Copyright © 2019 Albuquerque Journal
One year ago, Jeff Apodaca was vying with then-Rep. Michelle Lujan Grisham for the Democratic nomination in New Mexico’s gubernatorial race. Today, he’s investing in what he says is likely to become “the next great agricultural leader in our state”: Hemp.
“Pretty soon, when you talk about New Mexico, you’ll be talking about green chile, pecans and hemp,” Apodaca said.
Hemp, also known as industrial hemp, belongs to the cannabis species of plants like marijuana. The plants can appear nearly identical, but hemp varieties contain only trace amounts of psychoactive components and do not cause a high. That makes it ideal for extracting cannabidiol – more commonly known as CBD – for medical, health and beauty products.
Hemp can also be used for food, fabric, rope and biofuel, among other applications.
Hemp was legalized nationally in December with Congress’ passage of the Farm Bill, and the New Mexico House Bill 581, passed during the recent legislative session, authorizes several agencies to regulate the industry here.
Now New Mexicans are hurrying to capture part of what cannabis market research firm New Frontier Data estimated will become a $2.6 billion industry nationwide by 2022.
Apodaca was hesitant to disclose little more than that he is creating a hemp-focused company and is investing in related businesses with several partners. His interest in the plant stems from his experience with CBD oil, which he said allowed him to abandon a regimen of three to four Vicodin a day a few years ago after a debilitating back injury.
He and others describe the state’s burgeoning hemp sector as a “gold rush,” one that is attracting investors with varying degrees of sophistication.
“The hemp industry is bursting with potential,” Gov. Lujan Grisham said in a recent news release.
“As we do the work to diversify our state economy, hemp can and will play a key role.”
Which of the prospectors will reap the riches of this treasure hunt, if any? Brad Lewis, a division director at the New Mexico Department of Agriculture, said that will depend on any number of variables.
“There are no guarantees in this business at all,” Lewis said.
While people have grown hemp in the Southwest for centuries, it is only in the past few months that New Mexico has created the regulatory structure around a formal hemp industry.
The Farm Bill decriminalized cannabis varieties containing less than 0.3% of the psychoactive compound THC, providing the framework for the state’s agriculture department to begin issuing hemp-growing licenses in December.
New Mexico’s recent House Bill 581 created additional regulations, including ensuring that businesses would not be punished if the THC level rose temporarily during hemp processing.
As of April 15, the department issued 93 hemp-growing licenses and had 38 applications pending, according to information obtained by the Journal. Of the 93 licensees, 52 are for “continuous grow” operations, or those that will maintain a crop throughout a year. The remaining 41 are for annual grow operations. Nearly all of the licensees are associated with New Mexico mailing addresses, with a sprinkling from Arizona, Colorado and Texas.
Still, Lewis said, the regulatory issues in play with those licenses are far from resolved. For one thing, it’s not clear how the interstate commerce issues around hemp will be handled nationally. The state also has yet to submit a report to the federal government describing its regulation plan in detail, and the United States Department of Agriculture’s rule-making process will require time and stakeholder input.
Sovereign nations and tribal entities can also submit regulation plans. At a committee hearing during the recent legislative session, New Mexico Department of Agriculture Secretary Jeff Witte said the Navajo Nation had expressed interest in both hemp cultivation and processing operations.
One issue all parties are likely to monitor closely: how the state handles hemp crops that “go hot,” or have their THC levels spike above the 0.3% threshold before they are processed. According to Lewis, that can happen for any number of reasons, including unstable plant genetics, environmental factors and cross-pollination from nearby high-THC plants.
While the industry wants to sell such plants to the state’s medical marijuana producers, or have access to some form of financial relief, current regulations require hemp farmers to destroy their crop and lose thousands or millions of dollars in the process.
The green chile theory
Duke Rodriguez, CEO and president of Ultra Health, New Mexico’s largest medical marijuana producer and the parent company of Ultra Hemp, said that without resolving the hot crop issue, hemp investments will be “a very win-lose type of thing.”
“There’s very little margin for error,” Rodriguez said. “Nobody penalizes a green chile grower for having chiles that are especially hot one season.”
The green chile analogy has extra meaning for Rodriguez. He said there is some indication hemp and green chile plants prefer similar growing conditions.
He hopes studying the parallels between the two crops may lead to an answer to what he calls “the million dollar question”: How might requirements for hemp cultivation differ from requirements for cannabis cultivation in New Mexico?
The answer isn’t clear in this state, which unlike hemp-growing vanguards such as Kentucky and Tennessee, doesn’t have a long history of growing tobacco on an industrial scale. The cultivation of tobacco is somewhat similar to that of hemp.
For Ultra Hemp, it is quite literally the million dollar question.
Rodriguez said the company is experimenting with about 500 hemp plants and has spent $1.1 million on its Tularosa hemp- and cannabis-growing operation alone. Ultra Hemp also has cultivation facilities in Bernalillo. To diversify its investments, the company is looking at both CBD extraction and fiber production as end products.
While Rodriguez said he believes cannabis organizations with an existing New Mexico footprint have an advantage in the state’s newest industry, he also said farmers have a breadth of agricultural knowledge the medical marijuana producers don’t have.
“The smartest thing may be collaborations between cannabis farmers and cannabis companies,” Rodriguez said. “No one is going to figure this out by themselves.”
The path to profit
Gemma Ra’Star, founder of Wumaniti Earth Native Sanctuary, has grown hemp in New Mexico for years under a religious freedom law frequently used to defend plant-based sacraments.
Ra’Star said she is “excited” the industry is growing but feels that individuals are focusing so much on cultivating hemp that they aren’t thinking about what is required to process it at the industrial level: either their own machinery or partnerships with those who have it.
Mikki Anaya shares similar concerns. Anaya is the founder of Industrial Hemp Ventures, LLC, a hemp education and advocacy organization.
In addition to the processing issue, she believes New Mexicans have such outsized interest in CBD – which has driven the bulk of growth in the U.S. hemp market in recent years – that the industry here may become oversaturated, driving CBD’s price down. Anaya said she believes industry experts who say the price of the substance will peak here in five years.
“Everybody is really thinking CBD is where they’re going to get rich,” Anaya said. “But the price is all over the place … and there are companies out there making all sorts of unfounded claims about (the medical properties) of CBD.”
Those who sell CBD-laced products – everything from lotions to pet treats to vaping cartridges – claim it can be used to help alleviate anxiety as well as pain, inflammation and a host of other conditions.
Because hemp and CBD contain only trace amounts of THC, the products are available without a medical marijuana card and at a wide variety of retailers. While researchers say several applications look promising, the FDA has only approved one CBD drug that treats seizures and has issued warnings to companies that make other claims about the substance.
Michael Segura and Letitia Montoya, like Ultra Hemp, are choosing to diversify their investment by focusing on hemp’s fiber properties as well as CBD. Segura, a former executive at financial services company Wachovia, said their company Nebula Hemp will differentiate itself in an increasingly crowded field by focusing on processing instead of growing.
“Oh, my God, it’s like a free-for-all out here, and every time I turn around there’s a new company,” said Segura, who is based in Santa Fe. “There’s this train coming down the track, and that’s the growers. We want to lay down the railroad.”
Researchers have shown that merchants made more money than miners during California’s gold rush in the 1800s. Only time will tell if the same is true with hemp’s prospectors in New Mexico.