Will the U.S. Hemp Industry Rebound in 2023?

January 04, 2023

The U.S. hemp sector just concluded yet another challenging year. Low wholesale prices for hemp and processed products have persisted despite a drastic contraction in production. Uncertainty surrounding the hemp markets on a variety of issues has also continued despite the efforts of stakeholders pushing for regulatory clarity. With 2022 in the rearview mirror, hemp market participants are now looking forward to 2023 and its potential opportunities.

Optimism for the New Year

Erica Stark is Executive Director for the National Hemp Association. She also holds the same title with the Pennsylvania Hemp Industry Council. “Here in Pennsylvania the amount of permits and amount of acreage dropped significantly in 2022, but we’re also seeing a lot of optimism for the future, and particularly on the fiber and grain side,” she told Hemp Benchmarks. “It’s just taking that much longer to build that segment of the industry, but there’s definitely still a lot of interest in that.”

Stark said Pennsylvania’s state government is also taking steps to invigorate the local hemp market, such as issuing specific marketing grants and looking at various ways to attract hemp industry investors to the state. She is also counting on some regulatory changes, at both the state and federal levels, to boost the hemp industry. 

For example, Stark predicted that the hemp animal feed market will become “really large” in the coming years. However, she noted, “getting [hemp feed] approved in a state only opens up that market in that state; it doesn’t allow you to sell those ingredients across state lines. Pennsylvania is fortunately one of those states that is large enough that it would make a difference here, but for other states, not so much. So it’s not a substitute for getting the federal work done that we need, but it’s definitely a step in the right direction and a good move for the state.”

Waiting on the Next Farm Bill

One big issue for hemp stakeholders is how hemp will be represented in the upcoming 2023 Farm Bill. Hemp was formally legalized by the 2018 Farm Bill, and there are hopes that the industry will help Congress to iron out ambiguities that continue to exist in federal hemp laws and regulations, while improving conditions for the national hemp market.

Dave Ladd, President of the Minnesota Industrial Hemp Association, said the recent midterm elections should have a large impact on hemp’s future. The political calculus, he told Hemp Benchmarks, “all changes next month, it all changed with the election.” However, he added, hemp should not become a party issue. “Agriculture tends to be regional in nature,” he said. “It doesn’t need to be partisan, so I think there are opportunities. But we’ll have to educate a host of new [Congress] members that [hemp] is a reemerging agricultural crop, and educate those members as to the opportunities.”

Erica Stark also believes the hemp sector needs to clarify its priorities ahead of the 2023 Farm Bill. She expects there to be a concerted push for a hemp fiber and grain “exemption.” As we noted earlier this year in a June Hemp Market Insider article, an advocacy group formed by several industry stakeholders is urging Congress to draft and pass federal legislation that would not only differentiate between the hemp cannabinoid sector and the hemp fiber and grain industries, but also create a THC testing exemption to ease the production of the latter. 

According to Stark, an exemption for hemp fiber and grain “will have a positive impact across the country, in terms of fiber and grain production, and [by] starting to build … more reliable supply chains. I think you’re also going to see a lot of jockeying going on, for positioning of what people would like to see in the [2023] Farm Bill. And it remains to be seen how that is going to play out.”

The Potential 1% Solution

Along with possibly exempting hemp fiber and grain crops from THC testing, there has also been a push by hemp stakeholders to have the federal government raise its limit on THC content in hemp from the current 0.3% to one percent. For her part, Stark believes the transition to one percent THC content in hemp “has a decent chance” in 2023.

“There does seem to be relatively broad support for that,” she said. “There’s going to be some pushback from some areas, but I know that NASDA [the National Association of State Departments of Agriculture] supports It and I think most industry people support it as well.” A one percent limit, Stark added, is not only more realistic but also provides more “comfort room” for cannabinoid hemp farmers, many of whom must constantly monitor their crops to ensure they stay under the legal limit.

“When you’re talking tenths of a percent being the difference between something that’s legal and illegal, really something needs to be done,” she said, “and 0.3% has always been a kind of arbitrary number in the first place, so one percent makes more sense.”

Dave Ladd said the one percent controversy has been a topic of conversation among growers in Minnesota as well. “We’ve been hearing it over the past couple of years, but our view is there are enough issues [for the hemp industry],” he added. “In our view there are many opportunities to address.”

When it comes to priorities for the 2023 Farm Bill, Ladd said the hemp industry must concentrate on not only attracting investment and building infrastructure, but also on giving growers and cultivators some confidence in the hemp market going forward. Otherwise, he noted, “the uncertainty stifles opportunity and innovation.”

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Hemp Industries Association Midwest Hemp Council National Hemp Association