CBD Supply Chain: How the Hemp Industry Is All Connected
Today, we’ll explore how the American hemp supply chain is hampered by inconsistent laws and regulations.
Most people are unaware of the sheer complexity that goes behind putting their favorite product on the shelves. Exploring those complexities will help show how your favorite CBD product goes from plant to final product and explain the cost of CBD.
“Despite all the obstacles along the path of the hemp industry supply chain, brave individuals and companies have made a way for it to work,” said Keith Butler, co-founder and chief formulator for LifePatent.
LifePatent is one of our favorite CBD brands, so we reached out to Butler for an insider’s view of the process.
WHAT IS A SUPPLY CHAIN, ANYWAY?
To understand the CBD supply chain, we must first consider what a supply chain even is and what it means to a business.
A supply chain is essentially the bones & muscles of a company. The supply chain is comprised of raw material producers, system processors, customer service, truck drivers, factory floor workers. Hell, even the IT guys are part of it. This is why a good supply chain manager or team is essential in a healthy business. Whenever you buy, move, make, sell, service or repair you are using your supply chain. A supply chain is successful when all the links in the chain work together smoothly.
Let’s consider a simple cup of coffee at your favorite cafe. First, farmers grow and harvest coffee fruit (probably somewhere in South America). Further processing happens before shipping coffee overseas or to America. Then drivers, packagers, trucks, fuel and further processing are needed to get it to the companies who order the beans.
Those companies (part of the chain itself), roast, package, test and ship those coffee beans to different retail spots. Then coffee shops grind the beans and make them into a cup of coffee for you to buy.
All of this goes behind making a cup of coffee. Keep in mind this is a simplistic version of the real coffee supply chain. The real thing is much more complex. Depending on size and scope, a business might cover just one aspect of the supply chain — such as coffee roasting. Or they might oversee the entire process from coffee fruit to cafe. The same can be true of the CBD supply chain.
THE HEMP INDUSTRY AND THE CBD SUPPLY CHAIN
The hemp industry is growing at a break-neck pace.
Valued at $3.1 billion at the end of 2017, the industry is currently projected to triple that figure by 2022. When you factor in last December’s Farm Bill, the industry is only going to grow faster. This is not simply an American story as Canada, France and China have successful and fast-growing hemp industries.
Truly, the hemp plant is making a resurgence in popularity, mainly due to the robustness, simplicity, and ease of hemp farming. Not to mention over 50,000 different uses of the plant, from car panels in France, to hemp hearts grown in Canada and the massive hemp-textile industry in China.
Butler told us:
“The supply chain begins with the seeds. Today’s hemp genetics can be incredibly complex and equally as complex to acquire. With the explosive growth of the hemp industry, supply side beginning with something as simple as a seed can be a challenge. The companies who have access to the unique seeds and genetics are even harder to find. Once the seeds have been secured the supply side begins with the farming process.”
HEMP INDUSTRY SUPPLY CHAIN REQUIRES MORE INFRASTRUCTURE
This fast-growing industry has attracted many businesses, from retailers, producers, suppliers, farmers and so on and so forth. The supply-chain is growing just as fast as the industry itself. One simply needs to look at all of the different CBD-brands that have seemingly come from nowhere to see the pace of growth in the industry.
“Although hemp is a weed and is considered an easy plant to grow, making medicinal hemp is a little more complicated. The plant will require proper sun, moisture, nutrients and protection,” Butler said. “All of these factors will determine the level of medicinal quality which can be achieved, but the process takes months of time and patience not to mention luck and skill.”
But the support infrastructure necessary to power the hemp supply chain is still lacking in many places.
“Once the flower has been collected by the farmer it needs to be dried, again, a straightforward process which is not so simple. Sure, solutions are being created to simplify the harvesting and drying process, there are even systems which require no drying at all,” said Butler. “But these systems are few and far between leaving most farmers to do it and the old-fashioned way, by hand. Once the harvest has been dried it must be transported to the extraction facility.”
HOW CURRENT REGULATIONS INTERFERE WITH THE CBD SUPPLY CHAIN
But it’s not all rainbows & sunshine as the American hemp industry is seriously hampered by inconsistent federal and state level legislation.
While the aforementioned Farm Bill certainly helps, there are still major grey areas in the classification of hemp. The production of hemp is now federally legal, and the Farm Bill removed CBD from the Controlled Substances Act, but the industry is closely watching upcoming decisions by the FDA.
“Despite all the obstacles along the path of the hemp industry supply chain, brave individuals and companies have made a way for it to work.” — Keith Butler, LifePatent
As a result of incomplete government regulations, and inconsistent state laws and policies, some members of the CBD supply chain still face legal risks, resulting in occasional police raids on CBD stores and arrests of truckers transporting industrial hemp between states.
“Things can get tricky here depending on whether you plant to extract locally, in state or out of state,” Butler commented. “For those who need to transport over state lines to extract a whole new set of obstacles arise in the supply chain.”
“Recent seizures of hemp being transported across state lines after the passage of the 2018 farm bill show us that many places didn’t get the memo. And worse yet some states have challenged the legality of hemp even after its removal from the controlled substance act.”
All cannabis businesses still have to operate on a cash-only basis. Banks cannot offer financial services such as bank accounts or business loans. Alongside the clarification of CBD products by the FDA, the financial side of the business is the biggest supply chain obstacle for cannabis and hemp companies to overcome. With continued bi-partisan support of the STATES act, this may soon be fixed.
THE DEFINITION OF HEMP ALSO POSES RISKS TO CBD BRANDS
Butler explained the definition of hemp, pinned to 0.3% THC, also causes issues:
“To date the definition of hemp outside of less than 0.3% THC by dry weight has not been defined causing a whole new challenge for the hemp products producer. When extracted a 0.3% THC hemp plant will create extracted oils which can be in excess of 3% THC now. A number that can be 10 or more times above the legal limit of hemp, but it is from the legal hemp plant but now the oils appear to the world as cannabis despite the fact they are hemp derived. It is this single undefined issue that drives the extraction, formulation and bottling of most hemp products. When the hemp is extracted the THC levels increase as do all the other cannabinoids.”
Third-party lab tests help ensure that the final CBD-infused products consumers purchase remain under the legal limits of THC, but the extraction process puts hemp brands at risk. Butler thinks the issue may need to be solved in the courts:
“Unfortunately, no one in the government has addressed this reality and until someone with the resources required to put up a fight gets stopped and arrested with hemp oil extract the hemp industry will continue in the conundrum of can I transport the undiluted oil from extraction to a different state for bottling and formulation.”
THE INNOVATIVE MODERN AMERICAN HEMP INDUSTRY
“Creativity and ingenuity are the hallmarks of the American people and those in the hemp industry are more akin to the pioneers, blazing the trails to a better future,” Butler told us.
So next time you enjoy your favorite CBD tincture, soft-gel, cream or simple hemp-hearts, keep in mind the complex CBD supply chain necessary to bring that product to your table. The issues above reflect that more legislation may be needed to protect the hemp industry, though fortunately Sen. Mitch McConnell and other hemp supporters in Congress seem to be willing to undertake the effort.
“I know for guys like myself and the people with whom I began this journey with nearly 40 years ago, we found a way and now hemp is legal,” Butler concluded. “For the future I expect the new pioneers will create new trails and find new ways to bring our beloved plant to the peoples of the earth.”