North Carolina’s newest cash crop is illegal for most farmers to grow

North Carolina farmers take chances whenever they try to grow something new, but no crop poses the kind of uncertainties that surround industrial hemp.

Hemp is used in thousands of products, from parachutes to energy drinks and a growing number of supplements and remedies containing CBD oil. But the plant is also a cousin of marijuana, which makes almost everything about it harder for growers, from getting loans to buying seed to selling the crop at the end of the season.

Among the added worries: The level of the compound that gives you a high when you smoke marijuana, THC, might inch up a fraction of a percent in your hemp plants, making them a drug under federal law no more legal to possess or sell than cocaine or heroin.

Despite that risk and others, hundreds of farmers have signed on to a state program that allows them to grow industrial hemp in their fields or in greenhouses and sell it to processors to turn into products. It’s part of a big experiment run by N.C. State University and N.C. A&T State University under the guidance of the state Department of Agriculture. In the farm bill of 2014, Congress gave states permission to run test programs for growing and marketing industrial hemp, and since then, North Carolina and 38 other states have approved legislation needed to set one up.

Agriculture remains one of the state’s biggest industries, but falling demand for tobacco and uncertainty over commodity prices in the face of global competition have forced farmers to look for alternatives to traditional crops. The exploding demand for CBD oil derived from hemp flowers makes it a promising “next big thing” for farmers and rural communities — particularly if the government decides to stop classifying it as an illegal drug.

Farmers like Waylon Saunders see industrial hemp as a potentially lucrative alternative to mainstay row crops such as corn and soybeans, which are barely paying the bills lately. Saunders and his father own and operate a 200-acre farm in Randolph County, an hour’s drive west of the Triangle, and last year he planted a half-acre of hemp under the state’s Industrial Hemp Pilot Program to see what it would do.

This year, Saunders is planting 5 acres and has become the director of farming operations for Founder’s Hemp, a company in Asheboro that makes hemp products and sells them through its website and retail stores. The company has contracts with 10 farmers who are growing 32 acres of hemp for the company this summer, Saunders said.

“I see this being the largest cash crop in North Carolina in the next three to five years,” he says.

Others are more cautious about hemp’s potential. Fen Rascoe of Bertie County in Eastern North Carolina hopes hemp will eventually become a sizable part of his mix of crops, which includes peanuts, cotton, soybeans and another niche crop, clary sage, which is grown for its oil. But Rascoe, who is a member of the state Industrial Hemp Commission that oversees the pilot program, warns that some evangelists for the industry are suggesting to farmers that growing hemp will mean easy money despite the risks and challenges.

“This isn’t green gold by any means,” Rascoe said. “Like anything else, supply will eventually outweigh demand. It has the potential for a lot of people to get their feelings hurt if they’re not doing their due diligence.”

Still, like other growers, Rascoe says hemp’s versatility should make it a viable crop. The plant’s fiber can be made into a range of textiles, and hemp seed and oil are used in cosmetics, lotions and foods such as pasta and salad dressings.

But is it legal?

But what’s expected to drive demand for hemp is CBD oil, a compound found in its flowers that is thought to be effective in treating medical problems, such as epileptic seizures, anxiety and post-traumatic stress disorder.

The Food and Drug Administration this week approved a drug derived from CBD oil to treat seizures caused by two rare forms of epilepsy, the first CBD medicine to get government approval. The agency has not vetted other health claims and has warned that CBD products may not be safe or effective.

One concern is contaminants or unlisted ingredients: The Army has banned soldiers from using CBD products, and state officials issued a health warning in March after dozens of people who consumed CBD in electronic cigarettes ended up in emergency rooms with symptoms that included “altered mental status, hallucinations, seizures, loss of consciousness and rapid heartbeat.” The symptoms are “not typical for CBD oil use,” State Health Director Betsey Tilson said, leading her to warn that products labeled as CBD oil sometimes contain other substances.

Meanwhile, the Drug Enforcement Administration considers hemp illegal under the Controlled Substances Act and CBD an illegal drug because it comes from the flowers of the hemp plant. The DEA does not appear to have aggressively gone after CBD producers or consumers, but the agency’s position casts a cloud over the industry.

Still, demand for CBD continues to grow. Sales of CBD oil in the United States reached $170 million in 2016 and could hit $1 billion in 2021, according to the market research firm Brightfield Group.

Numbers like those are helping persuade farmers to give hemp a try. So far, 328 people have obtained a license under the state’s pilot program to grow hemp on 4,754 acres of farmland and up to 1 million square feet of greenhouse. Another 80 licenses have been issued to processors like Founder’s Hemp to allow them to buy and turn the hemp into products.

With each new batch of licenses approved by the Industrial Hemp Commission, vice chairman Sandy Stewart, director of the state’s network of 18 agricultural research stations, reminds farmers that while state and federal law clearly allows them to grow hemp and sell it to processors, the marketing and sale of products made from CBD oil is a “gray area.”

“The marketplace is very uncertain, because of the uncertainty of federal law,” Stewart said this week after the commission approved another 17 licenses for growers. “Do your research and seek your own legal counsel is the advice here.”

With the pilot program only getting started last July, this is the first full season for legal hemp cultivation in North Carolina. Farmers are still trying to figure out the best techniques for growing and selling it, said Tom Melton, the deputy director of the N.C. Cooperative Extension Service and chairman of the state commission.

“It’s still the Wild West basically with this commodity,” Melton said. “You hear different things from different people — what they’re doing, how they’re doing it, who they’re contracting with, what they’re making out of it, how much they’re paying. It’s just really difficult to get a handle on it.”

