Texas hemp farmers fear full THC ban would nip industry in the bud

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Andrew Hill, who studied and farmed hemp in California before it was legal in Texas, was a keynote speaker at the state’s first-ever agricultural hemp expo in Dallas in 2019. Amid considerable hype and excitement that followed the recent federal legalization of hemp, Hill tried to warn farmers that the industry wasn’t as profitable as state officials and seed vendors were pitching.

“There were guys running around telling farmers they could make $2,500 to $3,000 an acre on hemp. Being an actual farmer, not trying to sell seeds or clones, I couldn’t help but burst out laughing,” Hill said. “Everyone looked at me and asked what was so funny, and they gave me the mic and I said, ‘Ladies and gentlemen, I’ll tell you right now — I haven’t seen over $1,000 an acre since 2015.’”

Still, Texas lawmakers embraced the opportunity hemp presented in 2019, legalizing hemp products of the cannabis plant with less than 0.3% of THC, the psychoactive component in marijuana. Hill’s Texas Star Hemp Farms was among those to make the investment necessary to profit from hemp, including owning almost all the means of production and sales and spending millions on seeds, licenses and facilities.

Six years after that initial rush, industrial hemp farming in Texas stands on the brink. Senate Bill 3, which would ban any consumable hemp products that contain even trace amounts of THC, could destroy what farmers like Hill have built.

“Now, considering things like hemp hearts, hemp seed oils, salad dressings, and those health products that don’t have any cannabinoids in them to get you high, [they] will still be illegal under this law,” Hill said.

Hill is one of about 450 licensed hemp producers in the Texas Industrial Hemp Program at risk of losing a chunk of their livelihoods as Texas lawmakers have prioritized banning tetrahydrocannabinol, or THC products. Farmers say there is no way they can produce hemp without traces of THC, even for non-consumable products like clothing and paper, meaning SB 3 could deliver a death blow to the industry.

The GOP-controlled Legislature authorized the sale of consumable hemp a year after it was legalized nationwide to boost Texas agriculture by allowing the commercialization of hemp containing trace amounts of non-intoxicating delta-9 THC.

What ensued was a proliferation of hemp products, such as gummies, beverages, vapes and flower buds, sold at dispensaries and convenience stores across the state. Sen. Charles Perry, a Lubbock Republican who carried the 2019 hemp legalization bill, says such uses exploit a legal loophole and put children in danger.

His SB 3 attempts to correct this by penalizing violators who knowingly possess THC products with a misdemeanor that can carry up to a year in jail and 2 to 10 years in prison for manufacturing or selling them. The measure, which was approved by the Senate, also bars marketing and sales of consumable hemp to minors and requires all legal products to be sold in tamper-evident and child-resistant packaging.

Like SB 3, House Bill 28 would ban synthetic THC and products like gummies and vapes. But the House’s proposal focuses more on tightening regulatory loopholes, allowing hemp-infused beverages and assigning the alcohol industry to regulate products, as well as limiting the consumption of such products to those 21 years or older and implementing advertising regulations.

"This regulatory structure will also maintain the federal restriction on THC of no more than 0.3%, as well as limiting the amount a person can buy in a single day to 10 milligrams,” said state Rep. Ken King, R-Canadian, sponsor of the bill.

If the House passes its proposal, the two chambers must reconcile their differences for the legislation to become law. The House hasn’t taken up either of the hemp bills for a vote.

In public hearings, lawmakers heard from parents whose children were sickened by products containing dangerous unregulated forms of THC, and Lt. Gov. Dan Patrick said he will move to force an overtime session of the Legislature if lawmakers fail to pass the ban.

"Kids are getting poisoned today," Patrick told the Senate earlier this year.

A blow to farmers

Kyle Bingham describes himself as a niche big farmer. Over the past several years, his more than 2,000-acre farm has been primarily dedicated to cotton and grapes. Five percent or less of its acreage has been dedicated to hemp.

