After long deliberation, the 2018 Farm Bill was passed into law on December 20, 2018. This bill could potentially greatly affect the marijuana industry. Here’s how.
In this article:
- Baby Steps or a Giant Leap for Hemp Stocks?
- How Big Is the Effect of the Farm Bill to CBD and Marijuana as a Commodity?
- The 2 Government Agencies Controlling the Hemp Industry
- CBD Companies to Watch in 2019
CBD Stocks, Industrial Hemp, and the Farm Bill 2018
Baby Steps or a Giant Leap for Hemp Stocks?
Hemp Definition: A variety of Cannabis sativa plant species grown primarily for the industrial use of its derived product.
While Republicans and Democrats have debated long about the farm bill, mainly due to food stamp issues, marijuana declassification has largely passed without much fanfare.
The bipartisan support illustrates a growing legislative assent to marijuana. However, the question still remain as to when marijuana legalization will soon become a federal issue and not just a concern of specific states.
The bill also placed the Department of Agriculture as the agency to supervise grown marijuana that has tetrahydrocannabinol (THC) content of 0.03% or less.
This move displaces a good chunk of grown marijuana plants from the controlled substances watch list. Because the source of Cannabidiol (CBD) is no longer classified as a controlled substance, marijuana companies have more freedom with sourcing and manufacturing their products.
While this may look like big steps toward legalization, other investors can see that there is still a long road ahead.
The Food and Drug Administration (FDA) still holds sway on which medicine or CBD product can appear on the market legally.
As of now, most products can have relatively high CBD construction but must have minimal THC. Therefore, marijuana companies who want to sell THC products may need to wait a while longer.
The upgrade in the classification for cannabis plants greatly affects the marijuana industry. The 2018 farm bill has made farming marijuana easier as well as made research and development better.
Hemp cultivation is not just for the farmers but also for investors. Investors can invest in marijuana, not just through CBD stocks, but also through dispensaries and growing hemp.
How Big Is the Effect of the Farm Bill to CBD and Marijuana as a Commodity?
The farm bill now allows marijuana growers to experiment more with its chemical makeup.
Of course, CBD oil stocks can see direct benefits. However, the hemp industry as a whole can find additional markets and sectors to serve and profit from. We may soon get marijuana with better strains and the development of products may be fast-tracked.
The farm bill affects the agricultural industry but also, interestingly, other sectors like real estate, clothing, plastics, and paper.
Marijuana is not just for human consumption. The opening of the market to more product lines can give marijuana companies opportunities other than food and medicine.
For example, the farm bill can indirectly disrupt the paper sector. Currently, paper generally comes from trees, which can lead to deforestation. Hemp offers a more efficient system.
It only takes 4 months for hemp to grow satisfactorily for its fiber and cellulose content. Trees can take 20 to 80 years.
Also, trees generally only have 30% cellulose, which forces paper mills to use other chemicals and ingredients. Hemp has up to 85% cellulose, which lessens the costs and materials used.
A hectare of hemp can produce as much paper as 4 to 10 hectares of forests. Lastly, paper made from hemp lasts longer than normal paper.
Hemp can provide an alternative textile for clothing and is usually longer-lasting than other textiles. Marijuana requires 50% less water than cotton, making hemp a cheaper and sustainable textile.
The growth of demand for sustainable materials leads us to hempcrete. Hempcrete is a biocomposite material that is renewable and provides sturdiness for buildings.
Since the farm bill of 2018 can make these sectors viable due to increased marijuana production, a lot of marijuana companies can move to other sectors. This opening of markets can make CBD stocks more profitable, and investors can thank the farm bill, at least in part.
Hemp can also find a place in the energy sector as biofuel. As coal and oil supplies dwindle, leading to higher energy bills, companies in the energy sector can appreciate hemp as a sustainable source of electricity.
The 2 Government Agencies Controlling the Hemp Industry
While Congress has legalized hemp indirectly through the bill, control over the industry is given to specific agencies.
These controlling agencies, particularly the Department of Agriculture and the Food and Drug Administration, are the boon and bane of the industry.
By providing quality incentives and appropriate working requirements, these agencies can make cannabis companies and the investors bloom.
As of 2017, marijuana is the second most valuable agricultural product after corn. Farm bill programs can change that and federal and state entities can help make this projection possible.
CBD Companies to Watch in 2019
Some specific companies can also see growth due to the passage of the bill, especially those that have taken time to consolidate and forge strategic partnerships.
For example, Charlotte’s Web Holdings, Inc. (CWEB) has recently improved its marketing reach by increasing its retail presence in 3,000 retail locations.
While CWEB is technically classified as a marijuana company, it actually diversifies in another growing sector, the life sciences industry. Since their CBD products mainly center on wellness, the farm bill can provide indirect help through the easing of working requirements for hemp growers.
The benefits from the bill provide economic development not just for American companies, but also for global corporations.
For example, GW Pharmaceuticals PLC (NASDAQ:GWPH) is a UK biotech company that also works in the pharmaceutical sector. As most of their medicines are derived from CBD, possible farm bill programs open up the possibility of better marijuana strains.
Better marijuana strains can only mean good things for medical marijuana companies. As the administration and control of the working lands for hemp are under the Department of Agriculture and not the FDA, it means less stringent regulations.
GW Pharmaceuticals is the first to offer a natural cannabis derivative to the markets. Their flagship product, the multiple sclerosis treatment product nabiximols, has the first mover advantage when it comes to pain alleviation and treatment using CBD.
With the US as a big market for medical CBD, GWPH can get better logistics with the bill as more marijuana growers receive legitimization and support.
In the beverage sector, Canadian marijuana company TILRAY (NASDAQ:TLRY) takes advantage of the US bill through experimenting. As the supply of marijuana has a high probability of increasing through the bill, the company started researching other product lineups.
Perhaps the most interesting piece of news in the marijuana sector is the partnership between TILRAY and Budweiser maker Anheuser-Busch InBev SA for a cannabis-infused beverage. While their partnership is currently limited to Canada, the farm bill can persuade the partners to offer their developed products in the future as supply increases and, hopefully, better marijuana strains enter the market.
The reach of the farm bill is most likely farther than most people think. For instance, the medical industry, a financial juggernaut, can see disruptions in sleep aids and pain medication, two profitable sectors.
By making CBD products that are not addictive, but efficient and reasonably priced, painkillers and sleeping pills may soon find another competitor through marijuana products.
The farm bill is not just for the farmers but for everyone. However, only those who do their homework can understand what it means for the economy and investment portfolios.
Ignoring the opportunity brought by the marijuana industry can cost your IRA potential growth. Before you invest, always check if the investment aligns with your investment philosophy and strategy.
What are your thoughts about the farm bill? What opportunities will the hemp industry disrupt in the current economic model? Let us discuss in the comments section below.
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