The 2018 Farm Bill leads to big CBD opportunities in 2019
The 2018 Farm Bill, which passed in December, was noted for legalizing the production of hemp and hemp-derived products that contain less than 0.3 percent THC. Though hemp and hemp-derived product producers must now contend with regulation from both the USDA and FDA, depending on their focus, we have essentially entered the age of legal CBD.
However, some companies, like Diamond CBD, were already producing products with CBD oil that were fully legal under previous guidelines. Nevertheless, the Farm Bill also benefits such early adopters and, in Diamond CBD’s case, the stock of parent companies like PotNetwork Holdings.
The legalization of hemp and CBD
Hemp is a form of the cannabis plant that contains less than 0.3 percent THC according to long-standing legal guidelines. Prior to the 2018 Farm Bill, hemp production was allowed by specific U.S. states in controlled settings for research purposes. Specific parts of the plant could also be used commercially for manufacturing fabrics, ropes and similar products from hemp fiber.
The 2018 Farm Bill greatly expanded potential uses of hemp with limited THC which is also called industrial hemp or non-psychoactive hemp. The Bill did this, in part, by removing hemp and hemp-derived products such as CBD from the Controlled Substances Act. This decision radically changed hemp’s legal status and removed it from the purview of the Drug Enforcement Authority. The United States Department of Agriculture (USDA) now oversees regulation of hemp production with each state setting its own regulatory guidelines.
Though not all states have completed the process of setting guidelines for hemp production, which means hemp production is not yet fully legal in all states, they are expected to follow-through in most if not all cases. For hemp, that does mean that permits will be required for production but that it is most likely to be fully legal nationwide in due course. For hemp-derived CBD the situation is more complicated.
The Food and Drug Administration (FDA) has made it clear the hemp-derived CBD comes under its purview. Currently, the FDA does allow for the production of hemp-derived CBD but admits that the process needs to be streamlined. However, the guidelines are clear enough that companies operating in states that have completed the regulatory process for hemp can introduce products containing hemp-derived CBD for interstate commerce. In addition, it should be understood that CBD with zero THC derived from specific parts of the hemp plant are already fully legal though they must still comply with FDA product guidelines.
Until the FDA provides more specific guidance, hemp-derived CBD must simply comply with existing guidelines for related substances. In particular, packaging must contain certain information about ingredients and, most importantly, must not include any health-related claims. In addition, a company’s marketing must avoid claiming that hemp-derived CBD has medicinal effects though, as one can see with nutritional supplements, there is sometimes a bit of wiggle room in how such issues can be addressed.
Diamond CBD and the FDA
To fully understand the ramifications of these changes, one can look at the operations of a company like Diamond CBD which is a wholly-owned subsidiary of PotNetwork Holdings, Inc. (OTCMKTS:POTN). Diamond CBD has long been able to offer zero THC hemp-derived CBD in the form of hemp oil or CBD oil before the Farm Bill was introduced and so was able to fully develop CBD research and product creation operations. This approach does open up the possibility of Diamond CBD eventually offering additional CBD products with THC as the opportunity presents itself. However, Diamond CBD is currently focused on CBD products that contain zero THC and are already fully legal.
However, that does not mean Diamond CBD can ignore FDA guidelines. As you can see on the company’s page about CBD, health benefits are mentioned. Note that Diamond CBD is not making the claim that their products will lead to specific health benefits. Yet, they are totally in the clear for providing descriptions of specific studies that do indicate that CBD has health benefits. This is a classic example of satisfying FDA requirements while educating consumers about the known health benefits of CBD.
As with nutritional supplements, consumers can make the connections between CBD research and Diamond CBD products for themselves and draw their own conclusions. This is a well-established legal territory and is easily understood by today’s consumer who typically takes ownership of their health and recreational choices. By offering THC free CBD-infused products, Diamond CBD is also appealing to many consumers interested in CBD who desire no psychoactive effects whatsoever.
So why does the Farm Bill matter?
One may wonder why the 2018 Farm Bill matters to a company like Diamond CBD. The reality is that even though zero THC hemp-derived CBD was already legal, CBD, on the whole, had an aura of illegality to the general public since most forms were considered controlled substances. In addition, most people had not really heard of CBD until quite recently and the passage of the Farm Bill put it on the front page for many potential customers. So the Farm Bill benefited an already legal operation like that of Diamond CBD by spreading awareness and creating a positive branding effect.
In addition, widespread production of hemp means that Diamond CBD will have a much larger range of potential suppliers allowing the company to maintain its current high standards while dropping prices. Given the oversupply of marijuana now seen in states that have legalized pot, one sees that increased production can radically lower costs. That means that Diamond CBD can simultaneously drop prices and increase profit margins. In the long term, Diamond CBD can benefit financially from the Farm Bill while passing on the effects of lower prices to Diamond CBD customers and PotNetwork Holdings investors.
With CBD going mainstream, both Diamond CBD and parent company PotNetwork Holdings have a lot to which to look forward. At this point, the likely reduction in costs brought on by less expensive hemp does not seem priced into POTN stock. Investors should verify for themselves if this is, in fact, the case but it does add to the argument that Diamond CBD’s early adopter status, high-quality production methods and enticing range of products make POTN a stock worth investigating.
