Mitch McConnell pushed for hemp legalization. Now Kentucky farmers are tripling down on the crop

  • The home state of the Senate majority leader, who pushed to get the hemp legalization provision in the 2018 farm bill, is set to see acreage more than triple as tobacco sales decline.
  • Industrial hemp is used on a wide range of food and textile products, but the majority of the U.S. hemp market today is for CBD products sold for health and wellness.
  • Interest in cultivating hemp is strong among Kentucky's tobacco farmers as the state positions itself to become what the agricultural commissioner calls a "processor hub" for the nascent industry.
  • For farmers, hemp can be up to four times more profitable than corn or soybeans and offers growth potential and better returns than tobacco.
In this July 5, 2018 photo, Senate Majority Leader Mitch McConnell inspects a piece of hemp taken from a bale of hemp at a processing plant in Louisville, Ky. McConnell led the push in Congress to legalize hemp.
AP Photo | Bruce Schreiner
In this July 5, 2018 photo, Senate Majority Leader Mitch McConnell inspects a piece of hemp taken from a bale of hemp at a processing plant in Louisville, Ky. McConnell led the push in Congress to legalize hemp.

U.S. Senate Majority Leader Mitch McConnell of Kentucky pushed to get the hemp legalization provision in the 2018 farm bill. In 2019, his home state is set to see acreage more than triple as tobacco sales decline.

"Industrial hemp is promising and is the fastest area of growth in Kentucky agriculture," Ryan Quarles, Kentucky commissioner of agriculture, told CNBC in an interview. "We don't know if industrial hemp will replace tobacco, but we are going to champion it."

Industrial hemp is used on a wide range of products, including apparel, foods, pharmaceuticals, personal care products, rope, car parts and building materials.

Yet the majority of the U.S. hemp market today is for products that include the non-psychoactive compound cannabidiol, or CBD. Large retailers have started to carry CBD-infused products, such as oils, used for a wide range of medical conditions, from epilepsy to arthritis pain.

Hemp Business Journal forecasts the hemp industry will reach $1.9 billion by 2022, up 90 percent from about $1 billion in 2018. A bullish estimate by researcher Brightfield Group predicts the hemp-derived CBD market could reach $22 billion in 2022.

Hemp plants tower above researchers who tend to them at a research farm in Lexington, Ky.
AP Photo | Bruce Schreiner
Hemp plants tower above researchers who tend to them at a research farm in Lexington, Ky.

According to Quarles, the number of hemp grower applications this year in Kentucky is expected to increase about five times from 2018. Permitted cultivation of hemp is on track to top 50,000 acres in 2019, up from 16,000 acres a year ago.

Passage of the farm bill in December removed industrial hemp from the federal government's list of controlled substances, making it an entirely lawful agricultural commodity.

"By removing hemp from the federal list of controlled substances, farmers can explore the bright future of this versatile crop, found in everything from a coffee mug to your car dashboard," McConnell said in a statement.

"Kentucky's farmers are prepared to continue leading the nation when it comes to hemp and its potential to benefit our farm economy, and I'm hopeful that this exciting commodity can be as big of a part of our agricultural future as it has been in our past."

Interest in cultivating hemp is strong among Kentucky's tobacco farmers as the state positions itself to become what the agricultural commissioner calls a "processor hub" for the nascent industry.

Tobacco accounted for approximately half of the Bluegrass State's cash crop receipts in the early 1990s, but by 2017 it had fallen to below 15 percent, according to the U.S. Department of Agriculture. It comes as cigarette smoking rates continue to fall among American adults.

"Tobacco was a very strong staple crop for this area and made a lot of money and helped people pay their bills," said Shane Wiseman, a hemp farmer in Winchester, Kentucky, who in the past focused mostly on tobacco, corn, wheat and soybeans. "But it's just dwindled and went away, so it's a good thing that hemp has come along."

More than 120 hemp processors are in Kentucky, and those numbers are expected to continue growing and result in additional jobs, Quarles said. Kentucky's position as the nation's third-largest automobile-producing state also may help boost local demand for the crop, since hemp fiber is used in certain components of cars, including dashboards.

"We've challenged the Kentucky manufacturers association, which is bigger than the automotive industry, to start looking at hemp as a possible input," said Quarles.

As a plant, hemp looks like marijuana, but it contains low levels of THC, the chemical that produces a "high" for pot users.

CBD oil comes from the plant's secretions and is found in both marijuana and hemp.

Up to this year, industrial hemp production in the U.S. has been restricted to mostly research and pilot programs, although imports from Canada and Europe have helped fill domestic demand for hemp seeds and fiber.

Kentucky ranked among the top five U.S. states last year in hemp cultivation, although it still trailed Colorado and Montana, according to VoteHemp, an industry group.

More than 1,000 farmers in Kentucky are approved this year to grow industrial hemp, and many see it as a lucrative plant for years to come. For farmers, hemp can be up to four times more profitable than corn or soybeans and offers growth potential and better returns than tobacco.

"Right now there's pretty good profit in hemp," said Alex Barnett, a hemp farmer and tobacco producer in Harrison County, Kentucky. "The tobacco profitability has been declining for years based on worldwide demand decreasing. And the money we've been receiving for tobacco has stayed the same over time, but our expenses are going up constantly."