FAYETTEVILLE — A company in Northwest Arkansas plans to work with the University of Arkansas, Fayetteville, to grow, research and process different hemp flowers for the budding cannabis oil industry.
Fayetteville-based Arkansas Hemp Genetics LLC said it has recently secured a partnership with the university's horticulture department to research industrial hemp for the first time since its prohibition after World War II.
The way things have headed in recent years — increased cannabis product demand and support from businesses and politicians, including the recent passage of the farm bill — Bill Morgan, chief operations officer of Hemp Genetics, claims hemp could be a viable crop again, specifically for Arkansas.
“We see it as a way to shoot back money into rural economies,” he said.
Morgan joins a growing number of state firms moving forward with plans to grow or distribute hemp for research and commercial purposes, despite legal discrepancies at the federal level.
After the passage of the 2019 Farm Bill on Dec. 20, which effectively legalized industrial hemp, the Food and Drug Administration issued a warning that cannabidiol (CBD), a nonpsychoactive compound derived from cannabis, is still considered a drug ingredient and remains illegal to add to food or health products without the agency's approval.
Hemp and marijuana are both classified as cannabis, according to Encyclopaedia Britannica. The difference is hemp carries CBD but only traces of tetrahydrocannibinol (THC), the compound responsible for most of marijuana's psychological effects. For hemp to be legally grown in Arkansas, it must test below 0.30 percent THC. If it tests above that threshold, it is considered illegal and can be destroyed by state officials.
While the farm bill paves the way for farmers to start selling hemp across state lines, Ken Shea, a senior food and beverage analyst at Bloomberg Intelligence, said the FDA's stance signals to large food and drink companies tinkering with CBD-infused products that they should watch their speed.
“Hold your horses until we research it,” Shea said about the FDA's statement. “The [farm bill] is good news for farmers, but it's premature to think it's going to have an impact on consumer packaged goods.”
CBD is being used to treat many medical issues including epileptic seizures, anxiety, inflammation and sleeplessness. Experts say there has been little research to support claims that CBD is an effective treatment.
Hemp is already used in an array of products, including ropes, plastics, oils, foods and beverages. CBD products currently available online range from flavored vape pens to candies, bath bombs, eye balms and fruit smoothies. Meanwhile, major beverage companies Coca-Cola and Molson Coors Brewing are reportedly in talks to produce or are already developing cannabidiol-infused drinks. A cannabis-infused sparkling water marketed by Lagunitas, owned by Heineken, is on store shelves in California.
With state approval, companies are laying the groundwork for what's to come. Arkansas Hemp Genetics was given license by the state's plant board to grow and process hemp flowers shortly after it began courting the University of Arkansas.
Multiple phone calls to the university were not returned before deadline on New Year's Eve. Horticulture staff reached by cellphone said they had heard of rumors of this happening, but they believed nothing official had been set yet. Wayne Mackay, head of the horticulture department, said there was a preliminary meeting with Arkansas Hemp Genetics before the holiday break to meet and talk about any needs the company may have.
“In all of this we have come to some understanding … but we haven't had a chance to talk with any of our faculty,” Mackay said. The goal is for student researchers to be involved in projects with the company and to create internships for students interested in hemp cultivation without leaving the state, he said.
“We're still really early on this, but certainly we are going to pursue it,” Mackay said.
According to Arkansas Hemp Genetics, plans are in motion to build a 17,000 square-foot commercial hemp flower extraction facility in Hindsville, a Madison County hamlet, and a cultivation farm near Goshen, a town 11 miles east of Fayetteville. The company plans to test a dozen hemp cultivars for potency and yield during the first year.
In remarks to reporters, Hayden McIlroy, a co-founder and investor in Arkansas Hemp Genetics, said the new operations will help the hemp CBD oil industry “take root” in Northwest Arkansas.
Construction is set to begin this year.
But plans are likely to change. Victor Ford, associate director of agriculture and natural resources with the UA System's Division of Agriculture, said the current state regulations on hemp reflect the old farm bill. Companies like Arkansas Hemp Genetics have based their business models around state regulations, so the new farm bill may open the door for legislators to tweak policy at the state level, Ford said.
“It may not change, but I have a suspicion,” he said. “There's a lot still up in the air.”
Town officials, for example, said they knew little about the project, but knew it was happening. Max Poye, the former-mayor of Goshen, said he wasn't aware of the plans until reading about it recently in the Madison County Record. Poye said someone called him about a year ago asking if he would ever support a potential grow facility.
“I didn't support it, or oppose it,” Poye said on Monday, his last day as mayor. “My main concern would be if there are huge lights polluting our night sky.”
Otherwise, “I personally think it would be good if it was in city limits, then we could get tax money from it,” he said.
The Hemp Business Journal estimates the cannabis market, which includes CBD products derived from industrial hemp or marijuana, will be worth nearly $2 billion by 2022. According to the journal's 2018 study, hemp-derived products will more than double to $646 million in total U.S. sales between 2018 and 2022.
So far people in the counties seem excited for access to the budding industry, but Morgan said more will be on board “as soon as they wrap their head around the idea that we are not growing marijuana.”
Business on 01/01/2019