Could CBD Standards Become Global?

Translated from the website Cannabis Industry Journal

Here’s the good news: Regional and country-specific guidelines are starting to emerge for at least one crop of Cannabis that is widely cultivated internationally. This includes a number of medical records, but they are also expanding to the “other” crop of marijuana. That is, hemp.

Now, here’s the bad news: The regulation being developed in different regions is frustratingly not uniform and can still differ quite a bit in critical areas.

Most notably, for some reason, while the 2018 U.S. Farm Bill created a new national standard for the amount of THC that could be contained in American hemp crops (0.3%), the same conversation in Europe during the same period led to a decision to set the allowed THC level in hemp plants and products at a slightly lower level: 0.2%. As yet another confusing twist, Switzerland set its THC limits at 1% (Switzerland is not in the European Union) and other countries in the region have also attempted to limit THC in industrial hemp production to no more than that level, regardless of what regulators dominate at the EU level.

Just some of the many CBD products on the market today.

Beyond the lack of obvious scientific reasoning in this, by definition, it creates a natural barrier to trade between hemispheres. If U.S. farmers are looking for export opportunities to Europe (for example), not to mention other states, they need to be concerned about local and destination standards - which on the surface are at least incompatible at the moment.

It is also creating some frustrating problems for those in the hemp market as buyers or sellers.

Other Issues

Markets are driven by many factors - including regulations, but also costs and, of course, consumer demand for a product within a certain price range. Certainly, the CBD sector, if not the recreational THC right behind it (even in Europe now), desperately wants to attract those who are euphemistically known as "daily consumers".

This means that both price and consumer opportunities must hit a conventional distribution norm. While the recreational market will continue to be distorted by the delayed but inevitable discussions about reforms in Europe, the medical market is beginning to establish some foundations that are also blowing through the discussion. Notably, these extracts will play a big role here.

What does this mean in a world where agricultural cultivation standards are different?

Biomass and Extracts Are Gaining Importance

For those strictly in the “flower” game, the market, at least in the U.S., will continue to be a place where beautiful flower crops will fetch higher prices, as long as they meet local specifications.

However, this is a limited proposition, even now - especially in the CBD business. The edibles market, for example, has created enormous potential for large quantities of outdoor-grown, industrially produced hemp intended for extraction and downstream, a vast array of final products across a wide spectrum of niches - from wellness to purely cosmetic. The same goes for the growing medical market in Europe.

This means two things. The first is that consumer-facing products with any amount of cannabinoid (take your pick) can be produced on demand, regardless of the cannabinoid concentrations of the original plant. The second, by definition, means that biomass intended for extraction, primarily for export, will gain an increasingly larger share of the wholesale market.

In other words, does it really matter to a European extractor that the source product is more concentrated in THC than what is allowed for B2C sales in Europe? No. In fact, all that means is that they need to buy smaller quantities of biomass. The rest is just a mechanical issue.

Playing the Regulatory Game

For an increasingly competitive hemp market in the United States, in other words, foreign exports are an intriguing option for revenue at the moment and will continue to be while price competitiveness and general quality issues remain high. Moreover, there will be almost no pressure to regulate the market globally according to the same standards, especially if CBD itself is decoupled in December by the WHO.

In other words, the regulatory disconnect between the U.S. and Europe at the moment, and certainly for certain types of unfinished bulk products, could therefore open a new niche in the market that is unlikely to be “fixed” anytime soon.