When the latest edition of the Colorado Business Economic Outlook report was released earlier this month, it briefly mentioned industrial hemp as part of the state's agricultural industry.
Hemp, the less psychoactive cousin of cannabis that's derived from the same plant family, can be used for food, fuel, medicine, rope, as a plastic substitute and textiles. The report noted hemp was "taking root in some fields" in the state, including plots of lands previously planted to alfalfa or left unused now being planted with hemp.
"Questions still remain as to whether the hemp industry has the processing facilities to process the 31,000 acres of hemp in fields and the 4.6 million square feet indoors now planted in Colorado, and whether the 2018 Farm Bill will designate hemp as an agricultural crop," the report notes.
Well, we now know the answer to the last part.
President Trump signed the 2018 Farm Bill (officially called the Agricultural Improvement Act of 2018) on Dec. 20, which helps continue funding the country's agricultural industry. It's a bill that's passed every five years or so -- the last one was passed in 2014 -- but this year's edition included a provision removing hemp from the Controlled Substance Act.
Or in other words, it legalized hemp.
This is a big deal in Colorado, where the decision is opening up potentially lucrative opportunities. It's part of what prompted Sanitas Peak Financial, a Denver-based venture capital and private equity firm, to announce last week it was launching a $50 million private equity fund. The fund will provide investment opportunities for the industrial hemp industry, which is poised for growth after the bill's signing.
While the Colorado Business Economic Outlook didn't give specific projections for hemp, the Cannabis Business Times reported in September this market could balloon to $22 billion nationwide by 2022 with the Farm Bill's passing. The growth is tied to CBD oil, which comes from hemp plants.
Sanitas Peak Financial spokesperson Erin Passan said the first phase of the fund will involve raising the $50 million, which can come from investors across the country and be made available for companies across the country as well.
Yet Passan said hemp farms, manufacturers and distributors in Colorado likely have an upper hand since hemp production has been legal here longer than most other states.
"They are looking to raise $50 million that will likely go to work for local markets because it's been here for a longer period of time," Passan said. "You might imagine that Colorado companies have a first-mover advantage because they have been here longer."
Passan said the firm's founding partners have been working in the industry for the past couple of years. She said Sanitas Peak Financial was founded about two years ago in Denver.
A private equity fund works by raising money from investors then providing the money raised to other companies through either debt (like a loan) or equity (taking part ownership in a company) with the ultimate goal of generating a return for those who invested in the fund.
The fund will invest in several areas related to industrial hemp including farming, extraction, processing, laboratory testing and distribution. A release from the firm said its partners Zeid Masri, E. Nicholas Mortimer and Charles Wellso will be leveraging "their extensive background" to provide financing and business consulting services helping hemp farmers, farmers, manufacturers and distributors to streamline their operations.
"We have an intimate understanding of the challenges faced by hemp producers and believe that a hands-on investment approach can help each of our portfolio companies thrive, while unlocking the incredible potential of industrial hemp," Wellso, Sanitas Peak Co-Founder and Managing Partner, said in the release.
After the Farm Bill's passing in the Senate this month, Sen. Cory Gardner issued a statement praising the bill. Gardner worked to add provisions in the farm bill he believed would help the state's agriculture community, including pushing to make industrial hemp legal "to make sure Colorado farmers are free to use their land how they see fit."
"I look forward to using it to help our rural communities, our farmers and ranchers, survive and thrive well into the future," Gardner said in a video statement.
During the November election, Colorado took a major step toward ensuring the local hemp industry would benefit from a proposed change at the federal law.
When Amendment X was passed by Colorado voters, it removed the state's definition of industrial hemp from the constitution, which was outlined after the state legalized recreational marijuana in 2012. The change allows the state to use the feds' definition of hemp.
