SCHUMER: GROWTH OF RAPIDLY-EMERGING INDUSTRIAL HEMP INDUSTRY IN ROCHESTER-FINGER LAKES REGION & WNY HINDERED BY LACK OF ACCESS TO TRADITIONAL FINANCIAL SERVICES FOR THE CROP; SENATOR URGES FEDS TO ISSUE NEW GUIDANCE TO BETTER HARVEST POTENTIAL OF VERSATILE AND VALUABLE CROP
While Industrial Hemp Growing And Selling Was Legalized This Year—Due To Schumer Provision In The Farm Bill—Many Banks & Other Financial Institutions Are STILL Hesitant To Provide Services To Hemp Businesses Due To Confusion Over Legal Status
Schumer Calls On Major Fed Financial Agencies To Rectify Situation By Issuing New Guidance To Financial Institutions On Industrial Hemp, To Ease Concerns & Help Grow The Industry Upstate
Schumer To Feds: To Farm Economy-Jolting Potential Of Industrial Hemp, The Industry Needs Credit!
Standing at a soon-to-be harvested hemp field in Genesee County, flanked by growers, producers and industry experts, U.S. Senator Charles E. Schumer today launched a new push to iron out a thorny issue for the burgeoning industrial hemp industry in Upstate New York. Even though the enactment of the 2018 Farm Bill—including Schumer’s Hemp Farming Act of 2018—legalized the production and sale of industrial hemp, financial institutions have continued to question whether or not they can extend their services and products to industrial hemp-oriented businesses and farms even though it is fully legal. Schumer explained that without access to traditional financial services, local farmers and the industrial hemp industry Upstate and in Genesee County is being unfairly restricted, preventing further economic growth and the creation of good-paying jobs and choking off valuable income for farmers. To address this issue, Schumer requested that the Federal Deposit Insurance Corporation (FDIC), Federal Reserve, and the Office of the Comptroller of the Currency (OCC) expediently issue guidance to financial institutions confirming the legality of providing services to the industrial hemp industry, to better seed and grow it across Upstate New York.
“The industrial hemp industry is seeding and growing all over Upstate New York, with prospective hemp businesses like the Mills Family Farms popping up left and right, which is why I fought so hard to strip the burdensome and outdated federal regulations from it by passing the Hemp Farming Act of 2018. However, if these businesses aren’t able to get financing from a bank or find a credit card processor that doesn’t charge them an arm and a leg, none of that matters all that much,” said Senator Schumer. “If the financial institutions aren’t given updated guidance by the major federal financial regulators clarifying the legality of industrial hemp, the industry in Western New York and the Finger Lakes Region and producers like 4th generation Genesee County farmer Brad Mills will continue being tightly bound, prevented from growing and creating the good-paying jobs they’d otherwise be able to. That’s why I’m urging the FDIC, Federal Reserve and OCC to issue updated guidance to the financial institutions looking to provide services to industrial hemp-oriented businesses as soon as possible, to help growers, producers and industry harvest the massive potential of this versatile crop.”
Schumer explained that since the 2018 Farm Bill removed the federal regulatory shackles from industrial hemp production, manufacturing, and selling, New York’s industrial hemp industry has started to grow significantly, with new farms and businesses emerging and existing ones expanding operations. This has brought considerably more good-paying jobs and revenue to Upstate New York, making industrial hemp a critical new part of the state’s agricultural future. For example, Canopy Growth recently held a groundbreaking celebration for its new industrial hemp industrial park in Broome County, which will bring 400 new jobs to the region, with the potential for many more industrial hemp-oriented businesses to locate to the region. That being said, as industrial hemp farmers and businesses are exploring the full benefits of the 2018 Farm Bill, they have experienced serious difficulty accessing financial products with regulatory uncertainty at financial institutions. While some companies have agreed to offer financial services to the growing hemp industry, many have not due to confusion over the crop’s legal status.
While the enactment of the 2018 Farm Bill did legalize the production and sale of industrial hemp at the federal level, many financial institutions are still uncertain if they can extend services and products to related businesses. Without consistent access to these traditional financial services, such as checking accounts and credit, many industrial hemp businesses have faced difficulty expanding beyond their basic business operations. Small businesses and new entrants are hit hardest by these regulatory uncertainties.
Schumer pointed to Mills Farms Family Farm in Basom as the perfect example of an industrial hemp business brimming with potential that’s being tightly bound by the lack of regulatory clarity. Schumer explained that 4th generation farmer Brad Mills is growing hemp this year at his farm, partnering with the local company East Coast Growth to produce hemp to sell for commercial use. However, due to the lack of access to traditional financing, Brad has had to fund thousands of dollars in upfront costs himself this year. Furthermore, even though he has plans to further expand his operations, they will be stymied if the lack of access to bank financing continues. Additionally, East Coast Growth says that the lack of traditional financing is a major impediment to the entire hemp industry pipeline. The company operates in the middle of the industrial hemp supply chain, finding growers and matching them with producers who will purchase the crop. East Coast Growth says that besides the lack of financing for growers, the few producers in New York State have also struggled to secure bank financing, lines of credit, or to even use credit cards for sales or transactions.
Additionally, the lack of access to financial products not only affects the hemp businesses, but its employees as well. Schumer said his office has heard stories from employees of hemp businesses being unable to access private loans due to the nature of their employment.
