The Van Trump Report

Could Brazil Squeeze into the U.S. Hemp Industry?

U.S. hemp farmers could face competition in the next few years from Brazil and possibly be doing it from it a very distinct disadvantage depending on how all the regulatory details shake out. The agricultural powerhouse has draft legislation circulating that would allow farmers to grow Cannabis for both medical and industrial purposes. According to the proposal, only plants with THC levels above 1% on a dry weight basis would be subject to monitoring.  

As it stands, hemp in the U.S. is defined under the 2018 Farm Bill that legalized the crop as having no more than 0.3% THC, the main psychoactive compound in cannabis that produces the high sensation, with a negligence threshold of 0.5%. USDA’s most recently proposed rules would require plants be tested within 15 days of anticipated harvest and any that test above the 0.5% limit will have to be destroyed. A producer that exceeds the threshold three times in a 10-year window will be prohibited from cultivating the crop.

One of the most challenging things about hemp is that THC levels can spike even if a farmer does everything possible to keep it below the threshold. It’s thought that uncontrollable environmental factors such as drought or even just strong afternoon sun can result in higher THC concentrations but research into the phenomenon is very limited. Still, hemp that exceeds those levels, so-called “hot hemp”, is ineligible for federal crop insurance programs. That means a whole crop year down the toilet, basically.

USDA maintains that the THC rules can only be changed via legislative action because it is written into the Farm Bill, meaning it is statutory rather than regulatory, putting it outside the agency’s authority. The current Farm Bill expires at the end of 2023 but Congress could make changes in the interim via appropriations bills. Some policy wonks believe that December 2021 would be the cutoff date for making any effective changes via the appropriations path. Anything later would likely run into the next Farm Bill.  

It’s still early days in the legislative process for Brazil’s hemp legislation, with experts saying the soonest it could become law is the first half of 2021. Naturally, there is some pushback on expanding Brazil’s cannabis industry beyond strictly controlled medicinal purposes. They will, however, be arguing against a potential new income stream for both farmers and the government, something sorely needed right now.

In Brazil, it is estimated that the potential market could reach up to $900 million. Brazil imported $90.4 million of cannabidiol (CBD) from 2010 to August 2020, with the United States responsible for 14% of the total (US$ 12.7 million). In 2019, the U.S. hemp had its best export performance, sending $2.6 million worth of CBD to Brazil and accounting for 22% of the total. (Sources: USDA, HempIndustryDaily)

Leave a Comment

Your email address will not be published. Required fields are marked *