Hemp Production and Use
Botanically, industrial hemp and marijuana are from the same species of plant, Cannabis sativa, but from different varieties or cultivars that have been bred for different uses.2 However, industrial hemp and marijuana are genetically distinct forms of cannabis3 that are distinguished by their use, chemical makeup, and differing cultivation practices in production. While marijuana generally refers to the psychotropic drug (whether used for medicinal or recreational purposes), industrial hemp is cultivated for use in the production of a wide range of products, including foods and beverages, personal care products, nutritional supplements, fabrics and textiles, paper, construction materials, and other manufactured goods.
Both hemp and marijuana also have separate definitions in statute. While marijuana is defined in U.S. drug laws, Congress established a statutory definition for industrial hemp as “the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis” as part of the 2014 farm bill.4 Hemp is generally characterized by plants that are low in delta-9 tetrahydrocannabinol (delta-9 THC), the dominant psychotrophic ingredient in Cannabis sativa.5
For more background information, see CRS Report R44742, Defining “Industrial Hemp”: A Fact Sheet. However, joint guidance issued in August 2016 by DEA, USDA, and the Food and Drug Administration (FDA) suggests that there continues to be questions about what constitutes industrial hemp and its oversight under federal law.
Commercial Uses of Hemp
The global market for hemp consists of more than 25,000 products in nine submarkets: agriculture, textiles, recycling, automotive, furniture, food and beverages, paper, construction materials, and personal care (Table 1). Hemp can be grown as a fiber, seed, or dual-purpose crop.6 The stalk and seed are the harvested products. The interior of the stalk has short woody fibers called hurds; the outer portion has long bast fibers. Hemp seed/grains are smooth and about one-eighth to one-fourth of an inch long.7
Hemp fibers are used in fabrics and textiles, yarns and spun fibers, paper, carpeting, home furnishings, construction and insulation materials, auto parts, and composites. Hurds are used in animal bedding, material inputs, papermaking, and oil absorbents. Hemp seed and oilcake are used in a range of foods and beverages (e.g., salad and cooking oil and hemp dairy alternatives) and can be an alternative food and feed protein source.8 Oil from the crushed hemp seed is used in soap, shampoo, lotions, bath gels, and cosmetics.9 Hemp is also being used in nutritional supplements and in medicinal and therapeutic products, including pharmaceuticals. It is also used in a range of composite products. Hempcrete (a mixture of hemp hurds and lime products) is being used as a building material. Hemp is also used as a lightweight insulating material and in hemp plastics and related composites for use as a fiberglass alternative by the automotive and aviation sectors.10 Hemp has also been promoted as a potential biodiesel feedstock11 and cover crop.
These types of commercial uses are widely documented in a range of feasibility and marketing studies conducted by researchers at USDA and various land grant universities and state agencies. (A listing of these studies is in the Appendix A.) Currently, finished hemp products and raw material inputs are mostly imported into the United States and sold for use in further processing and manufacturing for a wide range of products.
Estimated Retail Market
No official estimates are available of the value of U.S. sales of hemp-based products. The Hemp Industries Association (HIA) reports that total U.S. retail sales of hemp products of nearly $600 million in 2015,12 which includes food and body products, clothing, auto parts, building materials, and other products (Figure 2). HIA further claims that growth in U.S. hemp retail sales averaged more than 15% annually over the 2010-2015 time frame. Much of this growth has been attributable to increased sales of hemp-based body products, supplements, and foods. Combined, these categories account for more than 60% of the value of U.S. retail sales.
Little detailed information is available on some other hemp-based sectors, such as for use in construction, biofuels, paper, textiles, or other manufacturing uses. Data are also not available on existing businesses or processing facilities.
U.S. Hemp Imports
The import value of hemp-based products imported and sold in the United States is difficult to estimate accurately. For some traded products, available statistics have only limited breakouts or have been expanded only recently to capture hemp subcategories within the broader trade categories for oilseeds and fibers. Reporting errors are evident in some of the trade data, since reported export data for hemp from Canada do not consistently match reported U.S. import data for the same products (especially for hemp seeds).
Given these data limitations, available trade statistics indicate that the value of U.S. imports under categories actually labeled “hemp,” such as hemp seeds and fibers—which are more often used as inputs for use in further manufacturing—was nearly $78.2 million in 2015. Compared to 2005, when the value of imports totaled $5.6 million, imported hemp products for use as inputs and ingredients has increased sharply. However, import volumes for other products, such as hemp oil and fabrics, are lower (Table 1). Trade data are not available for finished products, such as hemp-based clothing or other products including construction materials, carpets, or paper products.
