Farmers and distributors navigate a shifting hemp landscape and look to the future.
Take a walk down State Street and you’re sure to see them — stores advertising products like CBD, Delta-8 and an assortment of other recreational and medicinal items. While these stores can seem ubiquitous today, all of their products are actually relatively new, only having been legalized a few years ago.
What many of these products have in common is that they are derived from hemp, a class of cannabis with less than 0.3% tetrahydrocannabinol (THC), the psychoactive component of the plant.
Hemp has a multitude of industrial and horticulture uses, ranging from fabric and construction materials to food products and cosmetics, but is most commonly known for the production of cannabinoids, such as CBD. It is distinguished from marijuana by the level of THC, which is too low in hemp to provide the same high.
The rise and fall of hemp in Wisconsin
Despite it being legalized only three years ago, hemp and Wisconsin are no strangers. In 1908, researchers in the University of Wisconsin-Madison’s agronomy department, interested in learning about hemp as a source of fiber, harvested the state's first hemp crop. UW-Madison continued further experimentation in subsequent years, eventually concluding that hemp was an excellent source of fiber.
Encouraged by the university's success, neighboring farmers began planting their own hemp, according to the Leader-Telegram. Buoyed by a high demand for hemp fiber in the Midwest as well as federal promotion for hemp production, crop production grew at an exponential rate. In 1915, Wisconsin farmers were growing 400 acres of hemp. Just two years later, this number had grown to 7,000 acres, and by 1920 the Badger State was the largest hemp producer in the United States, with more acres growing hemp than the rest of the country combined.
By the 1940s, however, the hemp industry had declined dramatically. With the exception of a brief spike during World War II, hemp was falling out of favor, and by 1948 the U.S. government got out of the hemp business — ending their purchasing of hemp and the price support program. Coupled with decreasing demand and heavy restrictions, the hemp industry limped on until 1957, when the last hemp crop was harvested in Wisconsin. In 1970, The Controlled Substances Act identified hemp as a Schedule 1 drug, prohibiting its production and putting an end to legal hemp production in Wisconsin for nearly six decades.
“There was no hemp industry before 2014 — it’s that simple,” said Rob Richards, the president of the Wisconsin Hemp Alliance. “Any hemp that was in this country (fiber material, etc.) was shipped in from countries like China and India.”
Rebirth
The origin of Wisconsin's current hemp program lies in the passage of the 2014 U.S. Farm Bill, which authorized the production of industrial hemp under state-run pilot programs for research purposes. Despite the formal research, hemp remained a Schedule 1 Drug.
In 2017, Wisconsin established its state Hemp Program, aptly named the Hemp Pilot Research Program. This program was helmed by the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) and required farmers and hemp processors to submit a research plan to become fully licensed as providers of hemp. In the first year of the program, 347 people applied for a license to grow or process hemp. The next year, application numbers ballooned with DATCP receiving 2,227 applications.
A year later, the 2018 Farm Bill legalized hemp federally and directed the USDA to establish a permanent federal hemp program. Individuals would now be allowed to grow hemp legally as long as their state had a federally approved plan, and the state pilot programs would begin phasing out.
Fast forward to October 2020, the Department of Agriculture hadn’t approved the plans of 23 states, including Wisconsin, with the Oct. 31 approval deadline looming.
At the eleventh hour, Congress passed an act that extended the 2014 Farm Bill until September 2021, but by that time DATCP had already transitioned Wisconsin to a new hemp program — essentially an updated, functionally similar version that dropped the “research” and “pilot” parts of the title, according to Richard.
“The legalization of hemp was not terribly smooth,” Richards said. “Now that hemp-derived CBD is legal, there still is no regulatory certainty when it comes to utilizing it in dietary supplements, food or beverages. This has clearly hampered emerging hemp markets.”
What followed the transition was a swift and sudden drop in applications. In previous years, applications were higher than 2,200 per year, but in 2021 DATCP only received 1,337 applicants. More than a thousand of 2021 applicants were returning — a 42% fall in the span of a year.
“The saturation of the CBD market after the 2018 Farm Bill was signed into law was probably the biggest factor in the drop in applications,” Richards said. “Growers are very good at growing hemp, but if you don’t have a more expansive market to sell your product, then you’re going to have a glut of product in the system.”
