While enthusiasm around the legal cannabis business continues to build, the hemp industry may be poised for explosive growth as well.
For now, however, public equity investors have relatively few options for hemp compared to the availability of cannabis stocks on the OTC market, such as Canadian companies that trade in Canada and the U.S. and larger companies with some exposure to the booming legal cannabis investors.
More of an agricultural and industrial product, hemp fiber and seeds are used in a wide variety of products; in addition, the plant contains CBD, a cannabinoid that can be extracted. Its use gaining in popularity for its purported health benefits.
Hemp is a close relative of cannabis, but does not contain psychoactive properties that make you feel high. Despite that fact, federal law classifies it under the Controlled Substances Act as a Schedule I drug.
Despite this, 38 states currently have pilot programs in place to grow hemp. Most were set up after Congress included a measure in the 2014 Farm Bill that laid out hemp guidelines for states to follow. Under those guidelines, 11 states produced 9,700 acres of hemp in 2016 and 19 states grew more than 25,000 acres in 2017. This year, production is expected to take another big jump.
The Brightfield Group, a Florida-based analytics provider, predicts the hemp industry will be a $1 billion market by 2020. Purchase their report here.
McConnell’s Hemp Bill in the Senate
Meanwhile, Senate Majority Leader Mitch McConnell (R-KY) has managed to fast-track his Hemp Farming Act of 2018 by including it in the Senate Farm Bill. The measure would de-schedule hemp and amend other federal measures to legalize its wider use as an agricultural product and qualify it for federal crop insurance.
“Younger farmers in my state are particularly interested in going in this direction,” McConnell stated. “We have a lot of people who are extremely enthusiastic about the possibilities. As we know, hemp is very diversified.”
Hemp Industries Association President Joy Beckerman is enthusiastic about McConnell’s measure. “We’re going to get this thing done and the plan is for it to go right to the floor for a vote,” Beckerman tells Freedom Leaf. “I have very little in common with McConnell other than hemp, but he’s definitely a hemp hero. He’s been driving legislation in the Senate since at least 2012.”
In 1994, Beckerman opened Heaven on Earth, a store filled with hemp products in Woodstock, NY. She predicted then that one day New York would be known as “the Hempire State.” Last year, New York issued a $10 million grant to research and process hemp. “People thought I was crazy, but I was ahead of the trend,” Beckerman humbly notes.
HIA’s JOY BECKERMAN: “I have very little in common with McConnell other than hemp, but he’s definitely a hemp hero.”
Blue Moon Hemp, a Florida-based CBD seller, buys hemp from a Kentucky farm and processes it into CBD oil in a lab in Boca Raton. “Right now, hemp has that Schedule I classification and you have the 2014 Farm Bill, which allowed pilot programs,” explains national sales director Matt Byrne. “They’re diametrically opposed to each other. It’s a unique legal situation. We’re kind of protected on one end where they are saying you can do this and the other is saying you can’t. And they’re coming from the same place. It’s pretty dumb. The Hemp Farming Act will clear a lot of that up. That would be a game changer.”
Ex-Massachusetts governor William Weld, who’s on the board of directors of the cannabis company, Acreage Holdings (along with former Senator John Boehner), thinks McConnell’s hemp bill has a good chance of reaching a vote this year. “The reasons for legalizing hemp are even more obvious than cannabis,” Weld said at the CWCBExpo in New York on May 31. “You’ve got Mitch McConnell behind it, so that’s a freight train.”
Investing in Hemp Stocks
On the investment side, Alan Brochstein, who tracks the cannabis sector with his website, 420 Investor, hasn’t seen many substantial choices for long-term investors in the hemp space. “Most of these stocks aren’t worth anyone’s time except for day-traders, with several not even filing with the SEC,” he says.
Brochstein offers two recommendations: CV Sciences (“It’s increased rather dramatically over the last couple of months”) and Alliance International, a tobacco company that purchased 40% of the North Carolina hemp company, Criticality, in December.
Among hemp penny stocks, Hemp, Inc. (HEMP) trades at less than $0.03 a share, with a market cap of $7.3 million. For the three months ending March 31, the company narrowed its net loss to $13 million from $15.9 million. Net loss from operations was $1.27 million, compared to a loss of $5.16 million a year ago. Sales rose to $96,498 from $27,456.
HEMP, INC.’s BRUCE PERLOWIN: “There’s massive demand for biomass to make CBD and other products. Hemp is trending in ways none of us anticipated.”
Hemp, Inc. founder Bruce Perlowin says his company could cultivate as much as 25,000 acres of hemp in Colorado and Arizona this year. Perlowin’s so bullish on hemp and CBD that he’s been investing in extraction and grinding equipment for his facility in Spring Hope, NC. The company has also developed its own hemp strains (NC-1 and NC-2), which are aimed at fitting into a recently funded federal research program.
Last year, the Senate Appropriations Committee directed the federal Agricultural Research Service to spend $500,000 to maintain an industrial hemp seed bank. The committee voted to fund the program as part of a broader agriculture measure for fiscal 2019 to restore the nation’s stockpile of industrial hemp seeds after it was destroyed in the 1980s.
Perlowin, who was arrested and prosecuted for marijuana smuggling and other charges in the 1980s, continues to face legal problems. Now, his woes are related to shares in Hemp, Inc.
In 2016, the SEC filed a complaint against Perlowin for making fraudulent statements to registered broker deals in the sale of Hemp, Inc. stock, among other civil charges. He says the case remains ongoing, disputes any wrongdoing, doesn’t plan to settle the case with the SEC and would rather fight the charges in court.
Until the case is resolved, Perlowin remains focused on the power of hemp, which he believes can counter global warming because the plants absorb more CO2 than any other industrial crop. “The world needs hemp,” he exclaims. “There’s massive demand for biomass to make CBD and other products. Hemp is trending in ways none of us anticipated.”
CBD, Perlowin adds, has been gaining attention as a food additive, with giant food and drink manufacturers such as Pepsi and Nabisco taking a look at it as a healthy ingredient for their products.
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