In January, the U.S. Department of Agriculture’s (USDA’s) Agricultural Marketing Service (AMS) released its final rule on hemp. Though contentious aspects of the rule remain, some industry members believe the outcome is a big win for states and farmers.

One supporter is Justin Swanson, a prominent hemp lobbyist and lawyer in the Midwest. Based in Indiana, Swanson is principal at Bose Public Affairs Group, a government affairs and communications firm, and part of the Governmental Services Group at Bose McKinney & Evans LLP. He also serves as president of the Midwest Hemp Council, a trade organization that supports both cultivation and regulatory advancements in the region’s hemp industry.

In the wake of the rule’s release, Swanson expressed optimism to Hemp Grower about the flexibility afforded to state regulators and farmers alike, particularly on three issues: remediation, performance-based testing and field sampling measurements of uncertainty.

Under the final rule, farmers whose hemp tests above the legal 0.3% tetrahydrocannabinol (THC) limit can either dispose of the flower material or blend the entire plant into biomass material and have that retested. States also can develop their own field-sampling measurements of uncertainty (acceptable margins of error to account for differences during the sampling process), just as labs are required to include a measurement of uncertainty with their results. And, states can develop their own performance-based sampling methods as long as no more than 1% of plants in a lot do not test above the acceptable THC limit.

“States are supposed to be hubs for innovation and experimentation,” Swanson says. “It’s absolutely the right play to make. I’ll be even happier if I start seeing states really fully leverage this flexibility and get innovative and really kick-start this process.”

Hemp Grower spoke with Swanson about the status of the federal rule-making process, as well as his efforts to make hemp craft flower legal in Indiana and the future of hemp farming in the Midwest.

Paul Barbagallo: Tell us a little a bit about the Midwest Hemp Council.

Justin Swanson: Our core vision is to help promote and connect the entire hemp plant supply chain. And not just in Indiana. We recognized early on that the best way for farmers to be successful in this industry is to be working outside their communities, outside their state lines, and really figuring out what a good partner looks like for each individual farmer’s situation.

Barbagallo: You’ve been heavily involved in advocating for Indiana—and Midwest—hemp growers as the USDA finalizes regulations for hemp growing in the U.S. How do you feel about the final rule?

Swanson: It’s a vast improvement from the interim final rule. Our members would all agree that the final rule does a much better job recognizing the nuances and realities of hemp farming. For example, [the USDA] changed from a 15-day harvest window to a 30-day harvest window requirement. They also made it clear that farmers can only be subject to one negligent violation per growing season. Things like this helped quite a bit.

Barbagallo: Do any aspects of the final rule still give you concern as far as growing hemp in Indiana specifically?

Swanson: One of the bigger concerns is that labs be DEA [U.S. Drug Enforcement Administration]-certified. More and more labs are coming online. But in Indiana, for instance, we only have one DEA-certified lab. Probably the biggest question that the USDA decided not to take head-on is this idea of hemp extract work-in-progress.

Barbagallo: One of the most controversial aspects of the final rule is the THC limit. The Agriculture Improvement Act of 2018 (the 2018 Farm Bill), which federally legalized hemp, set the THC limit at 0.3%. Can this still be workable for farmers?

Swanson: The 0.3 percent threshold is purely arbitrary; [the USDA] went as far as they can go in the final rule in terms of raising the negligent threshold to 1% instead of 0.5%, and that’s really helpful. At the end of the day, if this industry is really going to take off, and farmers are going to have the confidence to move forward and invest in the industry, we’re going to have to raise that [THC limit] to 1%.

Barbagallo: Do you expect further legislative action to address that limit?

Swanson: Ultimately, you’re going to need a statutory change from Congress to change the [THC limit]. I do think that’s coming sooner rather than later. I fully expect that threshold to be raised. It’s more of a question of when, and not if.

Barbagallo: Broadly speaking, are you happy with how the final rule deferred to state authority over hemp farming?

