What happened to the billion-dollar crop?

Today I’m going to tell you the story of the rise, fall and coming resurrection of the world’s first wonder material.

It played a part in many of the world’s key historical events, from the discovery of the New World, to the Napoleonic Wars, to the writing of the Declaration of Independence.

In 1938, Popular Mechanics wrote that it was on the verge of becoming “the billion-dollar crop” – about $17.5 billion in today’s money.

That’s because it had so many uses in so many industries, from clothes to construction to publishing to transport and shipping.

Henry Ford even made a prototype car out of it, which he proved was “ten times stronger than steel” by hitting it with a sledgehammer.

Here’s a video of him doing it:

(click video to watch on YouTube)

Now, thanks to increased interest and new legislation in both Canada and the US, this wonder material is set for a comeback.

The material I’m talking about is hemp.

While everybody has been focusing on the legalisation of cannabis, its industrious but uncool cousin, hemp, is also being reclassified.

Not to be confused with cannabis. Hemp is similar but different. It has a THC content of less than 0.3%, as opposed to cannabis’ 10%-30%. What that means is, you can’t get high off it, and you would be a fool to try.

Which begs the question of why it was outlawed in the first place. I’ll get to that in a second. But first, let’s have a look into hemp’s history, because it’s essentially the history of humanity.

The globetrotting story of cannabis’ uncool cousin – hemp

Hemp is thought to be the first plant used for textiles. Hemp cloth has been found in the Middle East that dates back to 8,000 BC.

It is also believed to be the first example of industry. in 2,800 BC, Chinese Emperor Shen Nung taught his people to cultivate hemp for cloth.

It made it to Europe in around 1,200 BC and spread throughout the world from there.

The first paper was produced from hemp in 150 BC. And many of the old masters painted on hemp canvas.

In fact, the word canvas is derived from the Latin for cannabis. Ships’ sails and ropes were made from hemp, as it is three times stronger than cotton and resistant to salt water.

Back in the day it was so important to industry that in 1535 Henry VIII passed an act compelling all land owners to sow ¼ an acre of hemp or face fines.

When Christopher Columbus sailed to America, his ships used hemp sails and rigging.

And up to the 1920s 80% of clothing was made from hemp.

But with the development of the cotton gin, cotton became much cheaper to farm than hemp, which was processed by hand.

It took a while for hemp to catch up, but by the 1930s new machinery was available, which sped up the refinement profess and massively cut processing costs.

Hemp by-products could also be used in other industries. Its seeds could be turned into oil, paint and lacquer, and its fibres could be used for paper and in construction.

So by late 1937 hemp was on the verge of becoming “the billion-dollar crop”.

This is the point where hemp’s story takes a darker turn. And where conspiracy theorists’ eyes light up.

Guilt by association

The story goes that William Randolph Hearst, a newspaper mogul, demonised hemp in his publications on behalf of Andrew Mellon.

At the time Mellon was secretary of the Treasury and the richest man in the US. He was heavily invested in DuPont, which was behind the synthetic fibre industry.

Hemp was a direct threat to DuPont, which has some impressive inventions to its name: neoprene, nylon, Teflon, Kevlar and Lycra to name a few.

However, at this time DuPont’s focus was on nylon, which it had invented in 1935.

The story goes that DuPont lobbied Mellon, who in turn lent on Hearst and together they demonised hemp, so nylon could prosper.

Hearst was a big investor in paper mills and at the time one acre of hemp produced four times as much paper as one acre of trees.

Hearst jumped on the “reefer madness” bandwagon and published stories about the evils of cannabis up and down the country.

Eventually, in 1937 cannabis and its non-psychoactive cousin hemp were banned.

So a material that was fundamental in the founding of the US – the Declaration of Independence itself is written on hemp paper – was now outlawed by it.

This decision would have huge impacts for the environment going forward. Had we stuck with hemp, the critics say, we would not have half the plastic pollution problem we have today.

It’s a fairly convincing narrative, and there is evidence to back it up. However, as Wikipedia points out:

The company DuPont and many industrial historians dispute a link between nylon and hemp. They argue that the reason for developing nylon was to produce a fiber that could compete with silk and rayon in, for example, thin stockings for women. Silk was much more expensive than hemp and imported largely from Japan. There was more money in a substitute for silk. DuPont focused early on thin stockings for women. As a commercial product, nylon was a revolution in textiles. Strong and water-resistant, it was possible to make very thin fibers from cheap raw materials. The first sales in 1938 in New York of nylon stockings created a line with 4000 middle class women. For years to come, nylon demand was greater than DuPont could produce. And the DuPont Group was very big; it could move on if nylon had not become a success.

As I have written about previously here, the decision to ban cannabis was mainly due to racism. As the Drug Policy Alliance points out:

The demonization of the cannabis plant was an extension of the demonization of the Mexican immigrants. In an effort to control and keep tabs on these new citizens, El Paso, TX borrowed a play from San Francisco’s playbook, which had outlawed opium decades earlier in an effort to control Chinese immigrants. The idea was to have an excuse to search, detain and deport Mexican immigrants.

