In another breathtaking win for the American people, Congress passed and the president signed a 2018 Farm Bill which included nationwide legalization of the growing of hemp—effective January 1, 2019.
After nearly 50 years of prohibition, the 2018 Act amends the federal Controlled Substances Act of 1970, so that hemp plants containing no more than 0.3% THC (tetrahydrocannabinol) are no longer classified as a “Schedule 1” controlled substance. (Schedule 1 drugs are defined as those having no known medical application.)
With Jeff Sessions out at the Justice Department, jurisdiction will move to the U.S. Department of Agriculture, which will require prospective growers to submit cultivation plans. State laws will also apply. And we will witness the first federally-sanctioned commercial hemp grows since World War II!
Industrial hemp has an estimated 25,000 end uses, including as fiber, building material, fuel, nutrition and for nanotechnologies. In use since 1850 as the primary medicine for more than 100 separate illnesses or diseases, cannabis was declared illegal in 1937, opening the door for Big Pharma.
What is Cannabis? Some varieties of the Cannabaceae plant family produce hemp, which has been valued for its fiber for 10,000 years. Other strains, favored for recreational use (marijuana), contain high concentrations of tetrahydrocannabinol (THC), which is psychoactive. Strains used for medical applications (cannabis) have low THC and increased CBD. The plant contains more than 500 other chemicals, over 100 of which are chemically related to THC.
Marijuana is usually smoked in hand-rolled cigarettes, cigars and water pipes. It can also be used to brew tea and mixed into foods such as brownies, cookies or candies. This is “recreational” cannabis or marijuana/weed/grass/pot/Mary Jane … lots of nicknames. THC can produce intoxicating effects.
Cannabis converts include the NFL, which is using it to treat players’ injuries and pain. And U.S. communities are already benefitting from tax income from marijuana sales, and new employment—expected to exceed 250,000 jobs by 2020!
Medical applications have been driving initial growth. CBD used for pain is non-addictive and may be useful to treat addiction to opioids, cocaine, alcohol and even tobacco. Opioid addiction became a $1 billion target in the 21st Century Cures Act, and while opioids killed more than 33,000 Americans in 2015, there were ZERO reports of fatal overdoses on marijuana alone… Cannabinoid drugs are in development—targeted at epilepsy and neurodegenerative diseases, Dravet syndrome and Lennox-Gastaut syndrome.
A massive report released early in 2017 by the National Academies of Sciences, Engineering and Medicine confirmed benefits for pain, nausea and MS sufferers… Israel is currently running tests to see if cannabis can help victims of cancer or epilepsy, or if it helps with neurological disorders and intestinal diseases… And a report by Kimberly Carter Gamble is full of evidence that cannabis may offer a cure for cancer.
CBD is sold online and in many health food stores, thanks to the Rohrabacher-Farr amendment—which passed Congress in 2015, with strong support from Senator & MD Rand Paul.
Mark Blumenthal of the American Botanical Council wrote recently that data associated with CBD would result in its being considered a miracle drug—if only its source were any plant other than marijuana. And the FDA indicated it may legalize CBD in dietary supplements.
Investment areas. Cannabis has the potential to impact society more than alcohol did, following the 1933 end of Prohibition. It will be a major industry.
With support for cannabis now certain to build, sharp growth in food- and beverage-infused marijuana products is a no-brainer. As retail outlets grow, so will the need for the equipment and training needed to produce the products.
Packaging will be important in the early stages, with drinks, edibles and vaping products the likely leaders. To the extent that products are transdermal and edible, they will minimize the stigma associated with marijuana smoking.
The cannabis legalization trend is in its infancy. The range of products being generated now will find broad audiences among organic and natural health retailers and consumers. Production operations and retail outlets will grow, driving the need for equipment and training to produce the products. Hence, it is a particularly promising investment area. New machinery, and the acumen to run it, will emerge as a critical need.
In this brand new industry, quality and innovation are initially likely to dominate. Packaging and products will cover all demographic areas—over 50, millennials, etc. Higher quality structural strands and blends will prevail. There will be growing demand for properties zoned for cannabis businesses.
Finally, coupled with pressure from the political establishment to reduce drug prices, the pharmaceutical industry (and prices of its stocks) seems vulnerable to a comeuppance.
(Coverage of the many specific candidates for investment in this arena is beyond the scope of this article.)
Legal Disclaimer: Material in this blog is for information purposes only and is not intended to be an offer or solicitation for the sale of any financial product or service or a recommendation or determination that any investment strategy is suitable for a specific investor. This information is not intended to provide financial, tax, legal, accounting or other professional advice since such advice always requires consideration of individual circumstances. This blog does not constitute an offer to sell any securities in the United States. We will not be liable for any financial losses which might occur as a result of your use of this material.