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Federal Rule on Hemp Paves Way for Colorado Market Boom

Over the past six years, hemp production has become an increasingly promising industry in Colorado with more and more farmers deciding to devote acreage to growing the crop. At the same time, growers have found themselves occasionally operating within a somewhat nebulous framework of regulations, due in part to the lack of a federal, nationwide ruling that governs its production and shipment. Although Colorado legalized recreational marijuana in 2012 and hemp in 2014 and the 2018 federal farm bill legalized hemp across the nation, the lack of federal regulations left Colorado growers in the position of working around a patchwork of states where legalization of hemp had not been operationalized to the point where established guidelines were understood and followed. In a new market where old misconceptions about the product continued to exist, that can be a significant problem.

It seems all of that is about to change.

This week, the USDA is releasing federal rules that will establish that much needed regulatory framework. The interim rule will be published this Thursday and will take effect immediately, followed by a 60 day period for public comment. The final rule will be issued in two years.

The rule addresses a broad range of critical issues that have, at their core, impeded the burgeoning market for Colorado growers. First and foremost, it clearly states that interstate transportation of hemp is legal and no state or tribal government can prohibit its shipment. In so doing, the rule eliminates at the federal level any uncertainty about the legality of the crop, an act that should reassure banks and financial services who deal with hemp businesses. It should also pave the way for farmers to apply for crop insurance.

The impact of this rule on the market cannot be underestimated, especially given the enormous potential hemp production has for the Colorado rural economy. In 2014, after hemp was legalized in the state, there were 1,800 acres dedicated to hemp in Colorado. In February of 2019, that figure had grown to 31,670 acres with the Colorado Department of Agriculture predicting that, by year’s end, that figure would increase to 50,000 acres. In a recent press release, the governor’s office stated the actual allocation came in at 62,000 acres.

Related businesses are likewise being created. The most notable example occurred on August 29th of this year when Paragon Processing opened the largest hemp processing facility in the nation. Located in the small town of Colorado City with a population of 2,500 people, the facility contains 250,000 square feet of space and will have the capacity to process up to 50 million pounds of hemp. Company president Matt Evans estimates the facility should create 250 new jobs with a significant number of those being in Colorado City.

Another facility closer to home was highlighted in a recent speech by Senator Gardner on the Senate floor when he mentioned a new hemp processing plant to be opened in Springfield. “When…this hemp processing plant is fully up and running, they're hoping to employ around 50 people,” he said. “Millions of dollars of equipment [are] being invested in a very small town, the employees will have a shop, gym, recreational facilities, and they're going to build a lake there.”

In Bent County, Nature’s Alternative Farm has plans to build a processing facility west of McClave with plans to make it operational in 2020. There are also rumors of another processing plant, built by different investors unrelated to NAF, tentatively planned for construction in Kiowa County.

This industry growth is not limited to Colorado. In fact, although the state was formerly the leader in acreage devoted to farming hemp, Colorado has been falling behind Montana and Oregon as those states took steps to grow hemp production, both literally and figuratively.

Nonetheless, Colorado has already established a strong base of companies dealing in hemp production and CBD and has taken steps to encourage future growth through tax breaks and other incentives for companies interested in moving their headquarters to the state.

The potential hemp holds for farmers in Colorado is not lost on Governor Polis who views the crop as a vital part of his rural economic initiative, especially in the southern part of the state. where he would like to see the current allocation of 60,000 acres increase by 20% in the next year. But increased production is not enough; there must be the infrastructure in place to support, sustain and expand the market for the crops that are grown.

Toward that end, the Colorado Department of Agriculture created the Colorado Hemp Advancement and Management Plan (CHAMP), designed not only to oversee the implementation of regulations but to assist hemp growers in understanding and building a market for hemp.

As described by Polis in a statement at a recent conference on hemp production, and reported on by Westword, CHAMP has “created a partnership between state, local and tribal agencies as well as hemp-industry stakeholders in law, farming, manufacturing, testing and other sectors. The group will submit a report in 2020 with recommendations on how to improve hemp regulations, the plant’s supply chain, sustainable and environmentally friendly business practices, social equity and more.” Toward that end, planning sessions were held with various stakeholders and industry experts earlier this fall.

Against this backdrop of growth, a distinct irony must be addressed.

When colonists first arrived in what is now the United States, hemp was a huge part of the agricultural industry, and farmers were encouraged to grow it as a major crop. George Washington and Thomas Jefferson grew cannabis on their plantations. Benjamin Franklin started one of America’s first paper mills with hemp. Some historians even claim that the first drafts of the Declaration of Independence were written on hemp paper.

Over the following centuries, its use only expanded, both domestically and as an export to other countries, as it was used in fuel and for clothing, shoes, maps, books, ship’s rigging, parachute webbing, baggage, sales and tents. In fact, for more than two centuries, hemp was even considered a legal tender and could be used in paying taxes.

However, as the 20th century progressed, hemp became “confused” with marijuana (a story in and of itself), and the 1937 passage of the Marijuana Tax Act caused massive damage to the market. Despite a brief resurrection of production during World War II when hemp was grown to make uniforms for soldiers at war, the crop became permanently attached to marijuana—both legally and in the mind of the public. It wasn’t until the benefits of its production and usage prompted a re-examination.

And now, here we are.

The current interest in hemp is understandably related to the production of CBD with properties and benefits that are still be explored. However, those other everyday, multi-industry uses for the plant still offer a plethora of possibilities for both the region and the economy in which its grown. Here’s hoping this forthcoming rule marks a new season for the crop and delivers the promises that have been missing for too long.

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