He said the initial spike in applications was attributable to Wisconsin's “long and proud” history with hemp as well as farmers' desire to diversify to mitigate risks.
“Early on many dabbled in hemp out of curiosity or just to see if they could make some extra money,” Roberts added. “Many got out because they couldn’t sell their raw material and couldn’t sustain year-over-year losses.”
Finances seemed to be the driving factor behind Wisconsin's decision to give up its program. A Legislative Fiscal Bureau report from June found that Wisconsin's hemp program was going to end the year with a negative balance of $450,000, and the State Legislature refused to provide additional funding. DATCP suggested doubling application fees to increase income but decided against it, choosing instead to relinquish the program to the federal government.
Finally, in January, DATCP turned program authority over to the federal Department of Agriculture. Today, Wisconsin farmers and hemp processors follow the final rule on hemp, which became effective in March 2021. The DATCP hemp program was discontinued when the transfer happened, and the services they provided, such as the hemp sampling service, are now provided by the private sector.
To Samuel Santana, the owner and founder of Wisconsin Growing Company, a lack of inspectors has been the most noticeable impact of federalization. Previously, DATCP provided licensed inspectors who tested the hemp to ensure the plant didn’t contain more than 0.3% THC — the legal limit to be considered industrial hemp. According to DATCP, licensees are now responsible for finding their own sampling agent and laboratory testing facility.
“We'd call [DATCP] and they would send somebody to us,” Santana told the Cardinal in March. “Now we need to find a licensed inspector, but since it's so early, there are none.”
However, Santana expressed his optimism that the situation would improve in the coming months.
“It's just this transition period,” Santana said. “I have no doubt that that's going to get sorted out really quick.”
Last winter, when DATCP put out a call for licensed inspectors, there were only two USDA-certified hemp inspectors in Wisconsin. When the Cardinal spoke to Santana in March, there were 49 USDA-certified sampling agents in Wisconsin — a number that has only increased since.
Changes because of the shift to USDA authority include the discontinuation of hemp licensing fees for farmers and changing the requirement to renew a hemp license from yearly to every three. A processing license is also no longer required. Processors still need to abide by state and federal safety laws, but there is no specific hemp license tied to it.
According to Richard, the removal of the state “Certificate of Commerce” has impacted processors tremendously since they could use the paper to prove their product was credible, particularly when it came to transportation. He said processors have become inventive by using QR codes and other methods to protect themselves and their products.
One of the biggest changes with federalization is that growers now have to work with the Farm Service Agency in Wisconsin rather than reach out to DATCP. Richard said the absence of DATCP customer service was likely the most significant loss for growers and processors.
Still, Santana stressed that the Department of Agriculture has been helpful, particularly with communication and its simple process.
“They ask a lot less than they should,” Santana said, though he recognized the process wasn’t designed to be exclusive. “I also understand that they are not trying to weed people [out]. They're looking for a reason to approve people, not to deny people.”
However, Santana made a point to mention there were some policies he disagreed with, such as individuals with convictions not being eligible to receive a license. Santana, who received his license on the 2018 Farm Bill, highlighted the irony of the situation: even though hemp is now legal, people formerly charged for hemp-related offenses aren’t able to participate.
Ultimately, though, Santana said he welcomed federal hemp regulation as it opened up opportunities in banking, financing and interstate commerce that used to be closed when each state had different laws.
“All of these things — just boom — a bunch of doors open,” Santana said. “Once it's federal you stop having the limitations of state. So let's say if I want to buy a farm, using USDA money, or financing for a hemp farm. Now, it's easier for me to do that.”
Richard said DATCP sought out the Wisconsin Hemp Alliance's opinion on making the switch, noting that “we were aware of the move from day one.” He added that they worked together to ensure a smooth transition — setting up webinars, Q&As and connecting growers with resources at USDA.
Overall, Richard said the switch from the hemp pilot program to the USDA program went smoothly.
“I think there are pros and cons behind every decision but this one made perfect sense for Wisconsin,” Richard said. “Other states are now following Wisconsin’s path, and I have to believe many more will eventually make the move to USDA.”