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Hemp: An Old Crop with a New Opportunity

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Atalo Holdings, a Winchester-based company specializing in research, development and commercialization of industrial hemp, has subsidiaries developing seed varieties, hemp protein-based foods, and cannabidiol extract products.

An increasing number of people are aware that before it was known for tobacco, Kentucky was prosperous because of industrial hemp, and today’s generation of farmers and researchers are working to again unleash the crop’s economic potential despite still being handcuffed by stiff federal regulations.

“I’m very excited about the potential if we can get through some of these regulatory hurdles,” said Brent Burchett, Kentucky Department of Agriculture’s (KDA) division director for the Division of Value-Added Plant Production. “There is so much potential, and there’s consumer excitement for these products. Our farmers have shown they can grow this. Their granddaddies grew this.”

But just because previous generations of Kentucky farmers successfully cultivated hemp, doesn’t mean today’s playing – or growing – field is the same as it was in hemp’s pre-Prohibition heyday before being included in the Marijuana Tax Act in 1937. Kentucky hemp farmers from the 1800s through the early 1900s, including Henry Clay, primarily cultivated the crop for fiber. It was long considered to produce the best rope, paper and durable fabric. Kentucky hemp supplied millions of pounds of fiber for the World War II effort.

These days, interest is weighted more heavily on the human consumption side – in the form of the nutraceutical cannabidiol (CBD) oil, and seeds that can be hulled, toasted or ground up into protein powder. The highly profitable CBD oil is the most valuable, but also is currently under threat from the Food and Drug Administration.

On the seed and fiber sides, the applications are endless and the harvest is ripe. Hemp is considered a superfood and many Kentucky chefs are experimenting with it. Unique Kentucky fiber interests include equine stall bedding, car parts and building material.

“We haven’t even found all of the areas this can fill,” said Tom Hutchens, chief research officer at Atalo, a Winchester company that specializes in the research, development and commercialization of industrial hemp. “Fiber has one of the greatest opportunities down the road because it’s a totally new mindset.”

Atalo CEO and General Counsel William Hilliard added, “This crop is today where corn and soybeans were about 50 years ago.”

Ironically, more than 50 years ago, the “fall” of hemp production is what led to the rise of tobacco in Kentucky.

“It’s a very unique, once in a lifetime opportunity for most farmers to be on the front end of a brand new crop that could maybe be the premier protein source in the United States in the not so distant future,” Hilliard added. “And to apply our ingenuity and know-how and the Kentucky and American farmers’ knowledge to an old crop with a brand new opportunity is very unique.”

Kentucky farmers leading the way

Hemp is legal to grow in the United States under the Farm Bill of 2014, only under the pretense of research. It is still considered a Schedule I drug by the federal government. Kentucky was the first state to allow private growers to participate in its hemp research. Most states keep it within universities. In Kentucky, farmers who want to grow hemp need to obtain a Memorandum of Understanding with the KDA. For the 2016 growing season, the state had approved 4,600 acres of hemp growth and approximately 2,600 acres were planted, which was up from the 30-acre range just two years ago.

Burchett said Kentucky has a major head start on other states in the growing, processing and production side of hemp, with Tennessee having the closest comparable program.

And though the Farm Bill has no sunset, there are still so many hurdles surrounding growing, supply chain issues and funding. The Farm Bill does not allow for the use of pesticides or herbicides, and also does not allow for crop insurance – a necessity for many farmers.

Hemp lobbyists and state lawmakers on both sides of the aisle are optimistic that industrial hemp will be fully legalized and permanently de-coupled from marijuana. Hemp contains virtually no THC (tetrahydrocannabinol, the chemical responsible for most of marijuana’s psychological effects), but law enforcement is not able to quickly tell the difference between the two plants, and therefore they are both illegal.

This is a frustrating fact for Kentucky native Annie Rouse, who knows hemp better than almost anyone. Rouse is president and executive director of the Kentucky Hemp Research Foundation and earned a U.S. Fulbright Scholarship to study the environmental life cycle of hemp in Canada, which supplies the U.S. with most of its hemp. Last year, the U.S. imported approximately $600 million in hemp products, according to Alex Huber of CV Sciences Inc., a California company that has a heavy footprint in Kentucky.

“I started getting mad about it, said Rouse, who almost decided to ditch a hemp career altogether. “I was so annoyed by the fact that it was illegal for really stupid reasons. It really spurred this passion for me and lit a fire under me. I realized most don’t know anything about hemp at all and I saw the need to educate people.”

Rouse hopes to see hemp make an enormous impact in sustainable development and nutrition around the world.

“It is an industry with so much opportunity to really develop businesses and develop products,” she said.

Lexington’s AZUR Restaurant Group co-owner and executive chef Jeremy Ashby and AZUR co-owner Sylvia Lovely hope to see hemp legalized for many of the same reasons.

The duo work closely with farmers, policy makers and food consumers on a daily basis. Lovely called hemp an “indigenous industry” for Kentucky that can help keep the population healthier and help feed hungry people at home and abroad.

