The 2018 U.S. Farm Bill changes the way that CBD-based products are legally classified. If the federal government permits the sale of cannabis-sourced products online, established companies in the space could reap huge rewards.
- The legalization of cannabis in Canada and some U.S. States has demonstrated the latent demand for cannabis-based products.
- CBD is used to make numerous products and its potential uses are growing.
- Research suggests that the market for CBD products could grow to an estimated $22 billion over the next four years.
There are likely big changes coming to the cannabis sector this year. The 2018 U.S. Farm Bill took a major step towards the normalization of cannabis-based products. Now that the bill has passed into law, industrial hemp – and its byproduct CBD – will be regulated by the U.S. Department of Agriculture. SinglePoint Inc. (OTC: SING) (SING Profile) is in a good position to take full advantage of the changes in how CBD products are regulated. Major producers such as Cronos Group Inc. (NASDAQ: CRON) (TSX:CRON), Aphria Inc. (NYSE: APHA) (TSX:APHA), Medical Marijuana Inc. (OTC: MJNA) and OrganiGram Holdings Inc. (OTCQX:OGRMF) (TSX.V:OGI) are also well-placed to expand into the CBD space, but they may have to compete with a new class of growers.
There are more than 80 kinds of psychoactive compounds found in the cannabis plant. While most people are familiar with THC, which is used recreationally, CBD has shown promise in treating everything from insomnia to serious neurological disorders. The 2018 Farm Bill leaves THC-based products under the jurisdiction of the Drug Enforcement Agency (DEA) but gives jurisdiction of CBD-based products to the individual states. Most industry experts predict that the popularity of these products will explode as they become easily available due to the new regulations.
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A Waiting Market
Until now, CBD-based products were subject to federal regulations, which made them impossible to distribute nationally. They have been sold on a statewide basis in areas that allowed their use, but anyone who dealt with these products was shut out of the federal banking system because the crop – and its subsequent products – were categorized as illegal at a federal level.
With the signing of the new legislation, that appears likely to change. SinglePoint (OTCQB:SING) is an established distributor of CBD products and owns a decade-old web domain. Not only does the company have experience with marketing and distributing CBD-based products, it also has a background in payments processing.
CBD-based products are a new, largely unfamiliar area that may pose challenges for new companies entering the space. Universal standards for many CBD products have yet to be established or identified, so having a positive market image will likely be a significant benefit. Established companies with an existing client base and a positive reputation may be in a better position to leverage growth in the CBD sector. SinglePoint seems to fit this criteria well.
There is a big difference between cannabis grown for medicinal use and hemp that can now be used as a feedstock for CBD in the United States. Major cannabis producers have a much higher cost of production than hemp growers. With new changes that the 2018 Farm Bill creates for hemp farmers, the price of CBD may fall substantially.
Instead of being cultivated in near-laboratory conditions, industrial hemp is grown like any other commercial crop. Now that CBD can be refined out of commercially produced hemp, it will be difficult for anyone but U.S. hemp farmers to compete on price when it comes to CBD.
Additionally, the 2018 Farm Bill normalizes the CBD economy at a federal level. For the first time, hemp growers can use the banking system, insure their crops, and even sell their future hemp production via futures. Like any new market, it will take time for the infrastructure to be developed, but early movers in the space may have a significant advantage.
Big Changes for CBD
SinglePoint is in a unique position in the emerging CBD space. As both an online marketer and payments processor, the company looks to be in a strong position to help deliver CBD products to their target markets. The company has a strong strategy to grow its presence in the CBD space. Unlike many of the other publicly traded, cannabis-focused companies, SinglePoint has no connection with cannabis plants and cultivation, so the company should be able to take full advantage of the recently passed 2018 Farm Bill.
It appears that there is no shortage of potential CBD-based products. Currently, CBD is integrated into everything from lotions and edibles to beer and oil. With the legalization of CBD widely anticipated, research will almost certainly lead to additional discoveries into CBD properties and benefits, as well as the creation of new products targeting specific market segments.
The emerging CBD economy is also supported by the ability for hemp producers to raise funds publicly. Much like the Canadian cannabis producers that were able to expand quickly because of their publicly traded equities, U.S. hemp producers can now go public and leverage public interest in CBD to expand their operations.
Changing Production Profiles
The 2018 Farm Bill is a huge positive for U.S.-based hemp producers and CBD consumers.
One of the largest publicly traded cannabis producers available to U.S. investors, Cronos Group (NASDAQ: CRON) (TSX:CRON) owns two fully licensed cannabis producers in Canada and has other interests spread around the world. The company has maintained a multibillion-dollar valuation, despite some weakness in the publicly traded cannabis sector. In addition to producing cannabis in Canada, the company is involved in the distribution of cannabis products in many of the markets in which it operates. In the third quarter last year, the company reported increased revenues by 186 percent and sold 213 percent more kilos of cannabis than in the same time a year earlier.
Aphria (NYSE: APHA) (TSX:APHA) has grown its presence in the Canadian cannabis space via acquisitions and strategic investments and is one of the largest publicly traded cannabis producers. The company made two high-profile acquisitions last year, taking over Broken Coast Cannabis and buying Nuuvera, a Canadian cannabis company with already-existing strategic exposure to German and Italian markets. The vast majority of the company’s production capacity for cannabis is concentrated in a single facility, called Aphria One, which is located in Leamington, Ontario.
Medical Marijuana (OTC: MJNA) has been operating in the legal cannabis space for longer than most. The company owns numerous subsidiaries, including HempMeds, Kannalife and Kannaway. It also operates an international division, which has developed a substantial presence in Brazil, where it was the first company to introduce legal cannabis-based medicines to the Brazilian market. The company also has a direct marketing structure for cannabis products and appears to be well-placed to grow in the emerging CBD market.
OrganiGram Holdings (OTCQX:OGRMF) (TSX.V:OGI) is the parent company of Organigram Inc., one of the largest licensed producers of cannabis in Canada. The company delivers industry-leading yields from its growing facilities and is focused on expanding in the Canadian market for recreational and medicinal cannabis. Organigram developed a portfolio of brands for a variety of uses, including The Edison Cannabis Company, Ankr Organics, Trailer Blazer and Trailer Park Buds. In addition to growing cannabis, OrganiGram also distributes it.
With the passage of the 2018 Farm Bill changing the legal status of CBD, it is estimated that the CBD market will grow to be a $22 billion industry by 2022. SinglePoint has created a solid platform to be a part of that industry.
For more information about SinglePoint, please visit SinglePoint Inc. (OTCQB:SING).