Swanson: For as much as there’s left to be desired in the final rule, there’s even more opportunities for states to solve issues themselves. I’m personally really excited to see which states—I’m hoping it’s Indiana—really take this flexibility that’s offered and run with it when it comes to remediation, performance-based testing and the field sampling measurement of uncertainty.

Barbagallo: Indiana has made it a crime to manufacture, deliver or possess smokable hemp. Those laws are now being challenged in court. Meanwhile, you’ve been advocating for a state bill, H.B. 1224, to resolve this dispute and legalize smokable hemp. What is the state of play today with smokable hemp in Indiana?

Swanson: The Midwest Hemp Council is really ground-zero for craft hemp flower [legislation]. We’re demonstrating here in Indiana to our lawmakers, regulators and other policy makers that this is no different than a niche market like craft beer. We’re trying to educate people on what it is. Craft hemp flower is just another delivery method of CBD to the body based on consumer preference. It was criminalized in 2019, unfortunately, based on complaints from law enforcement [in Indiana]. That law was challenged in federal court. Now we’re back in federal district court, where we won originally, and [we’re]waiting on a new ruling on it. While that case is pending in the courthouse, we’re at the statehouse educating lawmakers on the benefits of opening up this market. [We’re working to modernize] our hemp statutes really to reflect the intent of the 2018 Farm Bill, which was to legalize every inch of the plant and every extract and derivative of that plant.

Barbagallo: Hemp flower really provides another opportunity for the farmer.

Swanson: Exactly. This is really going to help stabilize the CBD market. Think about it: When farmers sell their hemp crop to a processor to be converted into CBD oil, they will get about 50 cents per percent CBD per pound for that crop. But selling hemp flower directly can earn a farmer as much as $250 per pound. So, with craft hemp flower, instead of only having one outlet for your CBD biomass, you now have another option for that flower to sell directly to a consumer or to a retailer or other distributor. It’s going to provide confidence for farmers to move forward in the hemp space.

Barbagallo: Do you see regional advantages for hemp cultivation developing in the Midwest region?

Swanson: Our farmers have been trying to answer that question since 2018. Just because a genetic grows well in one state does not equate to it growing well in another state. What I’ve personally seen is that the produce farmers are more well-positioned to do CBD growing because it’s basically horticulture—you want to keep those plants feeling good. That’s in the southern part of the state. In the central and northern part of the state, you’re probably going to see more interest in the fiber and grain side because it’s much closer to row-crop farming.

Barbagallo: What do you see for the future regarding other uses of hemp, such as food and clothing?

Swanson: CBD has traditionally been the rock star of the industry. But the longer, more sustainable play is on the fiber and grain side. The more educated consumers get about sustainable clothing and food, they’re going to be asking questions about how it’s made and where it’s coming from. It’s just a matter of time.

Paul Barbagallo is a Boston-based writer and a former senior editor for Bloomberg News and beat reporter for Bloomberg BNA.

Hemp is re-emerging as an agricultural commodity at a time of unusual social and geopolitical unrest, driven in part by a global pandemic and the resulting economic fallout. Hemp markets are developing as a wide range of programs roll out funding to address the above issues. These financial programs, along with additional funding opportunities that incentivize sustainability, are creating abundant opportunity within developing hemp markets.

But of all the funding opportunities emerging for hemp producers, a larger focus on climate change by the Biden administration may be the most compelling. President Joe Biden and his administration are looking to mobilize billions of dollars over the next several years for climate change initiatives via agricultural policy.

In the administration’s Climate21 Transition Memo, the Biden team outlines the importance of the U.S. Department of Agriculture and, more broadly, agricultural practices in mitigating climate change: “While the U.S. Department of Agriculture (USDA) has not historically been at the center of the public conversation on federal climate policy, the Department has enormous and underappreciated discretionary financial resources and agency expertise,” the memo states.

It goes on to say these resources allow the USDA to facilitate the reduction of greenhouse gases (GHGs), bolster the resilience of farms and forests to climate change, promote bioenergy and more.