Schumer explained that in order to alleviate these concerns, updated guidance would better help financial institutions assess risk and make available a wider range of financial products to industrial hemp cultivators and manufacturers. It is critical that industrial hemp farmers and businesses have access to the financial resources they need to keep their business running successfully and industrial hemp a part of New York Agriculture. Therefore, Schumer called on the Federal Reserve, FDIC, and OCC to provide guidance and best practices to the financial institutions under their authority that are looking to serve hemp farmers and businesses, to allow them to recognize hemp as a legal agricultural commodity as it was set forth in the 2018 Farm Bill.
Schumer was joined by Brad Mills, Owner, Mills Family Farms, Jason Klimek of East Coast Growth and other local hemp farmers, Farm Bureau representatives and officials.
Brad Mills with Mills Family Farm said, “We planted our first-ever hemp crop this year but had to fund the thousands in upfront costs ourselves. As a 4th generation farmer looking for new opportunities to grow our family farm, we hope to expand our operation next year but know that access to financing will be an impediment. Expanding our operation means purchasing new equipment like $8000-$10,000 drying equipment and thousands more for plant seedlings, irrigation, fertilizer, and more. So we appreciate Senator Schumer’s efforts to unfreeze lending so hemp growers like us can benefit from this new cash crop.”
Jason Klimek with East Coast Growth said, “The hemp industry is poised to take off in New York but the lack of access to traditional financing continues to be a problem. It impacts the entire supply chain from growers who can’t get a bank loan, to processors in need of lines of credit, to retailers unable to let customers use credit cards for payment. We applaud Senator Schumer’s efforts because banks are interested to lend and eager to invest in this industry, but need assurances and guidance from federal regulators in order to act.”
The Schumer-backed Hemp Farming Act of 2018 was introduced by Majority Leader Mitch McConnell (R-KY), Sens. Rand Paul (R-KY), Jeff Merkley (D-OR) and Ron Wyden (D-OR). It passed and was signed into law as part of the 2018 Farm Bill. This legislation:
- Removes industrial hemp from Schedule 1 of the Controlled Substances Act
- Empowers states to be the principal regulators of hemp
- Allows hemp researchers to apply for competitive grants from the U.S. Department of Agriculture (USDA); and
- Makes hemp farmers eligible to apply for crop insurance
Industrial hemp is a type of cannabis plant that is grown largely for industrial uses, but it can also be utilized for food, oil, and cosmetic products. Hemp contains a very small amount, typically between 0.2 and 0.3 percent of tetrahydrocannabinol (THC), and while from the same species of plant as marijuana, it has varied widely in use. However, due to the existence of THC in hemp, Schumer explained, both plants were considered “controlled substances” under federal law, meaning the U.S. Drug Enforcement Administration (DEA) was the primary regulator for hemp production. Schumer argued that this narrow view has undermined the crop’s agricultural and economic potential. With the Hemp Farming Act of 2018 passed by Congress and signed into law last year, this unnecessary roadblock has been lifted, and industrial hemp’s significant potential to become a cash crop in Upstate New York will be unleashed.
A copy of Schumer’s letter to the Federal Reserve, FDIC, and OCC appears below.
Dear Chair Powell, Chair McWilliams, and Comptroller Otting:
I write to request that the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) provide guidance to financial institutions looking to provide services to the growing hemp industry. In 2018, Congress passed the Agricultural Improvement Act (2018 Farm Bill), removing hemp as a schedule I controlled substance. This law removes the obstacles that have prevented hemp businesses from gaining access to all financial services and products available to other agricultural businesses.
The Hemp Farming Act of 2018, which I was proud to cosponsor and fought to include in the 2018 Farm Bill, did five important things for farmers nationwide, including in my home state of New York. The 2018 Farm Bill removed industrial hemp from Schedule I of the Controlled Substances Act, empowered states to be the principal regulators of hemp, allowed hemp researchers to apply for competitive grants from the U.S. Department of Agriculture, made hemp farmers eligible to apply for crop insurance and allowed industrial hemp to be grown as an agricultural commodity if farmers choose. Since the bill’s passage, the New York hemp industry has grown significantly, as new farms and businesses have emerged and existing ones have expanded. This has brought considerably more jobs and revenue to New York, making hemp an important part of the State’s agricultural industry. As hemp farmers and businesses are exploring the full benefits of the 2018 Farm Bill, however, their growth has been hampered by regulatory uncertainty at financial institutions that has effectively led to a lack of access to financial products and services.
The enactment of the 2018 Farm Bill legalized the production and sale of hemp, yet financial institutions have continued to question whether they can extend their services to hemp-related businesses. Without access to traditional financial services, such as checking accounts and credit, many hemp businesses have been unable to effectively expand beyond their basic business operations. In order to alleviate these concerns, updated guidance would provide certainty for financial institutions to assess risk and make available a wider range of financial products to hemp cultivators and manufacturers. Small businesses and new entrants are hit hardest by these regulatory uncertainties. It is critical that hemp farmers and businesses have access to adequate financial resources to maintain and grow their operations, if hemp is to become an integral part of the New York agricultural enterprise.
It is important that financial institutions recognize hemp as a legal agricultural industry as set forth in the 2018 Farm Bill. I urge the FDIC, Federal Reserve, and OCC to provide guidance and best practices to the institutions under their authority that are looking to serve hemp farmers and businesses.
Thank you for your consideration of this matter.
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