The single largest supplier of U.S. imports of raw and processed hemp fiber is China. Other leading country suppliers include Romania, Hungary, India, and other European countries. The single largest source of U.S. imports of hemp seed and oilcake is Canada. The total value of Canada’s exports of hemp seed to the United States has grown significantly in recent years following resolution of a long-standing legal dispute over U.S. imports of hemp foods in late 2004 (see “Dispute over Hemp Food Imports (1999-2004)”). European countries have also supplied hemp seed and oilcake to the United States.
Three forms of seed are imported:13 (1) de-hulled seed, often referred to as hemp hearts, hulled seeds, or hemp nut, used in a range of food products; (2) non-viable whole seed, rendered non-viable through a sterilization process, usually through temperature exposure; and (3) viable whole seed, capable of germination under suitable conditions.
Purchasing viable seed for germination can be a complicated process. It can be difficult to locate a seed source, since there are no U.S. cultivars, and any seed must be sourced internationally. Also, the grower must submit a DEA 357 import form, and any seed source must be pre-screened by DEA and also meet USDA phytosanitary rules. Once the permit is obtained, a copy of the permit is then sent to the seed supplier and may be shipped by air freight.14 Other requirements include entry approval and ground transport to field sites and field site security.
Most hemp seed cultivars originate in the EU (mostly from France, Germany, Hungary, Italy, Poland, and Romania), Russia, Ukraine, and China.
U.S. Market Potential
Most researchers acknowledge the potential profitability of industrial hemp, but also the potential obstacles to its development. Current challenges facing the industry include the need to re-establish agricultural supply chains, breed varieties with modern attributes, upgrade harvesting equipment, modernize processing and manufacturing, and identify new opportunities.15
In the past two decades, researchers at the USDA and various land grant universities and state agencies (for example, Arkansas, Kentucky, Maine, Minnesota, North Dakota, Oregon, and Vermont; see Appendix A) have conducted several feasibility and marketing studies.
Studies by researchers in Canada and various state agencies provide a mostly positive market outlook for growing hemp, citing rising consumer demand and the potential range of product uses for hemp. Some state reports claim that if current restrictions on growing hemp in the United States were removed, agricultural producers in their states could benefit. A 2008 study reported that acreage under cultivation in Canada, “while still showing significant annual fluctuations, is now regarded as being on a strong upward trend.” Most studies generally note that hemp “has such a diversity of possible uses, [and] is being promoted by extremely enthusiastic market developers.” Other studies highlight certain production advantages associated with hemp or acknowledge hemp’s benefits as a rotational crop or further claim that hemp may be less environmentally degrading than other agricultural crops. Other studies claim certain production advantages to hemp growers, such as relatively low input and management requirements.
Other studies differ from the various state reports and provide a less favorable aggregate view of the potential market for hemp growers in the United States, highlighting challenges facing U.S. growers. For example, a 2000 study by USDA projected that U.S. hemp markets “are, and will likely remain, small, thin markets.” It also cited “uncertainty about long-run demand for hemp products and the potential for oversupply” among possible downsides of potential future hemp production. Similarly, a study by University of Wisconsin-Madison concluded that hemp production “is not likely to generate sizeable profits,” and, although hemp may be “slightly more profitable than traditional row crops,” it is likely “less profitable than other specialty crops” due to the “current state of harvesting and processing technologies, which are quite labor intensive, and result in relatively high per unit costs.”16 The study also noted that U.S. growers could be affected by competition from other world producers and by production limitations in the United States, including yield variability and lack of harvesting innovations and processing facilities, as well as difficulty transporting bulk hemp. The study further claimed that most estimates of profitability from hemp production are highly speculative and often do not include additional costs of growing hemp in a regulated market, such as the cost associated with “licensing, monitoring, and verification of commercial hemp.”
A 2013 study by researchers at the University of Kentucky predicted that despite “showing some positive returns, under current market conditions, it remained unclear whether anticipated hemp returns would be large enough to entice Kentucky grain growers to shift out of grain production” under most circumstances. They also noted that “short run employment opportunities evolving from a new Kentucky hemp industry appear limited (perhaps dozens of new jobs, not 100s),” because of continued uncertainty in the industry.17 Overall, the study concluded that there were many remaining unknowns and that further analysis and production research was needed.
Given the absence since the 1950s of any commercial and unrestricted hemp production in the United States, it is not possible to predict the potential market and employment effects of relaxing current restrictions on U.S. hemp production. While expanded market opportunities might exist in some states or localities if current restrictions on production are lifted, it is not possible to predict the potential for future retail sales or employment gains in the United States, either nationally or within certain states or regions. Little information is available from previous market analyses that have been conducted by researchers at USDA and land grant universities and state agencies.