The administration is aiming to give the USDA, and agriculture, a prominent role in the campaign against climate change. In addition to increasing agency staffing and overall capacity—with a focus on cultivating agency leadership—President Joe Biden plans to roll out programs that involve promoting climate-smart practices at both farms and forests, creating incentives through existing programs like crop insurance, as well as developing a carbon bank.

Carbon Markets

In the climate priorities laid out by the executive branch for the administration’s first 100 days, establishing carbon markets is right up at the top.

As explained in Biden’s memo, a carbon bank would allow the USDA to buy carbon credits from producers and forest landowners to sell to companies that want to reduce their carbon footprint. “A USDA carbon bank would provide a guaranteed price for producers while guaranteeing the environmental integrity of carbon conservation practices,” the memo states.

The concept of carbon trading is simple—the practice, not so much. One carbon credit equals one metric ton (MT) of carbon dioxide (CO₂). This system allows companies to offset their GHG emissions by paying a farmer to utilize agricultural practices that sequester CO₂ in soils. Carbon sequestration can be achieved by employing farming practices that forgo tillage or incorporate cover crops, for instance.

Measuring the amount of CO₂ stored by various cropping practices, however, is where carbon markets have struggled historically, as soil sampling at scale hasn’t been practical. However, the Soil Health Institute, a nonprofit organization dedicated to improving soil health, has recently been awarded a $3.25 million grant from the U.S. Department of Energy to develop a soil carbon measurement and monitoring system called the DeepC system. This will not only make carbon inventories more accessible, but also be indispensable for researchers looking to understand hemp’s capacity to sequester carbon.

Settling contracts for carbon thus far has been handled primarily by modeling with tools like the USDA’s COMET-Farm system. The platform incorporates granular data from farm management applications, satellite weather and field sensor data to quantify CO₂. At its simplest, if modeling shows a producer has captured 2 tons of CO₂, and pricing is contracted at $15 per credit, the contract would be settled at $30.

The Biden administration has discussed establishing the carbon bank by accessing funds through the USDA’s Commodity Credit Corporation, which has $30 billion in borrowing capacity. Biden’s memo suggests allocating $1 billion to purchase carbon credits at $20 per ton.

Creating a carbon bank will require congressional approval, but U.S. Secretary of Agriculture Tom Vilsack is a USDA veteran, and like other members of Biden’s cabinet, he has considerable experience in moving the levers of government.

The Potential for Farmers

The current agricultural carbon marketplace is nascent, and practice is far from widespread.

But it is poised to leap out of the gates with a government-supported program.

Existing companies like Nori and Indigo Ag have been active in buying and selling carbon credits. Indigo Ag estimates that producers will realize .3 carbon credit per acre in their first year of using existing conservation cropping practices. This doesn’t refer to hemp specifically, which may have far greater potential. Indigo Ag set a floor at $10 per credit, but pricing could reach $15 on that platform. (European credits are trending over double that in current spot markets and in European Union carbon futures markets.)

Some companies have already begun utilizing the carbon marketplace. Land O’Lakes cooperative, for example, recently announced the sale of 100,000 MT of CO₂ to Microsoft at $20/MT, as reported by Bloomberg. This allows Microsoft to voluntarily offset its GHG—something that may become compulsory in the future.

For hemp farmers, the ability to complement hemp prices with the sale of carbon credits is compelling. Fiber and hempseed producers will more likely benefit from this policy, as they tend to grow on a larger scale, but cannabidiol (CBD) producers using organic mulches and cover cropping may also.

Considerable research is still needed to fully understand the potential for hemp to sequester carbon in various soils. But hemp producers and researchers are developing agronomic practices for hemp concurrent with the emergence of carbon banks, which is enabling carbon offsets to shape production practices.

Ultimately, the development of carbon markets has potential to not only impact hemp agronomic practices, but also help hemp growers improve their soils while generating an additional revenue source.

