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USDA Final Interim Rule

Understanding What Matters

USDA Interim Final Rule

According to the USDA U.S. Domestic Hemp Production Program website:

"The 2018 Farm Bill (pdf) directed USDA to establish a national regulatory framework for hemp production in the United States. USDA established the U.S. Domestic Hemp Production Program through an interim final rule. This rule outlines provisions for the USDA to approve plans submitted by States and Indian Tribes for the domestic production of hemp. It also establishes a Federal plan for producers in States or territories of Indian tribes that do not have their own USDA-approved plan."
Click here to read the Interim Final Rule. Comments close December 31, 2019.

We’ve been listening to and participating in conversations with the hemp industry at large regarding the USDA's final interim rule. There are two main areas of concern regarding this rule.

1. The legal THC limit remains low at 0.3% - This is an area of concern for both growers and processors, especially since the hemp biomass and crude CBD oil is not being defined, to the best of our understanding, as a "final product." Unfortunately, USDA regulators have no authority over this law. So, we anticipate that the 0.3% THC limit to be around for a while.
2. Using Hemp for animal feed remains illegal - Though using hemp as animal feed is already legal in Canada, it has not yet been approved in the US. It will probably take multiple research studies before this use for hemp is legalized in the US.

We'll be following both of the issues diligently as well as submitting our own comments on this rule.

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The Northern Hemp Summit

Making Hemp Profitable in North Dakota and Beyond

Prairie Products is thrilled to have presented at and sponsored the Northern Hemp Summit that took place in Bismarck, ND on November 19-20, 2019.

The Summit was organized by David Ripplinger, the Assistant Professor in the Department of Agribusiness and Applied Economics at North Dakota State University and the state’s bioenergy and bioproducts economist and brought together together agriculture, industry and government leaders as well as regional and national experts who are building the hemp industry in the Northern U.S. . This conference was incredibly informative and ripe with connections. There were a number of interesting presentations covering the history of hemp to hemp for fiber and food to hemp for CBD to retail brands. Areas represented included hemp production, processing, marketing, and regulation.
Please click here and here for more information.

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Prairie Products is FIRST Licensed Hemp Processor in North Dakota

And We’re Very Proud!

We’re thrilled to announce that on May 14th, 2019, we became the first hemp processor licensed in the state of North Dakota.

This is an exciting new field for us and we’re looking forward to helping our state diversify its offerings and services and to participating in the growth and development of the local hemp and CBD oil industry.

Prairie Products' Submits Comments Letter to the USDA on the Final Hemp Rule

Dear Under Secretary Ibach:

On behalf of Prairie Products, a cryogenic ethanol extraction processor based in Fargo, North Dakota, we write to express our deep gratitude for seeking to create standards and regulations that will lead to the development of a safe, consistent, and trustworthy hemp industry that supports not only CBD hemp professionals, but the end users of their products, the consumers.

We’re pleased to have the opportunity to share our perspective as a hemp processor that works closely with growers to produce a 50-60% full spectrum CBD crude and a 60-85% refined broad spectrum distillate. This percentage of CBD represents what the market is currently seeking.

There are elements of the IFR that we support. Specifically:

·         The IFR’s assertion that the hemp industry is both legal and safe. We believe that this allows banking and other financial institutions to view hemp-based businesses as worthy of investment and support.

·         The IFR’s allowance for a margin of error in testing THC content. The understanding that labs can make mistakes and that samples can be retested is an appropriate way to address this issue.

·         That transporting hemp and hemp products across state lines is legal and that federal and state law enforcement officials cannot interfere with their transportation.

There are also elements of the IFR that we would like to draw more attention and consideration to as they could negatively impact the emerging hemp industry in North Dakota. Since producing and processing hemp is relatively new to our state, the learning curve is still underway. North Dakota lacks current and substantial hemp research that could aid farmers in their growing, harvesting and drying techniques, which has led (in this past harvest year) to unpredictable THC/CBD potencies. For processors, the challenge is in gaining access to affordable and effective technologies that make it consistently possible to adhere to the federal THC limit.

Since CBD hemp is an emerging industry in North Dakota, we’d like to request more flexibility for our growers, processors, distributors, and retailers so they can gain the necessary experience and knowledge to effectively adhere to state and federal regulations. Also, having more realistic margins for the North Dakota hemp industry is fundamental to transition us from an “emerging” status to an “established” period. They are used to selling their commodities in a system where price is based on quality so, more latitude during this initial phase of industry growth would be pertinent to our long-term success in the hemp field. Lastly, we are grateful to have the opportunity to bring hemp to our region to develop more viable economic avenues that can compete in the national marketplace thereby supporting our local communities.

We’ve responded to specific parts of the IFR that cause us some concern in more depth below:

·        We’re concerned by the strict adherence to the 0.3% THC limit as there is not enough scientific evidence supporting this as a valid measurement. The main reason is that the lack of flexibility around THC levels for “in process” materials (hemp biomass and crude CBD oil) places additional burden on both growers and processors to better manage THC content without the aid of affordable, effective strategies and technologies. For growers, there are no verified seed companies or effective ways to control weather events as well as increased costs for ongoing (but necessary) field testing to monitor THC levels. Also, selecting harvest dates based only on THC content can have a deleterious effect on the CBD content, driving down the value of their hemp biomass. For processors, the extraction process approximately increases THC potency by six-fold. Processors have limited options for remediating this except through chromatography and distillation/isolation methods. Chromatography is extremely expensive (whether outsourced or brought in-house) and can negatively impact CBD and other cannabinoid content, which drive the final value and marketability of the crude oil. Distillation and isolation processes require capital for equipment and overhead that may not be immediately available to processors. The other issue with that processors face is the need to dilute the crude oil before shipping it. This adds additional time to prepare the product for sale and can add more processing time on the part of the client (depending on their intended end use) which could further delay the sales and negatively impact cash flow. For new businesses, this could prove fatal.

