What the Farm Bill Means for Cannabis Stocks

Marijuana and money

Hemp, Cannabis and the Farm Bill

Politics makes strange bedfellows, they say, and so it was last week, when negotiators in the Senate and House announced that they’d reached an agreement “in principle” on the Farm Bill. The agreement bodes well for anyone who owns cannabis stocks.

Normally the result of a tug-of-war between conservative heartland agriculture interests and progressive coastal urbanites, and corporate farms vs. family farms, the current version of the Farm Bill will legalize industrial hemp, thanks to the pushing of Senate Majority Leader Mitch McConnell, who argues that there will be great economic benefits from legalizing the crop—and putting it under the purview of U.S. Department of Agriculture rather than the Justice Department.

The previous Farm Bill, passed in 2014, started the trend toward legal hemp. It allowed state-regulated, university-affiliated agricultural research programs to grow hemp plants as long as they registered with the Department of Agriculture. But that bill expired in September, and the new one has been held up by disagreements over SNAP (Supplemental Nutrition Assistance Program) as well as a disagreement over forestry practices—a sore spot in the wake of the California fires.

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The new bill, assuming there are no changes and President Trump signs it, will govern the distribution of $867 billion over the next five years through a wide variety of food and agriculture programs.

To my mind—which admittedly has a bias toward free markets—hemp farmers don’t need help; they just need their product to be legalized so they can give the market what it wants.

And right now, what the market wants is hemp to make cannabidiol, otherwise known as CBD. The oil is already produced in many states by small producers—including Mitch McConnell’s Kentucky—but they’ve only managed it by doing an end-run around federal prohibition, which still limits interstate trade and transport of hemp products.

When the hemp CBD produced by these growers is distributed, it’s typically been sold online or in small independent health stores, where the “crime” is not serious enough to attract the authorities.

But if the Farm Bill passes with hemp legalization intact, it could herald boom times for the CBD industry, with giant retail players like Walgreens and CVS and Walmart becoming the biggest retailers. In fact, Bethany Gomez, the director of research for the cannabis research firm Brightfield Group, said, “Once CBD is fully legalized, we expect that market to absolutely explode, with sales hitting $22 billion by 2022, which is higher than the U.S. cannabis industry.”

According to Gomez, the CBD market grew at a rate of 80% in 2018, with the year expected to close at $591 million—impressive considering it was fueled mainly by smaller players. So $22 billion in four years would be an enormous jump—which means someone is going to profit enormously.

Best Cannabis Stocks to Buy

So what are the best investments in the sector?

I’ve been writing about the hemp CBD sector seriously, as well as the marijuana sector, since early 2017 in my Cabot Marijuana Investor advisory, and I’m going to keep on writing about it, as the cannabis industry as a whole has the potential to become a $3 trillion industry by 2030.

Today, my recommended portfolio holds 13 marijuana stocks (or cannabis stocks, if you prefer), and is well diversified, with stocks both in Canada and the U.S., both in marijuana and hemp, and both in production and retail. With many cannabis stocks moving as much as 10% some days, you need diversification to smooth out the bumps.

You also need specific expert guidance, which is what I give my readers in every issue and every update. Last year the portfolio gained 121% and this year it’s up 31% as I write.

My latest issue was published just last week and if you’d like to see it, you can find more info by clicking here.

Timothy Lutts

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