Two Kentucky hemp processing companies are facing bankruptcy after months of financial problems, highlighting the regulatory problems that plague the fledgling industry.
Three creditors, owed more than $50,000 altogether, recently filed an involuntary-bankruptcy petition to force GenCanna, one of the state's largest hemp processors, into Chapter 11 bankruptcy. "GenCanna is also in arbitration with a group of Central Kentucky farmers who sued in October for $5 million over a failed joint venture," Janet Patton reports for the Lexington Herald-Leader. Among other things, the farmers allege that GenCanna didn't provide them with hemp to plant until it was too late in the growing season to make other arrangements, which forced them to accept poor-quality plants and sign "horrific" contracts.
"Separately, GenCanna was sued last year for more than $13 million over debts related to a Graves County processing plant" it's building, Patton reports. Last week, accounting firm Dean Dorton filed suit in Fayette Circuit Court, alleging that GenCanna owes it more than $500,000 in services.
GenCanna isn't the only Kentucky hemp company in bankruptcy court. In January, Sunstrand owner William "Trey" Riddle filed for Chapter 7 bankruptcy to liquidate assets. "According to that filing, Riddle and Sunstrand have between $100,001 and $500,000 in assets but owe more than $10 million," Patton reports. "It is unclear if Sunstrand, which specializes in using hemp fiber in a variety of materials, is still operating."
The companies' bankruptcies may reflect legal uncertainty in the hemp industry. The 2018 Farm Bill authorized its widespread cultivation, but left regulations largely up to states. The lack of federal regulation has led to interstate-commerce problems, and the crop's popularity has outpaced state laws governing its growth and distribution. Hemp farmers have also had a hard time with banking, and a lack of financial protections when processors or distributors don't keep their end of the bargain.
Many stakeholders are frustrated with the Wild West atmosphere, as evidenced by the 2,500-plus public comments the U.S. Department of Agriculture received on its proposed regulations for hemp production. Though some commenters complained that federal rules could hamper the industry, "Most commenters were glad to have some guidance after being stuck in regulatory limbo for much of 2019," Ryan McCrimmon reports for Politico's Morning Agriculture.
The American Farm Bureau Federation asked that the USDA develop a seed certification program for farmers who buy seeds from foreign countries. Such seeds might produce plants with too much tetrahydrocannabinol (the chemical in cannabis that produces a high), and that could jeopardize the crop's ability to qualify as hemp, McCrimmon reports.
"The National Farmers Union took issue with the rule’s 'negligence' threshold: If a plant exceeds a 0.5 percent level of THC, farmers risk losing their license. NFU said that’s too rigid, especially in the early years as producers try to develop best practices for growing hemp," McCrimmon reports. Bumping up the legal THC threshold is also one of the Farm Bureau's 2020 policy goals.
Three creditors, owed more than $50,000 altogether, recently filed an involuntary-bankruptcy petition to force GenCanna, one of the state's largest hemp processors, into Chapter 11 bankruptcy. "GenCanna is also in arbitration with a group of Central Kentucky farmers who sued in October for $5 million over a failed joint venture," Janet Patton reports for the Lexington Herald-Leader. Among other things, the farmers allege that GenCanna didn't provide them with hemp to plant until it was too late in the growing season to make other arrangements, which forced them to accept poor-quality plants and sign "horrific" contracts.
"Separately, GenCanna was sued last year for more than $13 million over debts related to a Graves County processing plant" it's building, Patton reports. Last week, accounting firm Dean Dorton filed suit in Fayette Circuit Court, alleging that GenCanna owes it more than $500,000 in services.
GenCanna isn't the only Kentucky hemp company in bankruptcy court. In January, Sunstrand owner William "Trey" Riddle filed for Chapter 7 bankruptcy to liquidate assets. "According to that filing, Riddle and Sunstrand have between $100,001 and $500,000 in assets but owe more than $10 million," Patton reports. "It is unclear if Sunstrand, which specializes in using hemp fiber in a variety of materials, is still operating."
The companies' bankruptcies may reflect legal uncertainty in the hemp industry. The 2018 Farm Bill authorized its widespread cultivation, but left regulations largely up to states. The lack of federal regulation has led to interstate-commerce problems, and the crop's popularity has outpaced state laws governing its growth and distribution. Hemp farmers have also had a hard time with banking, and a lack of financial protections when processors or distributors don't keep their end of the bargain.
Many stakeholders are frustrated with the Wild West atmosphere, as evidenced by the 2,500-plus public comments the U.S. Department of Agriculture received on its proposed regulations for hemp production. Though some commenters complained that federal rules could hamper the industry, "Most commenters were glad to have some guidance after being stuck in regulatory limbo for much of 2019," Ryan McCrimmon reports for Politico's Morning Agriculture.
The American Farm Bureau Federation asked that the USDA develop a seed certification program for farmers who buy seeds from foreign countries. Such seeds might produce plants with too much tetrahydrocannabinol (the chemical in cannabis that produces a high), and that could jeopardize the crop's ability to qualify as hemp, McCrimmon reports.
"The National Farmers Union took issue with the rule’s 'negligence' threshold: If a plant exceeds a 0.5 percent level of THC, farmers risk losing their license. NFU said that’s too rigid, especially in the early years as producers try to develop best practices for growing hemp," McCrimmon reports. Bumping up the legal THC threshold is also one of the Farm Bureau's 2020 policy goals.
The U.S. Hemp Roundtable, a lobbying group that represents companies that sell hemp products, said they disagreed with the requirement that only labs certified by the U.S. Drug Enforcement Administration can be used to test hemp, McCrimmon reports. That could lead to testing bottlenecks, the group said.
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