North Carolina produces more tobacco than any state in the country, and the crop is inseparable from the state’s history and economic success. But the tobacco infrastructure, along with some entrepreneurial foresight and significant changes in federal law, could position us near the front of another leafy, industrial revolution: hemp.
The national debate over legalizing marijuana has reached full discord and remains a tangle of social, economic, moral and scientific arguments. But the push to legalize the production of hemp, another member of the cannabis family, has been nearly opposite – quiet, bipartisan and successful.
Last year, Congress passed a farm bill by wide margins that declassified industrial hemp as an illegal drug, and allows it to be grown nationwide and produced as a commodity. Though some restrictions will remain, the bill, long sought by hemp advocates, will allow farmers, processors and investors to develop what Forbes magazine said could become a $20 billion industry.
North Carolina is one of a small number of states with a head start. In 2016, it licensed about 100 farmers to grow industrial hemp under a pilot program authorized by Congress for research institutions and agricultural states.
Many of those licenses were given to former or struggling tobacco farmers and a mini-industry has begun to develop in the state. Durham and Chapel Hill have a growing number of licensed farmers and processors, hemp-cultivation startups, investors and boutiques selling products – typically capsules and oils – with CBD, the plant’s chief extract, which has shown promise in treating chronic health conditions like epilepsy, multiple sclerosis and inflammation.
In May 2017, for example, North Carolina issued a license to Triangle Hemp, a Durham-based hemp growing facility that says it now has 10,000 square feet of greenhouse space. The company supplies hemp cuttings to 70 farmers across several states.
Criticality, a creator of food-grade hemp products based in Wilson, partnered last year with Pyxus, a billion-dollar agricultural company, with a goal of becoming the state’s leading producer of industrial hemp within five years.
Closer to consumers, a number of CBD retail stores are now open. Two shops are open on West Franklin Street in Chapel Hill, Tarheel Hemp and CBD, and Smoke Rings, which says that CBD products account for roughly a quarter of its business. The Hemp Store NC, which has shops in Raleigh and Wake Forest, expanded to Chapel Hill in March, while Carolina Hemp Hut operates a kiosk at The Streets at Southpoint. And signs advertising CBD are becoming more common in front of many traditional smoke shops.
Hemp has been harvested for centuries for its fibrous stalk and seeds, and was a staple of American agriculture through the mid-20th century, winding its way into American textiles, paper and rope. The plant is sturdy, thrives in North Carolina’s soil and is easily adaptable to tobacco farms. But while supply has boomed, demand for the crop as an agricultural product is still relatively small, risking a saturated market.
David Owens, owner of Durham Greens and a veteran of California’s medical marijuana industry, said that though he grew a healthy hemp crop last year, much of it remains unsold.
“When harvest comes around, it’s kind of like tomatoes – everybody’s got them,” Owens said. “And the price drops.”
Durham-based Hybrid Health was one of the area’s first producers of CBD products, and sells its inventory online. Founder and CEO Elliot Galdy said he launched Hybrid Health using Colorado and Tennessee-grown hemp when North Carolina was still rolling out its pilot program. Galdy says Hybrid Health now sources hemp from North Carolina farmers and processors, and is optimistic about the farm bill’s effect on the industry.
But, the passage of the farm bill is far from the end of the uncertainty.
Marijuana and hemp are closely related, but hemp is non-psychoactive. Both contain CBD, but hemp does not contain THC, the ingredient in marijuana that gets users high. This chemical distinction was at the root of advocates’ arguments for legalization, but remains widely misunderstood.
While public sentiment is changing, hemp growers and CBD providers say that many industry businesses crucial to growth, like financial instutions and marketing firms, are still reluctant to lend to them or do business with them. “Most traditional banks would not work with us,” Galdy said. “Even after the farm bill, that is still the case.”
Another question mark is federal regulatory issues. While North Carolina regulators say they will continue to keep the industry largely under rules put in place for the 2016 pilot program, the FDA and USDA have not articulated their regulatory protocol. That lack of certainty has driven many potential investors to the sidelines.
“There is certainly an element of a Wild West feel to the industry,” said Josh Hayes, a Chapel Hill attorney who specializes in the cannabis sector and works with corporate clients to identify, manage and minimize risk. “First, it’s a very young industry, and second, the regulatory landscape and the legal landscape is very undeveloped.”
Still, hemp is being touted as a possible savior of small family farms.
“We expect to see more and more tobacco farmers jumping into hemp,” said Brian Moyer, the CEO of Criticality. He said he expects some farmers “transitioning out of tobacco and some adding hemp to diversify their crops.” Criticality, said Moyer, built its 55,000-square-foot, state-of-the-art facility in Wilson because of the surrounding area’s strong tradition of small farms and growing expertise in the tobacco industry.
The optimism about hemp extends to its potential use as a raw industrial material in biodegradable plastics, bulletproof glass and a host of other items.
Robb Giddings, a colleague of Josh Hayes whose work focuses on the regulatory and operational aspect of the cannabis legal arena, believes this nascent industry has the potential to involve North Carolinians beyond what other cash crops have delivered.
“Small businesses drive the growth of all economy in the United States,” he said. “What I think we’re going to see is it’s going to be the startup companies, the smaller entrepreneurs, that are really going to build the industry from the ground up.”
