Hemp may be taking the first steps to overtake tobacco as a leading industry in Kentucky. Sugarmade Inc. (OTCQB:SGMD) (SGMD Profile) is among the companies moving into Kentucky, with a million-dollar investment in hemp growth. Hemp’s national prominence is growing through deals such as Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB)‘s collaboration with United Fighting Championship (UFC). Research work by Tilray Inc. (NASDAQ:TLRY) may involve using hemp to treat a growing range of physical and mental ailments. Curaleaf Holdings Inc. (OTCQX:CURLF) (CSE:CURA) is serving states without a strong, homegrown hemp industry, such as Florida. In addition, companies across the cannabis sector, such as Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON), are diversifying their product ranges as more hemp crops come online.
- Once the hemp heartland of the United States, Kentucky is rebuilding this lost industry following recent legislative changes.
- Both tobacco farmers and specialist hemp companies are contributing to the boom.
- The trend appears to also be profitable for companies providing support services, such as CBD extraction and hydroponic supplies.
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A Surprising State
In some ways, Kentucky is a surprising place to see a hemp boom. Conservative lobbyists in the state have consistently resisted legalization measures for related plants, despite the wider growth of the industry. Given the “thin end of the wedge” arguments wielded against drug reform, the hemp industry might have expected to face a cold response in the state.
Yet the state’s hemp sector has deep roots. During the 19th century, Kentucky was the largest producer of hemp in the United States, producing three-quarters of the nation’s hemp fiber. As hemp production went into decline following the First World War, tobacco took its place as a major cash crop for the state. However, tobacco now faces challenges of its own. With hemp production made legal on a federal level for the first time in nearly half a century, Kentucky has once again emerged as the country’s leading manufacturer.
Kentucky has become a go-to state for companies with an interest in hemp, such as Sugarmade Inc. (OTCQB:SGMD).
Since federal legislation allowed the production of hemp at test sites in 2014, Kentucky has taken a leading role in the industry. The Bluegrass state was one of only three states to exceed 100 acres by 2016, and research permits were issued for more than 12,000 acres in 2017. By the time the 2018 farm bill proposed the legalization of hemp across the United States, Kentucky hemp growers were becoming a powerful lobby. They won the support of the state’s politicians, helping to push national legislation through in December.
Sugarmade’s involvement in Kentucky comes through, at least in part, a million-dollar investment in Nevada-based Hempistry Inc. Hempistry has begun growing high-grade hemp on a 23,000-acre land option it holds in Kentucky. High in cannabidiol (CBD), an active ingredient in high demand for wellness products, this hemp offers a chance to maximize earnings from the land and set down roots for larger operations in the state.
Commentators watching the development of hemp in Kentucky have speculated that plant could overtake tobacco, once the state’s leading cash crop. A growing number of savvy tobacco farmers have started growing hemp on part of their land, hedging their bets against the decline in tobacco sales. Hemp certainly appears to be a natural alternative to tobacco for these farmers, as it can be grown in similar conditions and sold into related markets.
Consequently, the Kentucky hemp industry is already turning into a large and diverse one, driven by two separate trends. One is the need of farmers for new crops, as declining tobacco sales and the pressure of trade wars impact their profits. The other is the emergence of companies with a focus on hemp and related crops, such as Sugarmade. These companies provide specialist tools and invaluable knowledge, while the farmers bring decades of experience growing crops in the region. Old and new knowledge combine to build a booming industry.
Looking to buoy up the economic health of their state, Representative James Comer and Senator Mitch McConnell have pushed the hemp agenda at a national level, creating the space for Kentucky’s hemp industry to thrive. McConnell has been particularly crucial, using his position as majority leader to advocate for hemp reform, including publicly reinforcing his support for the industry through a tour of the state with Sonny Perdue, head of the U.S. Department of Agriculture (USDA). With this growing federal support, Kentucky hemp growers appear to be making long-term investments, confident that politicians will ensure a friendly business climate.