Hemp Company Files For Bankruptcy As 'Confounding Regulatory Guidelines' Hamper Growth

By David E. Carpenter
Source: forbes.com

Hemp farmers face shifting regulations.

CQ-Roll Call, Inc via Getty Images

Another in a series of hemp companies has filed for bankruptcy protection, as the relatively nascent hemp industry strives to find a secure footing since 2018 when federal legalization of the plant commenced in the U.S. Part of the sector’s stagnation can be laid at the feet of government regulators and an inability to create clear and nonrestrictive policies around hemp.

A key player in the emerging industrial hemp sector since 2014, Atalo Holdings’ predicament is a telling sign regarding the precarious status of hemp in America. One of the early movers in the resurgence of Kentucky hemp production, Atalo was one of the initial hemp processing companies in the state to receive clearance several years before legalization to grow hemp as part of a government pilot program. The company’s partners boast a history of research and advocacy for hemp reaching back 25 years – well into the dark days of the War on Drugs, when hemp was lumped in with marijuana as a Schedule 1 illegal substance. A laughable idea, considering it is non-psychoactive, but one that hampered the industry’s growth for decades.

Providing an alternative to declining tobacco and corn crops in large swathes of the U.S., farmers across the country have been cautiously optimistic about this vital crop option to complement their growing rotations. American consumers, too, have appeared poised to embrace hemp as a sustainable alternative to more environmentally destructive materials like cotton, plastic and fossil fuels. Known to be one of the most versatile and durable natural fibers available on the planet, hemp has been used globally for centuries and is currently utilized in the manufacture of clothing, food products, rope, hempcrete and auto parts. Add to that the stratospheric popularity of CBD over the past several years – an ingredient that can be derived from hemp and available in everything from sleep remedies to beauty supplies – and the idea of farming hemp looks to be a no-brainer for many American farmers.

But there have been significant hurdles placed in the way of those looking to benefit from growing hemp, exacerbated by government regulations. Impediments include the U.S. Department of Agriculture (USDA) and the Drug Enforcement Administration’s (DEA) restrictive and floating policies around hemp; as well as the U.S. Food and Drug Administration’s (FDA) failure to release formal regulations with respect to CBD. Atalo’s CEO Bill Hilliard cites those perplexing ambiguities as one of the major reasons why the emerging industry is hamstrung by the event.

“Hemp processors, along with our farmers and other partners, have essentially created an entirely new agricultural industry,” says Hilliard. “The path to success has been impeded by confounding guidance from regulatory agencies, unforeseen market forces and other challenges.”

Three other hemp companies have experienced similar financial difficulties this year, including both Sunstrand and GenCanna in Kentucky, and Commonwealth Alternative Medicinal Options in Pennsylvania.

Hilliard shares that Atalo was also impacted by a failed capital commitment, which left the company unable to pay creditors. Looking to continue operations while the bankruptcy proceeds, Atalo Chair Andy Graves describes how the inability to pay their creditors or deliver a return to shareholders is “disappointing to say the least,” he says. Touting the hemp company’s steadfast agronomic experience over 25 years – combined with its compliant plant genetics and on-going product partners – Graves believes the company “is an attractive opportunity for a timely new investor seeking revenue-producing assets.”

While the industrial hemp industry certainly faces some challenging headwinds, there is a silver lining. The march towards a more functional regulatory system seems to be slowly transpiring, as federal government regulators listen to feedback from states. Just last month, the USDA announced that it had reviewed concerns from farmers and agreed to temporarily lift two provisions that the industry viewed as troublesome. Those policies regard testing and disposal requirements. The hope is that regulators continue to see the need for less restrictive rules around the valuable crop.