Chase Hubbard is a senior hemp analyst at The Jacobsen, a commodity price reporting and price forecasting agency.

Growing hemp in a greenhouse can offer numerous benefits, such as light and climate control, year-round grows, and security, just to name a few. Below are four tips that can help reduce grow issues once seeds or clones have been planted.

1. Ventilate, ventilate and ventilate.

Whether you are producing transplants or a finished crop in your greenhouse, you must have ample ventilation. Many areas in the U.S. deal with high humidity. You need enough mechanical ventilation to remove moisture in the greenhouse and facilitate CO₂ exchange. If you do not have enough air movement across the plant canopy, you may run into issues such as powdery mildew and botrytis. For houses less than 150 feet long, fans located in one end wall with the appropriate square footage of louvres (wall shutters) at the opposite end seem to work. However, when houses are 150 feet or longer, we have found it better to place large fans on a sidewall at the midway point and pull outside air from each end-wall shutter. Our rule of thumb is that every plant in the greenhouse should be “dancing” (moving or swaying) constantly from air circulation.

2. Maintain proper pH and EC.

Choosing a quality growing medium is crucial since it will impact the plant throughout its entire growth cycle. Carolina Greenhouses uses soilless mixes with a pH between 6.3-6.5, good draining ability, high air porosity and effective water retention. Many good mixes have an assortment of bacteria and fungi that support plant growth. For our plant production, we use a mix that has a 65:35 peat-to-perlite ratio; this has given us our best yields to date.

You should always know what the pH of your media is during the entire growth cycle. Use proper PourThru techniques to check pH, and electrical conductivity (EC) readings. Ideal EC readings depend on what growth stage the plant is in, but proper EC and PH are both critical for a happy plant. (Editor’s note: Read more information about the PourThru method). We always make sure our solution tanks, where we mix nutrients with source water, have the proper pH and EC readings before we pump the water through the irrigation system. Every time we water or feed, we do this—not occasionally, but always! Hemp does not like to be overwatered nor overfertilized.

3. Do not skimp on genetics.

Start with good genetics. Whether you use seed or clones, genetics combined with proper nutrition have a huge impact on the quality of hemp grown in your greenhouse. Purchase clones from a reputable company that is willing to be open about its cloning process and mother plants. The same goes for seed. Make sure the company has proven genetics and is able to provide data on testing and the history of the variety.

4. Provide adequate plant spacing.

One of the biggest mistakes we have seen other hemp growers make is packing too many plants in a greenhouse. Hemp plants do not like to be overcrowded. This can cause various issues, such as pest infestations and yellowing underneath the canopy. Too many plants can also hurt yields. It’s better to err on the lower side than it is to overfill the greenhouse with plants that you cannot get to and properly care for.

[For tips on transplanting hemp in the field, read part I of this two-part series.]

Lisa Cobb is president of Carolina Greenhouses, a company that has grown agricultural crops such as tobacco for 30 years and incorporated hemp production when the 2018 Farm Bill passed.

On Jan. 15, the U.S. Department of Agriculture’s (USDA’s) Agricultural Marketing Service (AMS) released a final rule on hemp based on its previous set of regulations that drew public comments from nearly 6,000 people.

Sampling

The final rule made several changes to sampling procedures that should reduce burdens on both growers and regulators.

First, the rule increased the sampling window, which is currently 15 days. Samples for testing now need to be taken up to 30 days before a farmer plans to harvest, giving regulators more time to get into fields. Many stated in public comments that 15 days was far too little time to collect an appropriate amount of samples from each producer in the state.

The rule also slightly modified from where on the plant samples need to be taken. While the IFR required collecting a sample from the top third portion of the plant, the final rule now states samples should be taken “approximately five to eight inches from the ‘main stem’ (that includes the leaves and flowers), ‘terminal bud’ (that occurs at the end of a stem), or ‘central cola’ (cut stem that could develop into a bud) of the flowering top of the plant.”