That excuse became marijuana.

During hearings on marijuana law in the 1930’s, claims were made about marijuana’s ability to cause men of color to become violent and solicit sex from white women. This imagery became the backdrop for the Marijuana Tax Act of 1937 which effectively banned its use and sales.

I imagine that Hearst, Mellon and DuPont had some effect, but it seems like their role is routinely overstated.

Still, thanks to cannabis being banned, hemp was now banned too. Simply because it was similar.

Hemp cannot be used as a recreational drug. So the decision to ban it was, and continues to be, completely illogical. But then, politicians rarely follow logic.

Reefer redemption is helping hemp

As political attitudes have changed on cannabis, so to have those on hemp.

As a by-product of cannabis legalisation in Canada and in certain states in the US, it’s meant the hemp industry can get going again.

But hemp’s road has not been an easy one, thanks to the Drug Enforcement Agency (DEA).

The DEA, for some incomprehensible reason, is still vehemently against the cultivation of hemp.

As the Federation of American Scientists reports:

Starting in late 1999, DEA acted administratively to demand that the U.S. Customs Service enforce a zero-tolerance standard for the THC content of all forms of imported hemp—and hemp foods in particular. Development of DEA’s rules to support its actions sparked a fierce battle over the permissibility of imported hemp-based food products that lasted from 1999 until 2004.

In 2004, after a court ruling, the DEA backed down. That wasn’t the end though.

From the same report (emphasis mine):

In response to the enactment of the 2014 farm bill provision allowing for the cultivation of industrial hemp by research institutions and state departments of agriculture, several states made immediate plans to initiate new hemp pilot projects.

Kentucky announced plans for several pilot projects through the Kentucky Department of Agriculture. However, in May 2014, U.S. Customs officials blocked the department’s shipment of 250 pounds of imported viable hemp seed from Italy at Louisville International Airport. DEA officials contend that the action was warranted since the “importation of cannabis seeds continues to be subject to the Controlled Substances Import and Export Act (CSIEA)”.

To facilitate release of the hemp seeds, the Kentucky Department of Agriculture filed a lawsuit in U.S. District Court against DEA, DOJ, U.S. Customs and Border Protection, and the U.S. Attorney General.

In the lawsuit, the department contends that its efforts to grow industrial hemp are authorized under both state and federal law and that DEA should not seek to impose “additional requirements, restrictions, and prohibitions” on hemp production beyond requirements in the 2014 farm bill or otherwise interfere with its delivery of hemp seeds.

Kentucky’s seeds were eventually released and planted. However, these actions resulted in uncertainty for U.S. hemp growers.

Some in the industry claim that DEA continues to initiate policy changes intended to block hemp cultivation.

In response, Congress enacted additional legislation to stop DEA from intervening in the implementation of the 2014 farm bill provision. Although hemp production is now allowed in accordance with the requirements under the 2014 farm bill provision, the importation of viable seeds still requires DEA registration.

The DEA’s actions are hard to get your head around. I can see its logic: we have a zero-tolerance policy on THC. Hemp contains an amount of THC. Therefore we have a zero-tolerance policy on hemp.

But, it fails to recognise that the amount of THC in hemp is negligible. As one hemp producer pointed out, it’s comparable to the amount of opium in poppy seeds. But the DEA has no problem with poppy seeds.

I’ve written a lot about the freedom vs security debate, and the police using genealogy websites to now solve past crimes. It’s actions like these by the DEA that push my thinking more towards the freedom side.

The DEA’s policies and therefore the police’s policies are frankly scary. The failure to apply any critical thinking to what they are doing is terrifying.

The argument of “Well, that’s the law,” is also fairly terrifying. The lack of people’s ability to think for themselves – especially as we have the world’s information at out fingertips – sometimes makes me despair.

However, that’s the topic for another issue. Today, we’re talking about hemp. And here is the main reason why.

If this Senate bill is enacted into law, hemp is home free

Because hemp remains federally illegal, banks don’t generally deal with hemp producers.

But there is a bill going through Congress right now that will change all that.

It will make hemp legal at a federal level and mean that farmers and industries can produce and use the crop on an industrial scale.

Versions of the bill were passed in June, but it still has some paperwork and negotiations before it comes into force.

However, at this point it’s looking like a near-certainty that hemp will be made completely legal in the US, just as it already has been done in Canada.

As Statesman Journal writes:

The bill would ease the way for farmers to capitalize on a retail market that’s valued at $688 million, according to estimates released last year by Hemp Business Journal and advocates with Vote Hemp.

That market, which includes household products such as food, personal care products and supplements, is expected to breach $1.8 billion in sales in 2020.

So, while cannabis is grabbing all the headlines, it might be wise to turn your gaze on to hemp. There is a real possibility the world’s first industry could be making a massive comeback.

Could this crop be about to conquer the world once again?

Until next time,

Harry Hamburg
Editor, Exponential Investor

Category: Commodities

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