Seed supply bottleneck strangles development of made-in-USA CBD supplements

20-Apr-2015 - Last updated on 21-Apr-2015 at 19:39 GMT

For those monitoring the potential market of dietary supplements based on cannabidiol the message is this: Don’t hold your breath for products made in the US, if the experience of Colorado industrial hemp growers is any benchmark. The complex and in some ways nonsensical interplay of state and federal laws is strangling the market on the supply end.

Regulations clearer in Canada

In the race to get the first supplements based on CBD and other aspects of hemp onto the market in North America Canadian firms would appear to have a huge leg up in that they have a secure source of raw material. Canada has had industrial hemp production sanctioned by law for a number of years now, and business relationships around that activity have developed to the point of a providing a rational market in the raw material. Canadian development-stage firm Naturally Splendid, which has plans to bring an omega-3 oil supplement based on hemp to the market, recently announced that it had secured an industrial hemp seed supply sufficient for its projected raw material needs through 2016. The company has an agreement to purchase up to 3 million pounds of seed, according to the statement.

“It is vitally important for Naturally Splendid to secure enough industrial hemp seed to facilitate expanding our sales rapidly in our existing retail lines, retail lines in development and for our raw hemp-oil input for producing HempOmega. With this supply agreement now in place, the Company is confident we can focus on our sales and marketing strategies,” said Bryan Carson, VP of operations for the company.

Confusing picture

Compare that purchase with the situation in Colorado, which is one of 23 states that has approved medical marijuana and one of four in which voters have taken the additional step to approve recreational use. Industrial hemp production has been approved as well by legislators following the recreational use ballot initiative, so it is now legal under state law to grow Cannabis sativa for a variety of purposes in the state.

“Industrial hemp” is merely a name of a particular set of cultivars of the plant. To qualify as industrial hemp under Colorado law, the plants must contain no more than 0.3% of tetrahydrocannabinol, or THC, the narcotic fraction of the botanical. CBD, one of the non-narcotic fractions of the plant, is of interest to dietary supplement formulators because it has been researched for a number of health properties, including pain relief and anti-seizure indications. The state requires prospective growers to apply for a license to grow industrial hemp crops for either commercial or R&D purposes. Interest in these licenses is booming; last year the state reported receiving slightly more than 100 applications by the May 1 deadline. This year there is no filing deadline, and to date the state has received more than 180 applications (while most applications could be expected to be filed sometime in the spring a state Department of Agriculture spokeswoman said that some growers have applied to grow the crop in greenhouses).

But potential US industrial hemp growers face a huge hurdle in that there is no legal, secure, industrial-scale source of seed. The voters and lawmakers in various states can do what they like, but as far as the federal Drug Enforcement Agency is concerned, Cannabis sativa is still an illegal drug, and trade in any part of the plant, including the seeds, is either interdicted outright or so restrictively regulated as to be nearly impossible. Industrial hemp in Colorado has the 0.3% THC limit, but Federal law recognizes no such distinction.

“If they have a legitimate request and have all the security features in place we don’t deny people the opportunity to research the plant,” DEA spokesman Matt Barden told NutraIngredients-USA. The Colorado Department of Agriculture doesn’t agree with that assessment.

“Because industrial hemp is regulated by the [Controlled Substances Act], importation of industrial hemp seed requires a Drug Enforcement Administration (DEA) registration and import permit. To date the DEA has been very reluctant to grant registrations and import permits to import viable hemp seed,” the department has said.

Deal killer

This issue served to kill a deal announced more than a year ago between San Diego-based firm US Hemp Oil and 3rd-generation Colorado farmer Alfonzo Abeyta, who had applied for a license to grow the crop last year. The company was to supply the seed it has purchased overseas but the shipment was seized by customs agents on the docks, Abeyta said.

There is a small supply of in-state seed being offered by growers who have applied for state licenses. To date Colorado has certified 16 such businesses, but they are operating on a tiny scale.

“We started last year with two pounds of seed gifted to us by a longtime farmer,” said Mike Sullivan, owner of Hemp Farm Colorado LLC, one of the certified seed businesses. Sullivan grows his crop near the town of Brighton, in Colorado’s farming heartland in the north central part of the state. “We produced 800 pounds of seed from that, and we are hoping to have 30 tons of seed by the end of this year.”

Abeyta has applied to grow 40 acres of the crop this year on his land in the San Luis Valley near the border with New Mexico and is limping along with a small amount of seed procured through in-state channels.

“Right now there is very little seed available,” Abeyta said. He has started his crop in a greenhouse and is seeking to multiply the number of seedlings he will be able to transplant after the danger of frost by vegetative propagation, in other words, by taking cuttings from the existing seedlings and replanting those. Abeyta said that he hopes by the end of this growing season to have enough seed to consider industrial-scale production.

Certification of seed

A further difficulty is that the tiny amounts of legal seed that is on the market in Colorado is highly variable in quality and none of it is certified to yield crops that are guaranteed to come in below the THC standard. Growing a crop from this seed is a risk, the state acknowledges. If a crop fails to meet the standard at the time of harvest it would have to be destroyed. This supply conundrum has stymied the development of in-state processing facilities despite the plans that have been announced by several companies.

The state’s solution is a partnership with Colorado State University announced in February to develop seed varieties of consistent quality that could be certified to yield low-THC crops. Current law allows research institutions like CSU an easier path to obtain a DEA registration to import industrial hemp seed. This partnership could produce seeds that not only meet the THC standard but are also best suited to Colorado’s semi-arid climate. This research effort will take time, however, and could come to fruition by next year’s growing season at the very earliest.

In the meantime, Colorado’s industrial hemp production will remain a cottage industry. The vision of a thriving market in home-grown CBD dietary supplements has receded into the future, until either the in-state seed supply grows to meet potential demand or changes occur in federal legislation that would allow easier importation of the seed, either through an amended farm bill or an outright change in the legal status of the plant.