·        Testing that determines the total THC limit will include the entire spectrum of THC content instead of being limited to delta-9 THC.

·        We believe that a measurement of 0.5% THC or more should not be considered “negligent” as it could carry additional severe penalties for growers. North Dakota growers, who exceed the federal limit of THC, are not doing so intentionally, but rather as a result of the learning curve. We’ve talked with farmers regarding their hemp biomass (growing, harvest and drying) and it’s worth noting that producing CBD hemp is an intensive practice and requires more hands-on time, attention, and care compared to other regional crops such as soy, corn, potato, and sugar beets that are grown in our region. Sudden changes in temperature and weather events may cause a spike in THC/CBD potency. Basically, THC/CBD levels don’t always progress in a consistent and predictable way making it hard to judge the potency. Growers will need to perform more ongoing testing of hemp in the fields resulting in more costs potential delays in testing results based on local labs operating capacities. Additionally, growers already face serious losses if their hemp biomass exceeds 0.3% THC. Also, material over 0.3% THC holds no weight in the marijuana market whose audience is looking for a drastically higher THC potency than what CBD hemp biomass could provide. Since it’s not commercially viable in the marijuana markets, there are no financial incentives for growers to exceed the 0.3% THC limit with their hemp.

·        If hemp biomass is found to be non-compliant, we’d like growers to be able to use the non-compliant biomass on their farm via bedding, animal feed, or fuel. We’d also like the non-compliant hemp to be considered for use in fields where it will not be consumed such as bioplastics or fiber. This enables growers to recover some of their financial losses if they are unable to legally sell their biomass for consumption in the marketplace.

·         There exists ongoing confusion around how to pull an appropriate and consistent test sample. It’s still unclear, in the IFR, which part of the flower must be included in the sample. We would like to see guidelines on how to produce a homogenized sample as the preferred method since a sample that only pulls from the flower is more likely to test high in THC. There are other industries that have established standards on collecting representative samples, which we would like to see referenced in the IFR. One good example to follow is from the “Articles of Botanical Origin.” Please see this link to read more.   https://www.usp.org/sites/default/files/usp/document/our-work/DS/2015-dsc-chapters-561-616-1010-1092.pdf

·         Overall, we are concerned by potential impact on the timeliness and affordability of lab testing that would result from some of the policies laid forth in the IFR. Examples include increased testing of hemp in the field to control THC levels and the required 15-day pre-harvest test may create bottle necks for growers who base their harvest times on the total THC content. Also, we’re concerned that the 15-day timeline will create more challenges for North Dakota agricultural growers while favoring farmers who grow indoors or in warmer climates with year-round growing capabilities. Any time delay in getting test results (and therefore making decisions on when to harvest) may end up increasing the THC potency running the risk the crop becoming non-compliant. Also, requiring labs to report any tests that show THC is in excess of the federal limit is a conflict of interest. The labs are paid by hemp industry professionals not the government. This not only puts labs in a very difficult position with factors that directly impact their income, but it also could foster an environment of distrust where growers are less likely to test their hemp. The goal should be for farmers to feel safe to test more rather than less so they are freer to learn and innovate better growing methods during this critical, emergent period. Lastly, we are concerned about limiting THC testing to only laboratories registered with the Drug Enforcement Administration (DEA). This would limit the number of labs that are available locally to test hemp and crude oil. This places undue burden on geographic regions that lack DEA registered labs.  

·        We would like the USDA to consider how it classifies hemp biomass and its’ resulting crude oil during extraction and transportation as it can negatively or positively impact everyone in the supply chain (farmers, processors, and product manufacturers).  When THC compliant CBD hemp is processed the concentration of the resulting oil increases. This typically means the THC level goes up six times as a result of the extraction process. As of now, this is unavoidable and occurs even though the hemp biomass’s THC was below the legal limit.  Some jurisdictions believe this oil should be diluted (to bring the level of THC to 0.3% or lower) before it can be transported to another licensed hemp manufacturer. However, we believe licensed processors should be able to transport extracted oil without dilution to other processors and manufacturers based on the compliant analysis of the hemp biomass. Requiring processors to dilute the crude adds an unnecessary step and cost, which ultimately hurts the farmer. We encourage the USDA to permit hemp licensees to legally transport hemp biomass and it’s resulting crude oil even if it exceeds the THC legal limits to other licensees under the analysis of the parent hemp material. Our assertion is that the hemp biomass and crude CBD oil are not yet consumer ready or “finished” products.  

·        We would like the USDA to declare that the exportation of hemp and hemp products is legal. Especially since the 2018 Farm Bill does not prohibit exports. Also, we have encountered interest in our products and services from potential buyers and growers in Canada. Fargo is only 4 hours away from the border and this could lead to increased business and more success for the hemp industry in our region. Exportation of hemp provides the North Dakota new economic opportunities to capitalize on their location through reduced transportation costs.

Thank you for consideration of our comments on the IFR. Please do not hesitate to reach out to us with any concerns or questions.

Sincerely,

 

Veronica Michael

CEO, Prairie Products

Prairie Products