Ashby noted that the hemp he cooks with often has to travel thousands of miles, and he’s bothered by that large carbon footprint. And also because local farmers are missing out.

“We’ve lost coal, we’ve lost tobacco. They’re not coming back,” he said. “Now we have this uniquely Kentucky thing and are in a position to corner that market … I think that is where chefs can come in. There isn’t a lot of practice or research behind it in the kitchen but that is changing.”

He noted that hemp is an amazing supplement to any food, adding protein, fiber, amino acids and fatty acids. It is perhaps one of the most protein loaded and fat rich – with a perfect balance of Omega-6 and Omega-3 fatty acids – plant-based foods on the planet.

“But, currently it’s not too economically or environmentally sound to cook with in large quantities,” Ashby said, and then compared it to the dramatic success that another uniquely Kentucky crop – bourbon – has done for the state. “People will associate hemp with Kentucky.”

Through their weekly radio show, Food News and Chews, Ashby and Lovely hope to continue to educate people on the topic of hemp.

Connecting the past to the future

Hemp activist and business owner Alyssa Erickson and her business partner Kirstin Bohnert co-founded Kentucky Hempsters, United Hemp Industries and Heritage Hemp.   

“I think farmers are eager for an alternative crop and the more they learn about the markets available with industrial hemp, they’re putting the dots together and they’re going, ‘Why aren’t we doing this?’,” she said. “Our KDA has moved so aggressively and are doing a really good job. We have passion and momentum in government here in Kentucky.”

Kentucky Agricultural Commissioner Ryan Quarles was raised on a farm and knows the plight of the state’s farmers.

“Industrial hemp is a crop that connects our past to our future,” he said. “My family used to grow industrial hemp. My great grandfather grew it for the [World War II] effort. Kentucky is well positioned in the U.S. In three short years we’ve gone from zero acres to over 4,000. It’s attracted investment from across the country to Kentucky. I’m optimistic about it, along with other alternative crops the KDA is investing in right now.”

He added, “Thomas Edison didn’t make the lightbulb work on the first try. It requires management, input and a level of understanding to make it profitable to compete with other crops grown in Kentucky. It’s been remarkable how much distance we have covered in three years.”

To make it profitable and fully legal, he believes Kentucky farmers and processors need to demonstrate that they can grow the crop well and turn it into a valuable product.

Thanks to research from farmers, processors like Atalo and major institutions like the University of Kentucky and other schools around the state, this is happening.

“It’s important that we attract investment now so that Kentucky will be well positioned if and when Congress legalizes the crop,” he said. “I believe they will. The U.S. is the only industrialized country that does not allow the crop to be grown, and consumers continue to demonstrate a demand for it. I want Kentucky to be on the forefront when the crop eventually is commercialized.”

An applauded international reputation for agricultural research, ideal geographical location and ample water supply make Kentucky well positioned.

Still, the unknowns can be concerning and farmers won’t make a lot of money yet. The regulation process is tedious, and there are still many factors to the growing marketing process.

“We haven’t yet seen this market unleashed,” Burchett said. “If it was full blown, you could make some assumptions. When every state can do it, we’ll need a few years to do it, then we can make a true assumption about its capabilities.”

Quarles added that hemp was never portrayed as a replacement for what tobacco used to be, and that proponents must keep in mind that farmers are business owners and hemp must be competitive with other commodities grown in Kentucky.

“That’s why the research program is so farmer driven, to provide practical and pragmatic observations for how they envision industrial hemp as part of their farming operation,” he said.

That is where Atalo – investing millions in harvesting, laboratory and processing equipment – comes in.

Atalo Chairman Andrew Graves, whose family farmed hemp for hundreds of years, said Atalo is solidifying its processes and becoming proficient in genetics, food, development and building the supply chain. They want to expand their presence to other farmers around the United States. He sees it as a major economic development driver for Kentucky, and one that is drawing in people of all ages and attracting worldwide attention.

“It never can be understated how valuable rural economic development is,” Graves said. “That’s what we’re doing here in a large way. Tobacco was always the No. 1 player in my lifetime. but in my father’s lifetime, it was hemp.”

“We have very well-educated young farmers that are looking for opportunities,” Hutchens said. “And they’re not necessarily looking to do things that have been done before. They are looking at these new crops, and that’s where I think Kentucky has a huge opportunity in specialty crops.”

Atalo Contracting Officer David Spalding called many of today’s hemp farmers “progressive risk takers, and very bright.” He added, “We’re learning a lot from these guys, which is what the program is designed to do – to have everybody doing research.”

And the entrepreneurial environment is wide open.

“Everybody is coming up with ideas, and then they take it from an idea to fruition and make it a product,” Graves said. “That’s the beauty of what Kentucky’s doing here. And from that, it will be some sort of creation of money. That’s what we all measure everything by, how much money it created, tax growth and how much it elevates the standard of living.”

Graves thinks when it is fully legalized, American farmers who are “competitive by nature” will blow away the rest of the world’s hemp competition, especially since the state has already done it before.

Abby Laub is a correspondent for The Lane Report. She can be reached at [email protected].