How Hemp-THC businesses are bracing for a near total ban

0:01NPR.

0:06Sierra Juarez:Recreational weed is legal in half of all the U.S. states. But even in places where it's not, you'll still see smoke shops and liquor stores selling things with that signature star-shaped leaf. THC drinks, vapes, edibles, all of those are legal because of a loophole in the 2018 Farm Bill that by partisan legislation allowed a low level of THC derived from hemp. Yeah, but when it's treated in a lab, that low level of THC can end up mimicking the effects of weed. Right. That's how we got Delta 8, Delta 9. I think we're up to Delta 11 now. Probably we'll never see Delta 12. Much like the Fast and Furious franchise.

0:47But instead of an aging cast and a desperate need for new ideas, this collapse is all on the government. Because Congress is putting an end to that loophole with a harsher ban on THC.

1:01Sierra Juarez:This is the Indicator for Planet Money. I'm Adrian Ma. And today I'm joined by Mariana Bacayau, a reporter from WPLN in Nashville. Hey there. Hi, great to be here. And yeah, that ban will mean an end to the hemp industry's most popular products. That's a$28 billion industry that could be gone by the end of the year. A lot of businesses are having to make hard choices. So on today's show, we're taking a trip to Tennessee, where a recent state ban on basically all those hemp-derived THC products has impacted everyone from retailers to farmers. This message comes from LinkedIn. Owning a small business comes with a lot of challenges and means juggling multiple things at once.

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2:49Sierra Juarez:So, Mariana, you're from a state that's already gotten a taste of an economy with the Deltas pulled off the shelf. Right. Here in Tennessee, a ban on most THC hemp products took effect in July. So we're already kind of living in a post-hemp world. Last year, lawmakers here got ahead of Congress by banning full-spectrum CBD and things like smokable flour. Smokable flours. I have an image in my head of what that is, but I'm picturing somebody like just like letting up a daffodil. Not quite. It looks a little bit closer to what you would think of when you think of just regular weed. It's a type of hemp flower.

3:28When you light it, it mimics the effects of weed.

3:31Sierra Juarez:Got it. Anyway, hemp has been a cash crop for a lot of farmers there. Take Lee Crabtree. I met up with him on his farm in Reedyville, Tennessee. He told me that he's had to return to growing more traditional seasonal crops like blackberries. He picks a big one off the vine. It's hard to tell when they're exactly ripe. Usually when the flies are eating it, you know it's sweet. Much of Lee's farm had been devoted to a CBD variety of hemp. But that new state law has made selling his products illegal. So where there were once rows of hemp, Lee now has blackberries and corn. Hoping that it sells good.

4:12And inside, Lee still has an industrial kitchen from when he made his own CBD goodies. Now his wife Stacy is using the large stainless steel counter to chop grapes for her chicken salad.

4:23Sierra Juarez:In the months leading up to the THC ban, she started selling her chicken salad and pimento cheese sandwiches at a farmer's market up the road. Stacy likes to cook. I don't know how much longer she liked to cook when she has to do it all the time. This new chapter of their business is all about trying new things. Like many former hemp farmers, Lee has had to pivot. But he says he's making less money. You know, back when CBD was huge there for a minute, it was really good there for a moment. It had its time in the sun. Lee says he understands the need for greater regulation on an industry that has largely existed inside a loophole.

5:03Sierra Juarez:Lawmakers say these regulations protect consumers who might not know how intoxicating a product is. Here's Tennessee Republican Representative William Lamberth. If someone, you know, buys a Sprite, they expect to get a Sprite, not a beer. If they buy beer, they expect to get a beer, not a bottle of tequila. If they buy a bottle of tequila, they expect not to get a Sprite. And so we wanted customers out there to know exactly what they were getting. But even if farmers likely agree with the logic, they worry the law has gone too far in overcorrecting. If Lee's more traditional crops don't sell, he says he'll be looking for a job.

5:35That's also the reality for employees of larger hemp companies who have been laid off because of the new regulations. Other companies are moving across state lines to North Carolina.

5:45Sierra Juarez:Like Emily Schaeferick. Her company, Burning Acre, moved from Columbia, Tennessee to North Carolina to keep growing. To uproot your entire retail manufacturing and wholesale supply chain to another state is definitely racks up a little bit of a bill. But even as Emily prepares to commute nearly 300 miles between her home state and the new growing site, she says she's been lucky in navigating the new law. Many other businesses have had to close entirely. And there's a bigger threat on the horizon for companies that have moved. They could uproot their whole business, only to find the industry is completely decimated this December.

6:23That's when that national ban on those THC hemp products is poised to take effect. I've described it as an extinction-level event. That's hemp economist Beau Whitney. He says for the roughly half of all U.S. states where marijuana isn't legal, the ban means basically no THC products on the market.

6:42Sierra Juarez:But for places where marijuana is legal, consumers could still feel the pinch without cheaper alternatives like Delta-8. Because marijuana can only be grown in certain states, while hemp can be grown and shipped anywhere. And so you can develop these massive operations and lower your costs and then ship them throughout the United States. On the marijuana side, they have to set up individual supply chains on a state-by-state basis, and they don't have the economies of scale that hemp does. Economies of scale. And you, our dear Indicator listeners, probably know this. In economics, that's a cost-savings advantage for businesses that produce a lot of the same good, resulting in the cost per good being significantly lower.

7:26And those are savings that companies can pass on to their consumers, making hemp-derived edibles a lot cheaper than their weed counterparts. parts.

7:34Sierra Juarez:Consumers may not be the only ones feeling a pinch under a federal ban. For a lot of state budgets, losing the hemp industry could mean losing a good source of tax revenue. Just here in Tennessee, it's meant a$54 million hole in the state budget. The impact goes way beyond just the cannabinoid industry. Bo says it could put hundreds of thousands of jobs at risk. But there is some hope for these businesses. The White House has urged Congress to delay or revise the ban, And so far, the Senate is on board. Now the House is too. They voted to postpone the ban earlier this month. But these moves would only delay it by a month, from November to December.

8:14That has some Tennessee farmers getting back to their roots, growing a fiber variety of hemp that's used to make everything from rope to packaging to car parts. In Springfield, Tennessee, farmer Bill Corbin is preparing his first crop of fiber hemp for the French company Hemp It. There's not a person in this industry that didn't know this day was coming. Bill says the industry was unsustainable, and he agrees with lawmakers' efforts to tamp down on people using hemp derivatives recreationally. But he's worried about consumers who use it medicinally. Take me, for example. Obviously, I'm an older person.

8:52I have issues with arthritis. I rely heavily on full-spectrum CBD.

9:00Sierra Juarez:Full-spectrum CBD is a big part of the market. And the products left after the ban might not be strong enough for older folks or people trying to avoid using opioids for pain relief. And for a growing number of people, they're embracing the California sober life by switching from alcohol to weed or THC drinks. And this is a federal ban, so that will affect people in states where weed is legal. That is, unless President Trump can convince Congress to reconsider the nationwide ban. Until then, we're looking at a very sober Christmas for half of the country.

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