The CDFA recently released guidance concerning the industrial hemp market in California.
There has been a lot of confusion surrounding the regulations of this plant.
In this two part series, we’ll break down the state’s policy regarding hemp, as well as give you some insider tips for entering this new market successfully.
What is the difference between hemp and cannabis?
To begin, it’s important to establish the key difference between cannabis and hemp.
Cannabis is a “family of plants with two classifications – Indica and Sativa.” Hemp is a member of the Cannabis Sativa family.
As a result, hemp contains a very low concentration of THC. Marijuana, which is considered a member of either the Indica or Sativa families, has concentrations of THC between 15% - 40%.
The state of California has a very specific definition of what qualifies as hemp vs. cannabis.
According to the CDFA:
“Industrial hemp" means a crop that is limited to types of the plant Cannabis sativa L. having no more than three-tenths of 1 percent tetrahydrocannabinol (THC) contained in the dried flowering tops, whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin produced therefrom.”
Why should you start a hemp farm?
Unlike cannabis, which is still classified as a Federal Schedule I Controlled Substance (subject to the 280E regulation), hemp is not federally regulated. The Agricultural Improvement Act of 2018 went into effect at the beginning of this year, thereby removing hemp from the list of federally controlled substances. This is a new market that isn’t subject to the same strict financial and tax codes of the cannabis market.
Simultaneously, in September, 2018, Governor Jerry Brown signed and approved Senate Bill 1409 which permits the cultivation of industrial hemp by California growers. Before this bill was signed into law, only growers who qualified under the state’s pilot program and the Agricultural Act of 2014 could cultivate industrial hemp.
The cannabis market is a tightly regulated, highly competitive space. Licensing limits and zoning restrictions make it expensive and difficult for new entrants to gain traction in this billion dollar market. Industrial hemp, however, presents an alternative opportunity for cultivators to participate in the cannabis market without the high barriers to entry.
Commercial Cultivation of Hemp in California
California state law as it relates to hemp cultivation is a little hard to parse. The reason for this is the state regulations don’t align perfectly with the federal regulations that deregulate hemp as a controlled substance.
California may allow for commercial hemp cultivation, but conflicting articles in the 2018 and 2014 Farm Bill do not.
The previous 2014 Farm Bill does not permit the cultivation of hemp for “purely commercial” reasons. However, the 2018 Farm Bill deregulates commercial hemp provided that states submit “hemp production plans” to the USDA.
So, in theory, California’s state plan must be reviewed and approved by the USDA – which would impact hemp cultivators down the road.
In the meantime, California has begun the process of accepting hemp cultivation registration applications – here’s what you must fill out and confirm to begin planting hemp in California.
How to Register as a Hemp Farmer in California
If you wish to become a grower of industrial hemp, the first step is to be approved by your county agricultural commissioner. You can find your county ag commissioner’s office on this map provided by the CDFA.
Unlike the commercial cannabis market, there is no state registration required to grow industrial hemp. Prospective growers only need to complete a county registration to grow industrial hemp. Applications for both seed breeders and growers can be found on the CDFA Industrial Hemp Program website. The registration fee is $900 and registration is valid for one year.
Applications for commercial cultivation and seed breeding don’t vary dramatically. Generally speaking, you will be asked to provide basic information about the business owner, the cultivation site, your business plan, GPS coordinates, and other site information.
Some counties are not accepting hemp applications. These counties include: Amador, Calaveras, Glenn, Humboldt, Lassen, Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey, Napa, Nevada, Orange, Placer, Sacramento, San Bernardino, San Joaquin, Santa Barbara, Shasta, Sierra, Siskiyou, Sonoma, Tehama, Trinity, Tulare, Tuolumne, Yolo, and Yuba.
Hemp Seed Breeders v. Cultivators
There are two potential ways to participate in California’s hemp market: as a hemp seed breeder or as a hemp cultivator.
If you plan to cultivate hemp for commercial purposes, you should fill out the application for growers. If you plan to cultivate industrial hemp for seed development or production, you should complete the application for breeders. If you wish to do both, complete both applications.
In Part 2 of our Guide on How to Start a Hemp Farm in California, we’ll outline more detail about the importation and movement of industrial hemp; details on manufacturing, processing, and selling industrial hemp; and tips on how to establish your hemp business and get started in this market successfully.
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