Hemp, The Favored Crop of U.S. Presidents

Looming on the calendar is President’s Day, a national holiday celebrated this year on Monday, February 20. Now’s an opportune time to see what two former American presidents had to say about marijuana’s often ignored cousin, hemp.

George Washington: “Make the most you can of the Indian Hemp seed and sow it everywhere.”

Thomas Jefferson: “Hemp is the first necessity to the wealth and protection of the country.”

In addition to being Founding Fathers, both men were agronomists who avidly cultivated hemp (Washington at Mount Vernon, Jefferson at Monticello) for commercial purposes to make clothing, sailing canvas, rope, writing paper…you name it.

Here’s a news update about hemp, an “underdog” crop that’s poised to provide promising investment opportunities in 2023.

Hemp further joins the mainstream…

Stereotypes die hard. Even though marijuana and hemp companies have joined the mainstream of capitalism, many banks still treat them as sinister back alley entities.

This reluctance of financial institutions to lend money to “canna-business” has generated a cash crunch among many pot and hemp companies, in turn weighing on their shares.

But relief finally arrived for hemp. U.S. and state regulators recently announced to bankers that hemp businesses should not be regarded with any more wariness than other clients.

Read This Story: Get Hip…to Hemp!

Hemp is now legal in the U.S., thanks to passage of the 2018 Farm Bill. Signed into law on December 20, 2018 by President Trump, the sweeping agricultural legislation essentially decriminalizes hemp (see chart).

States and localities are starting to get accustomed to the tax revenue from hemp growers, a trend that will further cement hemp’s newly legal status. But the inherently cautious banking industry has been slow to come around.

Growing industrial hemp became illegal in the 1970s when the federal government strengthened the criminal code on marijuana and related products. Hemp got caught up in the “war on drugs,” but it contains very little of the psychoactive component tetrahydrocannabinol (THC) found in marijuana that makes people high.

Hemp is a sturdy and versatile fiber with a myriad of industrial and medical uses, but hemp producers have grappled with an inability to receive loans and banking services. No longer. The recent regulatory change has paved the way for easier credit.

Federal and state bank regulators have jettisoned an onerous mandate that dis-incentivized banks from lending to hemp companies.

Banks are now freed of the requirement to treat their hemp customers as suspicious and file copious paperwork for each interaction. The red tape was born of largely unfounded fears that hemp producers could be fronts for illegal money launderers.

Playing it SAFE…

Marijuana is increasingly legal at the state level but remains under a federal ban, which means that many banks are reluctant to provide financial services to canna-businesses, even though many of these pot operations also cultivate hemp.

The U.S. House of Representatives has seven times (yup, seven) passed a bill that would protect banks that service the cannabis industry from being penalized by federal regulators. Called the Secure And Fair Enforcement (SAFE) Banking Act, the legislation seeks to expedite the provision of financial services to cannabis companies by removing the fear of potential federal action against lenders.

The SAFE bill is now in the Senate, where the odds of passage aren’t good, considering the divided government and increased partisan bickering we’ve gotten since the November 2022 midterm elections. The Democrats narrowly control the Senate and the Republicans narrowly control the House. The GOP is generally opposed to marijuana legal normalization.

Marijuana: medicinal for millennia…

Most people are confused about the difference between hemp and marijuana. Let’s first get the terminology straight.

“Cannabis” is a genus of flowering plants that includes the primary species cannabis sativa. Put in simple terms, both hemp and marijuana are strains of the cannabis sativa species.

Cannabis the drug and hemp the industrial product both contain THC, but they are distinct strains with unique chemical compositions and uses.

Hemp is naturally high in cannabidiol (CBD) and low in THC; the reverse is true of cannabis. Hemp has a long and illustrious history: people first spun the plant into usable fiber 10,000 years go. Many academics believe that hemp was the first crop ever cultivated by mankind and served as a catalyst for the earliest innovations in civilization. Hemp is the strongest natural fiber in the world and boasts up to 50,000 uses.

Cannabis has been used for medicinal purposes for thousands of years. Chemical components in cannabis called cannabinoids activate specific receptors in our bodies that produce pharmacological effects in the nervous and immune system.

Cannabinoids provide benefits in the treatment of cancer and treatment-related side effects. Cannabinoids can be taken by mouth, inhaled or sprayed under the tongue.

Cannabis has been studied in laboratories and clinics for relief of pain, nausea and vomiting, anxiety, and loss of appetite. Studies demonstrate that it can be useful in the symptoms of cancer and has been shown to kill cancer cells in the lab.

THC is the main component responsible for marijuana’s mind-altering effects. Cannabinol and cannabidiol are compounds that have some of the properties of THC, but cause fewer psychoactive effects — i.e., the high.

The bottom line? The legalization of marijuana is a once-in-a-lifetime investment opportunity, as I’ve repeatedly made clear in this publication. But don’t give short shrift to hemp.

According to the research firm Research and Markets, the global industrial hemp market is projected to grow from USD 4.6 billion in 2019 to USD 26.6 billion by 2025, posting a compound annual growth rate of 34%.

The U.S. farm bill represented an inflection point. The legalization of the cultivation of industrial hemp is a boon for major agricultural companies but also for the smaller entrepreneurial outfits that are devising new uses for hemp. These research and development efforts are leveraging hemp seed and hemp seed oil for applicability in a wide range of industries.

The regulatory change about hemp was issued by the Federal Reserve, the Federal Deposit Insurance Company, and other state and federal regulators. The official notice tells banks that they can now treat hemp producers like other customers. We’ll soon see if bankers step up to the challenge.

Editor’s Note: As I’ve just made clear, marijuana and its ancillary industry of hemp are dynamic and rapidly expanding. Every portfolio should have exposure to cannabis-related companies. That’s why I’ve launched a service detailing how you can financially benefit from the consumer mainstreaming of weed.

Called Marijuana Profit Alert, my publication is your guide to reaping profits from the marijuana bonanza. Click here to learn more.

John Persinos is the editorial director of Investing Daily.

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