USDA is giving some farmers an ultimatum: Grow hemp or marijuana

American farmers seized the opportunity to grow hemp after it was legalized in the 2018 farm bill, hoping the potentially lucrative crop could help keep their businesses afloat.

But now, the U.S. Department of Agriculture is revoking hemp licenses for some farmers who have also chosen — in states where it’s legal — to grow hemp’s federally illegal cousin: marijuana.

Some farmers say the USDA’s interpretation of federal law has yanked a financial life raft from under them.

“It was definitely a huge blow to our business,” said Sam Bellavance, a cannabis farmer in Vermont who had separate licenses to grow both marijuana and hemp before USDA rescinded the latter earlier this year.

Bellavance estimates that he will lose at least $250,000 in revenue due to the license revocation.

The inconsistency between federal and state interpretations of the 2018 farm bill reflects the larger challenges hemp and marijuana farmers face in an emerging market where two nearly identical agricultural products have very different legal statuses. Even though more than half of Americans now live in a state where adults can legally possess weed — and 70 percent of Americans support marijuana legalization — under federal law it continues to be classified as a highly dangerous drug with no medical applications, the same as heroin.

Hemp industry officials complain that lack of legal and regulatory clarity from the federal government has scared off retailers from selling hemp-derived products and tanked the price of the crop.

That’s led farmers to dramatically reduce cultivation levels. In 2019, farmers planted 275,000 acres of hemp, but that plummeted to just 21,000 acres last year, according to Hemp Benchmarks.

USDA’s moves to rescind hemp licenses is further roiling the market.

“It’s just another example of the absurdity of keeping a substance, for which now 55 percent of Americans live in a jurisdiction where it’s legal, federally illegal,” said Tim Bryon Fair, who founded the law firm Vermont Cannabis Solutions. “It’s insane.”

Bellavance is just one of many farmers in at least two states — Vermont and Mississippi — who lost their hemp licenses this year after entering their state’s regulated marijuana industry, POLITICO has learned. Another hemp grower in Missouri said USDA informed him in April 2023 that he would lose his hemp license if he applied to participate in the state’s newly legal marijuana industry.

But in contrast, several state-run hemp programs — which are approved by USDA — have continued to license farmers who also grow marijuana under licenses from their states.

USDA declined to answer specific questions about its decision to rescind certain hemp licenses, but a spokesperson said that the issue remains complicated by marijuana’s federally illegal status.

“While the 2018 Farm Bill legalized hemp production, marijuana remains a Schedule I controlled substance under federal law,” said USDA spokesperson Allan Rodriguez in a statement. “This presents a unique jurisdictional and regulatory landscape that producers of more traditional agricultural commodities do not have to navigate.”

Rodriguez added that USDA remains “committed” to helping farmers learn about hemp-related rules and connecting farmers with research, risk management and conservation tools.

USDA also said that the department oversees “all states and growers in the [hemp] program in the same way,” despite apparent discrepancies in how the licensing is enforced.

USDA approves state hemp programs as required by the 2018 farm bill. The agency also directly oversees hemp farmers in eight states — including Vermont, Mississippi and Missouri — that do not have state-run programs. Seven of those eight states have state-run medical or recreational marijuana programs. All of the farmers who told POLITICO that USDA refused to let them have both hemp and marijuana licenses reside in states without state-run hemp programs.

In contrast, farmers participating in state-run hemp programs have retained their marijuana licenses, suggesting that the rules are different depending on whether state or federal regulators are in charge of overseeing hemp cultivation. Oregon and Colorado, for example, have guidelines in their state regulations detailing how farmers with licenses to grow both hemp and marijuana should keep the operations separate.

“It’s another attack on the little guy,” said Connor Reeves, a cannabis attorney with the firm McLaughlin PC in Jackson, Mississippi. “They don't seem to care how it impacts small farmers and folks in rural parts of the country that are otherwise following the law.”

Brittany Adikes, an attorney with McGlinchey Stafford specializing in cannabis law, said it seems like USDA is “reaching far to claim that there is a regulation that clearly prohibits having both licenses.” Instead, Adikes said, the statute language and rules USDA cites to defend its position could easily be interpreted to specify that a farmer cannot grow hemp and cannabis on the same land under the same license — not that a farmer is barred from holding both a state marijuana license and a federal hemp license.

