26,000 acres planted this year alone.

But the growth of hemp and hemp processing in Kentucky under 2013 SB 50 and the 2014 U.S. Farm Bill has presented what Kentucky Agriculture Commissioner Ryan Quarles calls “growing pains,” with farmers and processors facing some uncertainty from both federal regulators and financial lenders.

Although the federal government no longer classifies hemp – a type of cannabis plant--as a controlled substance under federal law, it still regulates the sale of cannabis and cannabis-derived products such as the increasingly popular CBD (or cannabidiol). That has not changed according to the federal Food and Drug Administration, which stated on its website in July that only one CBD product (the epilepsy drug Epidiolex) had been approved by the FDA to date and that marketing of any other CBD product for therapeutic, health or food use is “currently illegal.”

Quarles said FDA oversight is the top issue facing hemp growers and processors, especially when it comes to any “consumable end product” like CBD which is often consumed as an edible or in drops under the tongue.

Quarles said Kentucky has been in talks with the FDA about hemp’s potential as food or other additive, but that uncertainties remain.

“We still like to remind all of our program participants … that this is still a crop that has risks involved,” he told the Interim Joint Committee on Agriculture recently. “But the FDA is a very process-oriented organization, as you know, and so we want to make sure that they don’t regulate this business to death, that we educate them on the nutraceutical health care/health supplement side of the crop as well as other areas which are currently prohibited by law.”

Financial lending is another challenge for the hemp industry, said Quarles, who said a lot of banks are hesitant to provide loans to processors and growers. That has improved since hemp became a legal crop in 2018, but he said lenders—especially national banking institutions—are holding back.

“We’re just trying to figure out what issues they have,” he told lawmakers. “A lot of these issues will have to be resolved in Washington, D.C.”

A lack of crop insurance options is another concern for growers, said Quarles. A handful of the state’s hemp growers elected for crop insurance coverage from a company called Whole Farm this year, he said, but he said he didn’t expect many farmers to use that product in 2020.

Quarles said it could take three or four years for the hemp industry to produce the data that insurers need to provide the type of coverage now available for corn and soybean crops.

“They need production data. We simply don’t have the data nationwide to say ‘this is what an average yield is,’” he told the committee.

Rep. Joe Graviss, D-Versailles, said he is aware of some cash flow and payment concerns from Kentuckians in the hemp industry. He asked Quarles how those concerns are being addressed, and Quarles emphasized a need for more access to financial lending.

“The inability of our legal hemp companies to go into a bank and have access to credit (is an issue,” he said. “It’s disrupting business here in Kentucky.”

Senate Majority Floor Leader Damon Thayer, R-Georgetown, asked Quarles if any legislative changes regarding hemp are needed at the state level. He mentioned the possibility of a special legislative meeting on hemp before the start of the 2020 session to iron out any proposals before budget talks consume lawmakers’ time in February and March.

“There is a lot of bipartisan support for hemp, and we want to make sure we are prepared to send a message to growers and potential growers that we in Kentucky want to stay ahead of the curve,” said Thayer.

Nearly 1,000 Kentucky growers had a hand in this year’s crop – a record for hemp production since Kentucky began licensing hemp growers and handlers under the state’s Industrial Hemp Research Pilot Program in 2014.

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