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COWEN COLLABORATIVE INSIGHTS February 25, 2019 CBD Hemp Cultivation (Neivert) 2 2018 Farm Bill Legalizes Commercial Cultivation of Hemp: The 2018 Farm Bill legalized industrial hemp at the federal level removing it from schedule | status under The Controlled Substance Act. The bill defines industrial hemp as a variety of cannabis with a THC concentration of </=0.3% and allows farmers to grow and sell hemp under state regulation. According to the National Conference of State Legislatures, 41 states have set up cultivation and production programs to regulate the production of hemp. (CT, ID, SD, IA, OH, TX, LA, MS and GA do not currently allow hemp cultivation.) Hemp is currently being grown under state Industrial Research Pilot Programs. Once USDA rules are released, pilot programs may end in favor of USDA rules and rules of state programs approved by the USDA. Prior to the 2018 Farm Bill, the 2014 Farm Bill allowed universities and state departments of agriculture to conduct hemp research under Agricultural Pilot Programs in an effort to evaluate industrial hemp as a commercial crop. The bill allowed states to begin research on best methods for hemp cultivation. Cultivation Practices Of Hemp Dependent On Intended Harvestable Component Hemp is grown for fiber, grain/seed and floral materials with different varieties of hemp planted for each component. Fibers are used in rope and textiles, grain is used in human food (not legal for animal feed), pressed seed oil from grain is used like sunflower seed oil, and oils, including CBD, are removed from floral materials for health supplements. Cultivation practices differ for fiber, grain/seed and CBD in an effort to maximize the yield of the desired harvestable component. U.S. states have conducted pilot programs in recent years to help gain a better understanding of best practices. Limited Research Available On CBD Hemp Cultivation There is little research on CBD hemp cultivation methods as hemp cultivation research historically has focused on fiber and grain/seed. This lack of research, combined with a number of variables that impact hemp for CBD yield, makes hemp for CBD cultivation much more art than science at this point. Cultivation methods have been described as all over the map. That being said, we detail methods from recent academic research studies and conversations with industry participants below. (The University of Kentucky and University of Vermont have both conducted research in CBD hemp cultivation in recent years but further research is needed for conclusions regarding proper production techniques.) Hemp CBD Cultivation Steps: e © Obtaina license. Growers must obtain a grower license from their state department of agriculture for the specific type of hemp they want to grow. e Find a buyer/processor. Growers then need to find a buyer/processor for their harvest as crops can only be sold to licensed processors. e Source seeds or clones. The grower must acquire seeds or transplants. Clones (rooted cutting of a plant) can be used instead of seeds. The key factor in selecting seeds or clones is understanding which strains produce flowers with high CBD concentrations while keeping THC at </=0.3% since CBD and THC are positively correlated which caps the CBD level. (A crop that exceeds 0.3% THC COWEN.COM 11 HOUSE_OVERSIGHT_024827