Vermont Cannabis Control Board Compliance Director Cary Giguere explained that Vermont ended its state hemp licensing program in December 2022 because Vermont’s program was “was costly and offered no additional flexibility or safety” compared to the newly established federal program. Vermont farmers then applied for USDA licenses, only to find those licenses rescinded after joining the state’s nascent recreational marijuana program.

Enforcement of hemp rules also appears to be inconsistent within state programs overseen by the USDA. Vermont's Giguere confirmed in emails to POLITICO that the agency is aware of farmers who still hold both a federal license and a marijuana cultivator license from the state.

Vermont’s Seven Days, a local newspaper, first reported on Bellavance’s experience, but he is not alone. The shift has impacted farmers across the state, Vermont-based cannabis lawyers have observed.

Farmers in other states relate similar experiences.

Mississippi farmer Eric Sorenson learned he would lose his federal hemp license soon after he became licensed to grow medical marijuana by the state. Mississippi legalized medical marijuana in 2022, and sales began in January 2023.

“While Medical Cannabis is not federally legal, we will not be able to allow you to maintain your current hemp license in addition to the medical cannabis cultivator license,” USDA wrote to Sorenson in an email shared with POLITICO.

“It doesn't make any sense,” said Sorenson, who also founded the Mississippi Industrial Hemp Association. “It's the same plant.”

Reeves, the Mississippi cannabis lawyer, said he knew two other farmers licensed to grow medical marijuana by the state who were forced to give up their federal hemp licenses after receiving a letter from USDA.

Chris Beerman, a hemp farmer in Joplin, Missouri, transitioned to the federal hemp licensing program when Missouri’s state program ran out of funding and shut down. A USDA representative called him to confirm the approval of his hemp license, and also told him — without prompting — that he could not expand into Missouri’s new state marijuana program.

Missouri’s Department of Agriculture ceased administering the state’s hemp program on Jan. 1, 2023, around the same time it legalized recreational marijuana. Lower than expected involvement in Missouri’s hemp industry led to shuttering of the state program, which was funded by the program’s tax and fee revenue.

As a hemp farmer, Beerman hoped to diversify his business under the microbusiness licenses Missouri offers for cannabis growers. If the state still had its own hemp program, he said he would have applied for one of those licenses.

But in states that run their own hemp programs, the situation is very different. Colorado voters approved recreational marijuana and approved the production and regulation of industrial hemp in 2012 — and both programs have been operating separately but alongside each other ever since. In Colorado, hemp production is regulated and licensed by the Colorado Department of Agriculture, while marijuana is regulated and licensed by the Colorado Department of Revenue.

“The only thing specific is [farmers] … can't grow anything greater than three tenths percent THC on a hemp registration,” said Colorado Department of Agriculture’s Hemp Program Manager Brian Koontz, citing the federal threshold for illegality. “There’s nothing prohibiting them from having a separate marijuana business.”

USDA approved Colorado’s hemp plan, and state regulators said it did not include any prohibitions on hemp licensees also entering the state’s cannabis industry. Nevertheless, USDA approved the latest plan in August 2021, and Koontz said dual licensing did not come up when USDA audited Colorado’s hemp program earlier this year.

“Our plan does specifically address that no registrant … can commingle marijuana and hemp on the same farm,” he added.

The revocation of hemp licenses for farmers that also grow marijuana has largely gone unnoticed. Hemp industry officials and trade groups that spoke to POLITICO said they had not heard of the loss of USDA licenses by marijuana farmers.

Lawmakers were similarly ignorant.

“I haven't [heard about it], but I'd be happy to look at it,” said Sen. Eric Schmitt (R-Mo.).

Senators representing states with medical or recreational marijuana programs as well as USDA-run hemp programs, such as Utah Sen. Mitt Romney (R) and Vermont Sen. Peter Welch (D), told POLITICO they were not aware of the problem. Welch said he would “have to check on it,” adding that if true, it would “be a real conflict.”

Adikes, the cannabis lawyer, says USDA’s actions could pave the way for a lawsuit.

“It could possibly be a violation of the [Administrative Procedures Act], and I'm curious to see what comes of this, in terms of litigation in the states that are being affected by this,” she said.

Garrett Downs contributed to this report.