Andrea Hope J. Steel, the director at Coats Rose P.C. and co-leader of the law firm’s Cannabis Business Law group, tells Hemp Grower this provision will allow sampling agents to collect more stem and leaf material than previously allowed.

“That will help reduce instances of hot crops,” Steel says. Stems and leaves typically contain lower levels of cannabinoids—and specific to this issue, of tetrahydrocannabinol (THC)—than the flowers.

However, Graff says the final rule still requires sampling from primarily floral material despite comments on the IFR that requested switching to a whole-plant sampling approach. 

The final rule dedicates a significant portion of its 300 pages to addressing and responding to the most highly requested comments, including those on sampling.

“Even though many commenters felt that whole plant sampling should be allowed, AMS is of the opinion that since THC is concentrated in the flower material of the plant, the flower material is more appropriate to test than the entire plant,” the final rule states.

Perhaps most significantly, the final rule has changed sampling protocols from collecting a “representative sample of every lot [growers] plan to harvest” using specific methodology, according to the IFR, to allowing states and tribes to implement a more “performance-based” method of sampling.

The AMS says these performance-based sampling protocols may take into account:

• seed certification processes (or other processes that identify varieties that have consistently produced compliant hemp plants);
• whether the producer is conducting research on hemp at an institution of higher learning or that is funded by a federal, state or tribal government;
• whether a producer has consistently produced compliant hemp plants over an extended period of time;
• whether a producer is growing “immature” hemp, such as seedlings, clones, microgreens or other non-flowering cannabis, that does not reach the flowering stage;
• other similar factors. 

Ultimately, the amendments provide greater flexibility, especially for producers and varieties with a history of compliance.

“Flexibilities afforded to States and Indian Tribes developing their own hemp production plans will allow them to incorporate best practices, as those change and develop over time. For example, States and Indian Tribes can adapt field-walking patterns to various sized and shaped hemp grower operations,” the final rule states. “AMS believes that a national standard would be difficult to consistently apply given the various grower operations and that standard ‘zig-zag,’ or letters ‘M’ or ‘Z’ walk patterns may not be feasible for sample collection of micro-acreage producers, very large scale producers or those with polygonal hemp lots.”

States will need to include details of their performance-based sampling methods in their hemp plans, which the USDA must approve. (Visit this site for the AMS's updated guide on sampling.)

The latest set of regulations makes several highly requested changes to the interim final rule (IFR) that are seen as favorable to both hemp producers and regulators.

Still, contentious aspects of the IFR remain, but some industry members are hopeful there is still time to amend them.

“Overall, the final rule’s contents in some ways show progress and demonstrate the USDA has looked into the industry as part of its public comment process,” Garrett Graff, managing partner of Denver-based Hoban Law Group, tells Hemp Grower. “In another way, the final rule remains stagnant.” 

Testing

While the final rule implemented generally positive sampling changes for the industry, THC testing will, for the most part, remain burdensome. 

The final rule retains that hemp must remain below 0.3% total THC on a dry-weight basis. Total THC is defined as the sum of delta-9-THC and tetrahydrocannabinolic acid (THCA). On its own, THCA does not produce psychoactive effects like delta-9-THC, but it can be converted to THC through decarboxylation.

While increasing that limit was one of the most highly requested changes in public comments, the USDA was unable to do so, as that limit was written into law in the Agriculture Improvement Act of 2018 (the 2018 Farm Bill) and would require an act of Congress to change.

However, legislation has been introduced in both Kentucky and at the federal level by Sen. Rand Paul to amend that limit to 1%.

The final rule also retained “one of the most hated provisions,” Graff says—its requirement for labs testing hemp to be registered with the U.S. Drug Enforcement Administration (DEA), despite numerous public comments opposing it.

“Registration is necessary because laboratories could potentially handle cannabis that tests above 0.3 percent THC on a dry weight basis, which is, by definition, marijuana and a Schedule 1 controlled substance,” the final rule states.