The hemp industry is hoping Congress eliminates the legal uncertainties surrounding hemp and CBD oil by passing the farm bill approved by the U.S. Senate agriculture committee this month. The bill would make it legal nationwide to grow and sell industrial hemp and hemp-derived products with THC levels of less than 0.3 percent. That compares to THC in marijuana of anywhere from 5 to 25 percent.

But the House version of the farm bill that passed last week doesn’t contain the hemp provision. For now, the only way to legally grow or sell industrial hemp in North Carolina is under the pilot program, through an exception to federal drug laws carved out by Congress in 2014. Hemp is the only commodity in North Carolina that requires a license to grow, and only farmers with a track record of growing crops are eligible.

Looks like marijuana

Despite its novelty now, hemp has been grown for its fiber for thousands of years. The earliest English settlers in Virginia grew hemp, and George Washington was a big proponent. But as a variety of Cannabis sativa, hemp was heavily taxed along with marijuana under the Marihuana Tax Act of 1937, sending the industry into decline. There was a brief resurgence in hemp cultivation during World War II, but the crop all but disappeared when hemp was made illegal under the Controlled Substances Act of 1970.

These hemp plants grown by Matt Spitzer and his business partner, Chase Werner, of Triangle Hemp have low THC content.

Hemp plants are indistinguishable from marijuana; the only difference is in the THC content, which is determined by lab tests. The commission that oversees the pilot program includes a police chief, Tony Godwin of Cary, and Sheriff Sam Page of Rockingham County, whose term ends June 30.

Because hemp is still officially classified as an illegal drug by the federal government, banks won’t loan farmers money to buy hemp seed or seedlings, and insurance companies won’t insure their hemp crops. That means if a storm flattens a farmer’s field of hemp, the loss is his to swallow.

And then there’s the risk that the plants will test high for THC — above 0.3 percent, a number set by Congress in 2014. It’s not clear what conditions might cause THC levels to rise in hemp plants, but heat, drought and leaving the flowers on too long all may be factors. Of the 140 fields sampled by the state Department of Agriculture last year, 14 tested above 0.3 percent for THC and had to be destroyed.

“The sad thing is that the 0.3 is a very arbitrary number,” Melton said. “There was no particular reason for it. So it’s really hard for a farmer when he’s 0.42 and it’s nothing that can possibly get anybody high. It’s nothing that’s going to hurt anything, but he’s over that arbitrary legal limit and gets his crop destroyed.”

Farmers try to avoid THC trouble by buying seeds or seedlings taken from a single strain of plant that has tested low for the compound. Only female plants produce flowers, so farmers growing for CBD will often start with a field or greenhouse full of female clones.

Chase Werner and Matt Spitzer grew thousands of clones this year in greenhouses in Durham that were built for lettuce and tomatoes. The partners, who call their venture Triangle Hemp, got seed and clones for eight varieties of hemp from Colorado last fall and began growing and testing them, looking for a strain with high CBD and low THC content.

“This was the winner,” Werner said, standing in a greenhouse full of bushy, 6-foot-tall hemp plants.

Cuttings from these plants were pampered with water, sunlight and nutrients until they developed healthy root systems and could be sold as seedlings to farmers across the state and as far away as Kentucky. Werner and Spitzer have been growing lettuce, basil and tomatoes for several years and still do through their company Endless Sun Farms in Raleigh. They say the lessons they learned growing food crops can be applied to hemp.

Werner thinks hemp will replace illegal marijuana for people who are smoking it to relieve anxiety. He said they have an employee who is a military veteran who was smoking marijuana to relieve symptoms of PTSD but switched to smoking hemp flowers with CBD oil, which gave him the same effect without making him high. Werner smokes his own product, which he says loosens the tightness in his neck and shoulders.

“Its just a general mood lifter,” he says. “Almost like a cup of chamomile tea.”

Similar to tobacco

Hemp is a labor-intensive crop, particularly if you’re growing it for the plant’s flowers that yield CBD oil. The U.S. Environmental Protection Agency hasn’t approved any pesticides for use on hemp, so weeding must be done manually or by machine. And once the flowers are ready, they must be harvested by hand and dried, often in tobacco barns or dryers.

“The whole process is very similar to burley tobacco,” said Saunders, the Randolph County farmer. “If I had just started out with 5 acres last year, I would have been overwhelmed. It’s hard to keep up with.”

Tobacco farmers like Tony Finch think the similarities give them advantages in adapting to hemp. Finch and his father used to grow 80 to 100 acres of flue-cured tobacco outside Spring Hope in Nash County but saw that number shrink over the years as the tobacco company wanted less and less.

Finch didn’t plant any tobacco this year, but he has 1 acre of hemp growing behind his father’s house from seedlings he raised in the greenhouse they once used for tobacco. Finch said he was in that greenhouse every day this winter, making cuttings from plants left over from last season and seeing what would make them grow.

“I killed my fair share trying to learn how,” he said. “It’s a time-consuming labor of love. If you’re a farmer, you like growing things. I must admit, it’s fun.”

If all goes well, Finch expects to be harvesting hemp flowers in October to sell to Hemp Inc. in Spring Hope, which claims to be North America’s largest hemp processor (the company began processing fiber from kenaf plants last fall and now has the equipment to begin extracting CBD oil from hemp). Because of his work with tobacco, Finch has experience managing the field workers who will harvest the flowers and already owns the dryers he’ll use to get it ready to market.

The rest of Finch’s 600-acre farm is planted in sweet potatoes, soybeans and kenaf, which he sells to Hemp Inc. But as he stands next to his 1-acre plot of hemp, Finch says he hopes the surrounding fields will someday be covered with it.

“I believe this stuff right here can save a lot of family farms,” he said.

Richard Stradling: 919-829-4739, @RStradling
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