The National legalization of hemp under the 2018 Farm Bill provides marijuana business with essential lessons to use when preparing for a highly analyzed, commodity-driven industry. The lessons would especially be valuable to small companies that are well managed.
The co-founder and president of the American Trade Association for Marijuana and Hemp, Michael Bronstein, said that although hemp and marijuana are different industries, marijuana can learn some few things from the national rollout of hemp.
Experts advise companies to anticipate changes in the marijuana industry, even if it takes a few more years before marijuana can be legalized at the federal level. The companies should become more professional in their operations by adopting standards from other industries that are highly regulated.
Bronstein said that companies, whether they are specializing in the production of CBD, THC, or both, should adopt best practices and participate responsibly in the industry.
The co-founder of Canna Advisors Diane Czarkowski said that companies should expect constant changes as well as more regulations in the industry. Canna Advisors is based in Colorado and offers several consulting services to marijuana and hemp companies.
Discussed below are some of the lessons marijuana companies should learn from the national legalization of hemp:
- It will take a while to develop federal rules
After the enactment of federal reforms on marijuana law, there is a possibility that cannabis policy development will drag. The chief of the National Hemp Association in Washington DC, Geoff Whaling, said that it is going to take years before hemp policies are implemented.
The USDA took 11 months to finalize interim final rules for hemp, and it continues working on them. And more months had to elapse before financial institutions could accept to serve the hemp industry.
- Expect federal and state oversight
After the federal legalization of marijuana, there would be a lot of scrutiny from several federal agencies such as USDA, FDA, and DEA. Therefore, marijuana companies should be prepared on how to deal with the regulations, how to implement them, and their impact on their businesses.
Bronstein said that his trade group is collaborating with state regulators in the development of standard testing, devices and appliances, transport, quality management, security, and track and trace systems. These will come in handy after the federal legalization of marijuana.
Companies should also anticipate inter-state marijuana businesses.
- Prepare for green rush 2.0
In the U.S., the pot sector has already experienced a ‘green rush,’ and another rush might happen after cannabis is legalized federally.
The executive director of the U.S. Hemp Growers Association, Caren Wilcox, said that in January 2019, the hemp industry experienced a rush where every farmer wanted to plant hemp. If this happens in the marijuana industry, only farmers with strong skills and are savvy in business would survive and thrive.
- Prices to fall as marijuana becomes a commodity
According to a senior attorney at McAllister Garfield, David Wunderlich, after commoditization of marijuana, cannabis companies should expect a drop in the price of retail and wholesale pot. The law firm specializes in hemp and marijuana law.
Wunderlich noted that since hemp was legalized, the price per kg has dropped to $1,000-$1,500 from $6,000-$7,000.
Industry experts have predicted that marijuana will become more of a commodity after it is federally legalized.
Wunderlich further said that marijuana companies should include several assumptions in their models and not assume that after legalization, the prices will remain constant and overinvest.
He also noted that a drop in prices affects the supply chain, which may result in a breach of contract, and delays in delivery.
According to experts, these are serious concerns that cannabis companies like Plus Products Inc. (CSE: PLUS) (OTCQX: PLPRF) may be thinking about since only the companies that can quickly adapt to the evolving landscape will survive the initial surge of players once pot is legalized federally in the U.S.
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