“We’ve done everything from peanuts to sesame seeds to garbanzo beans and blue corn, so rotating hemp into our process was pretty natural,” Bingham said.

Bingham said his first hemp crop brought a reality check that curbed the early hype and enthusiasm.

“When we got interested in selling hemp biomass, it was about $3.50 a pound. We assumed the price would drop by the time we got to market to below $2 a pound. But in reality, it dropped to about 80 cents a pound. There was a massive oversupply issue,” Bingham said.

Texas was years too late for farmers to see profits from the initial hemp boom, and an oversaturated market with little profit has remained.

The state projects SB 3’s financial impact would be a $19.3 million loss of general revenue-related funds, less than 1% of the state’s revenue over the biennium, including an annual loss of $450,000 for counties and $610,000 for transit authorities by 2027. The primary revenue loss will be due to the closure of THC businesses, leading to a decline in taxable sales revenue. Cities are projected to lose $2.1 million a year by 2030.

"We are urging the Texas House to carefully consider the consequences of SB 3 and HB 28 on the tens of thousands of small businesses, farmers, and consumers who rely on the hemp industry,” said Cynthia Cabrera, president of the Texas Hemp Business Council and chief strategy officer at Hometown Hero.

No state analysis addresses HB 28's or SB 3’s financial potential hit to Texas farmers if they must abandon production under a total THC ban, as the Senate bill proposes.

“There is not a single fiber of hemp that meets this” THC-free criteria, Hill said.

Agriculture Commissioner Sid Miller said the Texas hemp program had around 1,200 farmers interested in 2019. Of the roughly 450 licensed hemp producers today, 166 applied for a permit to grow hemp during the past 12 months.

After his early enthusiastic support of hemp — calling it “one of the most exciting new prospects for Texas farmers in a long time” in an introductory video — Miller now speaks with the benefit of hindsight.

“We planted too much and had way too much product and no place to market it,” Miller said.

Miller said the cratering hemp market in Texas is the reason why he believes the proposed ban on THC products will have little effect on farmers: Most of them have already given up anyway.

“Farmers are not interested. This is not a complicated issue,” Miller said.

Zach Gauger, director of sales for Caprock Family Farms, one of the largest hemp producers in the state, told lawmakers last week that despite the early struggles, the industry is now valued in the billions, putting it among the state's top commodities due to the investment of those who stuck around.

“The hemp industry is sitting just behind the cattle industry ... and this bill will make it impossible to grow hemp as an alternative crop to be profitable,” Gauger said. “I have seen farmers all around our area show interest in growing this plant, but they are worried about failing a test, or how to sell it, or not having the facilities to send it to be processed.”

Gauger said research has shown that after the Ogallala Aquifer, which the Great Plains of Texas relies on, runs dry in 20 to 25 years, the investment in hemp will be seen as a choice of survival for farmers.

“The time to diversify is now,” Gauger said. “Hemp extraction and consumption give us a way out of this cycle, not fiber.”

If fully unleashed, hemp is one of the more versatile crops for farmers. It can be used for industrial fibers and to produce CBD, which doesn’t induce a high like THC but has been studied for possible therapeutic effects. The grain can also be used for animal feed and to make hemp seed oils, clothing, biodegradable plastics and more.

Successful hemp farmers, primarily small organic operations that grow hemp for CBD production, can make $500 to $800 an acre, leading to thousands in monthly revenue if they do quick harvests and sell to processors. Farmers like Hill, who control both the production and sales side of hemp byproducts, can make more than $10,000 a month.

However, it can take years of reinvesting small profits into buying the cleaning and processing equipment needed to make the larger profits. The Texas hemp industry is just now starting to see some stability due to these efforts, but the state is now threatening all of this.