In 2020, the USDA announced the delay of some requirements outlined in the IFR, including the requirement for labs to be registered by the DEA. That delay has been further extended until December 2022.

Jeff Greene, co-founder and director of business development of The Florida Hemp Council, sees that delay as a good sign—especially if the Biden administration chooses to reexamine and amend the final rule.

“There’s still some work to be done, but [the USDA] acknowledged that by pushing off the DEA lab requirement until 2022, so they acknowledged they don’t necessarily have it right,” Greene says. “I think if the industry can show the USDA that [the DEA lab requirement] is not necessary over the next year, I believe it will be lifted.”

The final rule did make one positive change on the testing front. It raised the negligence threshold from 0.5% to 1%, which means if hemp tests above 0.3% but below 1%, it will not be considered a negligent violation (however, it will still need to be disposed of or remediated). Those with crops testing at or above 1% THC will receive a Notice of Violation from the USDA, which will include a corrective action plan that producers are required to follow by a certain date and report progress on to the USDA. Producers with more than three negligent violations within a five-year period will be ineligible to participate in the licensed hemp program for the next five years.

However, producers are only subject to a maximum of one negligent violation per year, even if their hemp from multiple lots tests up to 1% THC.

“I think it has taken a lot of the bite out of criminality,” Greene says about the increased negligence limit.

Options for Hot Hemp

If hemp does test “hot” above the 0.3% THC limit, the final rule has given producers additional options for disposal beyond the total destruction written into the IFR.

States now have several options for more productive and less wasteful methods of disposal that can result in useful soil amendments.

Those include:

• plowing under
• mulching/composting the hemp
• disking
shredding the biomass with a bush mower or chopper.

Producers may also bury or burn their hot hemp. (The AMS implemented these additional options in early 2020, but they were not written into the IFR.)

The final rule also implements a brand-new option for hot hemp crops: remediation.

The rule states producers can remediate their material by “removing and destroying flower material, while retaining stalk, stems, leaf material, and seeds.” Producers may also shred the entire plant to create a “biomass-like material” and then retest it for compliance.

Producers also no longer need to use a DEA-registered distributor or law enforcement to dispose of hot hemp.

“Through both forms of remediation, producers may be able to minimize losses, and in some cases produce a return on investment while ensuring that non-compliant material does not enter commerce,” the final rule states. (Go here for more information from the AMS about crop disposal and remediation.)

Other Changes and a Potential for Future Amendments

The final rule makes several other changes, including clarifying authorities tribes have over hemp production.

“The IFR did not specifically address whether a tribe with an approved USDA plan could exercise primary regulatory authority over the production of hemp across all its territory or only lands over which it has inherent jurisdiction,” AMS says on its website. “The final rule provides that a tribe may exercise jurisdiction and therefore regulatory authority over the production of hemp throughout its territory regardless of the extent of its inherent regulatory authority.”

The AMS also makes clear in the new regulations that the final rule only pertains to hemp cultivation. Any production that takes place afterward is under purview of the DEA and U.S. Food and Drug Administration (FDA).

“What happens after growth is not under the purview of the USDA,” Steel says.

While these regulations are the so-called “final rule” on hemp, they may not be so final. Several industry sources say that President Joe Biden’s administration may call for a freeze on the rule, which is due to take effect March 22, and make amendments to it. As of press time, the USDA said its final rule was “under review,” but not withdrawn.

Ultimately, many say the final rule is a step in the right direction for the hemp industry. Still, improvements can be made.

Greene predicts the USDA will learn from how states implement their performance-based sampling procedures and eventually standardize the most successful programs on a federal level.

“The DEA lab requirement and how [hemp is sampled] are two things that will be finalized during the Biden administration,” Greene says, adding that Sen. Rand Paul’s bill to increase the THC limit to 1% would be the trifecta of amendments for the industry. “If we hit those pitches out of the park, then we win the game.”

Theresa Bennett is editor of Hemp Grower.