Editorial Coverage: Hemp may be taking the first steps to
overtake tobacco as a leading industry in Kentucky.
Sugarmade Inc. (OTCQB: SGMD) (SGMD
Profile) is among the companies moving into Kentucky,
with a million-dollar investment in hemp growth. Hemp’s national
prominence is growing through deals such as Aurora Cannabis
Inc.’s (TSX: ACB) (NYSE: ACB) collaboration with United
Fighting Championship (UFC). Research work by Tilray Inc.
(NASDAQ: TLRY) may involve using hemp to treat a growing
range of physical and mental ailments. Curaleaf Holdings
Inc. (OTCQX: CURLF) (CSE: CURA) is serving states without
a strong, homegrown hemp industry, such as Florida. In addition,
companies across the cannabis sector, such as Cronos Group
Inc. (TSX: CRON) (NASDAQ: CRON), are diversifying their
product ranges as more hemp crops come online.
- Once the hemp heartland of the United States, Kentucky is
rebuilding this lost industry following recent legislative
- Both tobacco farmers and specialist hemp companies are
contributing to the boom.
- The trend appears to also be profitable for companies providing
support services, such as CBD extraction and hydroponic
To view an infographic of this editorial, click here.
A Surprising State
In some ways, Kentucky is a surprising place to see a hemp boom.
Conservative lobbyists in the state have consistently resisted
legalization measures for related plants, despite the wider growth
of the industry. Given the “thin end of the wedge” arguments
wielded against drug reform, the hemp industry might have expected
to face a cold response in the state.
Yet the state’s hemp sector has deep roots. During the 19th
century, Kentucky was the largest producer of hemp in the United
States, producing three-quarters of the nation’s hemp fiber. As
hemp production went into decline following the First World War,
tobacco took its place as a major cash crop for the state. However,
tobacco now faces challenges of its own. With hemp production made
legal on a federal level for the first time in nearly half a
century, Kentucky has once again emerged as the country’s leading
Kentucky has become a go-to state for companies with an interest
in hemp, such as Sugarmade Inc.
Since federal legislation allowed the production of hemp at test
sites in 2014, Kentucky has taken a leading role in the industry.
The Bluegrass state was one of only three states to exceed 100
acres by 2016, and research permits were issued for more than
12,000 acres in 2017. By the time the 2018 farm bill proposed the
legalization of hemp across the United States, Kentucky hemp
growers were becoming a powerful lobby. They won the support of the
state’s politicians, helping to push national legislation through
Sugarmade’s involvement in Kentucky comes through, at least in
part, a million-dollar investment in Nevada-based Hempistry Inc.
Hempistry has begun growing high-grade
hemp on a 23,000-acre land option it holds in Kentucky. High in
cannabidiol (CBD), an active ingredient in high demand for wellness
products, this hemp offers a chance to maximize earnings from the
land and set down roots for larger operations in the state.
Commentators watching the development of hemp in Kentucky have
speculated that plant could overtake
tobacco, once the state’s leading cash crop. A growing number
of savvy tobacco farmers have started growing hemp on part of their
land, hedging their bets against the decline in tobacco sales. Hemp
certainly appears to be a natural alternative to tobacco for these
farmers, as it can be grown in similar conditions and sold into
Consequently, the Kentucky hemp industry is already turning into
a large and diverse one, driven by two separate trends. One is the
need of farmers for new crops, as declining tobacco sales and the
pressure of trade wars impact their profits. The other is the
emergence of companies with a focus on hemp and related crops, such
as Sugarmade. These companies provide specialist tools and
invaluable knowledge, while the farmers bring decades of experience
growing crops in the region. Old and new knowledge combine to build
a booming industry.
Looking to buoy up the economic health of their state,
Representative James Comer and Senator Mitch McConnell have pushed
the hemp agenda at a national level, creating the space for
Kentucky’s hemp industry to thrive. McConnell has been particularly
crucial, using his position as majority leader to advocate for hemp
reform, including publicly reinforcing his support for the industry
through a tour of the
state with Sonny Perdue, head of the U.S. Department of
Agriculture (USDA). With this growing federal support, Kentucky
hemp growers appear to be making long-term investments, confident
that politicians will ensure a friendly business climate.
