Considerations, Rules and Processes for Growing Industrial Hemp in North Carolina

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The N.C. General Assembly passed Senate Bill 313 in 2015, allowing the Industrial Hemp Commission to develop the rules and licensing necessary to stay within federal laws. The law was modified in 2016 in House Bill 992 and temporary rules developed were approved by the Rules Review Commission of the Office of Administrative in 2017. Furthermore, the 2018 USDA Farm Bill transferred regulatory authority of industrial hemp from the DEA to the USDA. As such, greater interest in the crop has emerged.

Data is very limited for production, processing or marketing within this area. In fact, one goal of the NC Industrial Hemp Pilot Program’s is to determine whether hemp production could be a viable crop within North Carolina. As such careful planning and risk management is advised.

Below are some points to consider in planning and resources that will be helpfully listed by topic categories.

Types of Hemp, Production and Potential Profit

  • One of the first choices an individual must make is which type of production is desired. Hemp is grown for fiber, seed (oil and food) and floral harvest (CBD oil). Each type of production has specifically bred plants, equipment, costs, potential profit margins, and risks. One cannot successfully “merge” the production or type of plants to harvest fiber, floral parts and seed. No NC State University data is currently available to compare varietal performance. University of Kentucky’s Industrial Hemp Agronomic Research is perhaps the nearest state that might provide such.
  • Currently, potential profit on a per acre basis is likely the least for fiber and the most for floral harvest. Seed production is likely between the two. This distinction in potential profit is driven by consumer demand and may change. One must also consider that even within a certain type of production, prices received varies according to actual yield, quality of product, and contract sales agreement.
  • No pesticides are allowed for any type of production. As such, for now, there are no pesticides labeled to manage disease, weeds, or insects. This needs to weigh heavily on the decision as to which type of hemp to grow. As examples:  1) placement of any production where weed control cannot be obtained will likely result in failure should weeds overtake the crop; 2) the corn earworm is an annual pest within this region and will commonly feed on hemp and, 3) diseases are common in greenhouse or field production. Expect insect and diseases to reduce yield. Images of the known pest are found at NC State Extension’s Industrial Hemp webpage.
  • There are no published production guides, official variety test results or other production information that N.C. Cooperative Extension can provide. Research is still too limited to offer such. Information will have to be obtained from regional meetings or gleaned from information posted NC State Extension’s Industrial Hemp webpage.
  • There are no existing N.C. Department of Agriculture and Consumer Services marketing or quality standards. Until such is developed, a producer assumes all risks.

Who Can Obtain a License to Grow Hemp

  • One must apply for a license to grow industrial hemp. Part of this process requires the applicant to designate the amount of production (acres or square feet if grown in a greenhouse), exact GPS coordinates of the production area, and whom will purchase the hemp. Thus, one must research production AND marketing before making an application. The application and licensing process are regulated by the NCDA&CS Plant Industry Division. Once approved, any change in production or marketing must be provided to the NCDA&CS Plant Industry Division within 30 days. Thus, one must plan carefully. It may take quite a bit of research, market development, field location or even a small financial investment prior to completing the application process.
  • Only individuals that can show that they are a part of an existing farming operation that is profitable can currently be licensed. Acceptable forms of evidence of farm income are:
    • Schedule F of the Form 1040, U.S. Individual Income Tax Return;
    • S corporation filers, Page 1 and Schedule B, of the Form 1120S U.S. Income Tax Return;
    • C corporation filers, Page 1 and Schedule K, of the form 1120, U.S. Corporation Income Tax Return;
    • Page 1 of the Form 1065, U.S. Return of Partnership Income and Schedule F of the Form 1040, U.S. Individual Income Tax Return (for partnerships).
  • Applicants must provide a research objective and be willing to share all data with NCDA&CS and Industrial Hemp Commission. Data will collectively be used to advance research for production.

Sources of Seeds, Purchasers of Hemp or Processors

Potential Research Ideas and Sharing

Below are examples of reasonable research ideas intended to provide ideas as to what is meant by “research” on the application. Other ideas are welcome and encouraged. For all of these research projects, remember that accurate records must be kept and shared. Keep this in mind so that record keeping and evaluation is not too complex.

  • Vary planting dates of one or more varieties to determine yield response by planting date
  • Vary nitrogen (N) rate, timing or source to determine potential yield response
  • Plant multiple varieties to determine varietal performance
  • Compare transplant method using existing tobacco equipment to plants grown on plastic
  • Plant one variety on multiple row spacings

Monitoring THC

  • THC levels of all hemp production will be tested. Expenses for testing are the responsibility of the grower. When the crop begins to flower one should let NCDA&CS know via designated email.
  • Request for THC testing is by email only. Those calling for appointments will be directed to the NC Industrial Hemp Sample Request Form 
  • If hemp production exceeds 0.3% THC levels, the crop will be destroyed.
  • Agreement to licensing provides access to plantings and storage for NCDA&CS personnel and local law enforcement at any time without prior warning.

Transporting Hemp

  • Current changes to the US Farm Bill transferred regulatory oversight of hemp from DEA to USDA. States will have to submit their proposed program rules to the USDA to get approved to operate a hemp program under USDA guidance. Thus, until such occurs, the existing NC Industrial Hemp Pilot Program regulations and process still applies.
  • THC testing is still required under the farm bill. However, now that hemp is no longer a Schedule 1 Drug, interstate transportation restriction for industrial hemp should be negated. Commercial shipping should be allowed.
  • Currently, transport of any hemp plant or product still requires a license agreement present with transport.

 Additional Resources & Information

Keep in mind that the primary purpose of the Industrial Hemp Pilot Program is to determine whether or not industrial hemp can be successfully grown within NC. As such, there is still much we do not know or understand. Just as with tobacco, we may find that it can indeed be grown but quality and yield may vary by region,  soil types or climatic factors. Again, today, we simply do not have answers. Also realize that changes in the USDA Farm Bill may result in a rapid expansion of processing, and marketing efforts. This process and expansion might even exceed the pace of establishing regulations or standards and processes. As such, caution is advised to make sure you understand the current regulations, individuals with whom you may enter into business contracts, and full understanding of risks.