“If House Bill 28 passes, I won’t be able to operate in Texas anymore. My business model and every product I sell will be made illegal overnight, but I won’t shut down — but move my operations to a state where this industry is treated with the regulatory respect it deserves,” Kallan Salganik, a hemp manufacturer for Salganik Services Inc. told lawmakers in a House hearing earlier this month. “And with that move, Texas loses jobs, tax revenue and the economic ripple effect that comes with [lost] local business activity.”

Some Texas lawmakers maintain that the ban on THC will only hurt the consumable hemp retail industry. But farmers say the plant naturally has THC that can’t simply be removed, meaning this law could lead to the elimination of products that contain hemp seeds or oils that have been on the market for years.

“This whole debacle is a lack of understanding of organic chemistry,” Hill said.

For Texas farmers, industrial hemp is primarily an export crop. Texas lacks processing facilities for fiber or grain hemp crops, and the rules already in place limit what they can do with the crop beyond CBD products.

“We could go into the animal feed market with this hemp grain. It’s very nutritious and great for chickens and cows. But there are no rules for it in Texas, so we can’t touch the animal feed market,” Bingham said. “We were able to start making some progress on those rules recently, but until we have that, we are just kind of sitting here spinning our wheels.”

Alternatives to banning THC

Hemp planting season is upon us, but farmers are hesitant to plant because SB 3 doesn’t clearly state whether hemp already planted will be protected if the bill passes. Farmers could face felony charges in the fall for a crop that was legal in the spring.

“We’re looking at an industry that, we hope, is recovering and could provide value to the state, both from an economic impact and also creating jobs. We’d like to see all that hard work pay off, but we’re in a position where I’m not risking a felony for it. I’ll walk away before risking a felony,” Bingham said.

Under SB 3, a person can commit a misdemeanor by purchasing or possessing a consumable hemp product not registered with the state of Texas. Growers who don’t pay the $500 permit application fee and get approved to grow hemp could face a third-degree felony.

Bingham said the bill won’t address what lawmakers say is the central issue: stopping cannabis from getting into children’s hands. Bad actors, he said, “will still be able to find loopholes to continue doing what they do, and they’ll keep going. It won’t change anything.”

Instead, Bingham said, the THC ban will nip the industry in the bud.

“It will kill everything. The grain industry, supplements, oils will all be killed under this bill because people do not understand — including the politicians who wrote this bill — don’t understand the chemistry of hemp.”

Perry did not respond to calls for an interview or emailed questions about the bill and protections for hemp farmers.

Multiple mothers told lawmakers last week during the Committee on State Affairs that THC vape pens, which can contain harmful chemicals in addition to hemp by-products, are dangerous for young people.

Chandel Strickland’s son was diagnosed with cannabis-induced psychosis.

“He was an athlete on a full-ride scholarship and an engineering major. He looks nothing like this today,” Strickland said. “He is now a 22-year-old struggling with addiction to THC. He had to medically withdraw from school because he simply didn’t have the cognitive ability to continue with school.”

Farmers say the answer to ensuring the safety of hemp products is straightforward: Create regulations for hemp CBD products similar to what was done with vapes a few years ago. In Texas, an individual must be at least 21 years old to legally buy e-cigarettes or vape devices and in 2023, lawmakers banned vape packages with images of fruit, juice, and cartoon characters.

Bingham said THC is in the same boat.

“The lawmakers didn’t regulate it, and now they’re unhappy with how it’s on the shelves. There weren’t a lot of rules. They didn’t put age limits on it. They didn’t put rules about child-proofing or child-resistant packaging,” Bingham said. “A large part of this industry has been asking for it, and we’re not getting it.”

Texas should further regulate retail sales of hemp, Bingham said, instead of banning THC and eliminating all agricultural production.

“Do we want to give up everything we have built in hemp? I don’t think that is the answer,” he said.

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Texans seeking help for substance use can call the Substance Abuse and Mental Health Services Administration’s free help line at 800-662-4357. They can also access services in their region through the Texas Health and Human Services website.

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