Providing the Fundamentals
Of course, it takes more than political goodwill to make an
industry grow. Suppliers providing tools and materials to support
the fundamental activities involved in the industry are crucial.
This need is what attracted Sugarmade to the industry and is still
the bedrock of the company’s hemp strategy.
Sugarmade entered the hemp space as a supplier of hydroponic
equipment. Hydroponics are essential to the hemp market. While some
hemp is grown outdoors, much is grown indoors, where greater
control can be asserted over growing conditions. Hydroponic systems
are used for this indoor agriculture, and Sugarmade supplies some
of the best available systems available. In addition, the company
is looking forward, exploring the use of
artificial intelligence to monitor crops and ensure the best
Agricultural supplies are one of the bottlenecks in the hemp
industry. The sector has grown so quickly that suppliers have struggled to keep up. These
circumstances have created what appear to be ideal conditions for
Sugarmade, as demand for its core products seem to be all but
ensured, allowing the company to expand by acquiring
other firms. This savvy pick-and-shovel strategy has taken
Sugarmade beyond its original strategy and into the Kentucky
cultivation sector through the investment in Hempistry.
Supplying producers has given Sugarmade space to diversify. In
addition to hydroponics, SGMD now sells extraction
equipment. This is used by hemp growers or specialist
processing companies to extract the CBD from hemp, so that it can
then be sold to manufacturers as a raw ingredient. Sugarmade’s
future plans include the introduction of new types of processing
machines, aimed to keep the sector innovating and moving forward
and also strengthen the company’s position as a leader in the
Subsidiary services such as extraction are one more reason why
hemp may grow in importance to surpass tobacco. These services
provide extra forms of employment and an extra boost for a state
such as Kentucky. The state’s workers and tax base benefit not just
from hemp farming but also from agricultural supplies, processing
businesses and the entire supply chain of hemp and CBD products, a
chain that looks set to only expand as the industry continues to
see extraordinary growth.
The Hemp Boom
Big players from related industries are also making use of hemp
to broaden what they offer as well.
Aurora Cannabis Inc. (TSX: ACB) (NYSE: ACB)
recently acquired Hempco Food
and Fiber Inc., a company it has been investing in since 2017.
This provides Aurora with a high-volume supply of raw hemp from
which it can extract cannabidiol for use in a wide range of
products. The company is also working to raise the profile of hemp
and find new ways to use the it. At least part of these efforts are
being accomplished through a partnership with
mixed martial arts company UFC. Aurora’s products and
discoveries are designed to be used to help UFC athletes manage
pain relief, tackle muscle strains, and enjoy the rest and
relaxation they need between fights. As well as drawing attention
to Aurora and hemp, the collaboration may prove invaluable insight
into what CBD can do for professional athletes.
A pioneer in the use of cannabinoids, Tilray Inc.
(NASDAQ: TLRY) is a company with a heavy focus on
research, contributing to studies around the world. The company has
recently gained permission from the U.S. government to import CBD to the states for clinical trials at the NYU
School of Medicine. These studies will explore the
effectiveness of CBD in treating patients suffering from Alcohol
Use Disorder (AUD) and AUD with Post-Traumatic Stress Disorder
While regions such as Kentucky are seeing a hemp boom, others
have yet to see such growth and remain underserved for CBD
products. Curaleaf Holdings Inc. (OTCQX: CURLF) (CSE:
CURA) is focused on these areas, taking the opportunity
provided by unmet demand. States such as Florida, Massachusetts,
New Jersey and New York have limited licensing and large
populations, making them ideal settings for this strategy. Curaleaf
is about to open its 26th
dispensary in Florida.
Cronos Group Inc. (TSX: CRON) (NASDAQ: CRON) is
working to strengthen its position in the hemp market through the
recently completed acquisition of four
subsidiaries of the Redwood Holding Group. This adds a range of
hemp-derived consumer products to Cronos’s lines, giving it more
prominence in the market.
The hemp boom isn’t limited to Kentucky, but with growing
political and corporate support, the state appears set to return to
its former place as the U.S. hemp leader.
For more information on Sugarmade, visit Sugarmade Inc.
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