Markets, Economics, Cultivation, Law
by Richard Lawrence Miller 1991

From a biological production agriculture standpoint, hemp and marijuana come from the same plant, Cannabis sativa L. But, as will be detailed below, the law distinguishes between hemp and marijuana, in order to permit hemp commerce while forbidding marijuana commerce. For many years the federal government maintained a registration system that promoted hemp commerce even though marijuana was illegal. After hemp farming disappeared in the 1959, the federal government dismantled its system and allowed each individual state to establish its own system if desired. Missouri can establish a system to encourage hemp commerce while suppressing marijuana, a system modeled on the successful federal one.

Recognizing hemp growing as a legitimate agricultural pursuit, Congress exempted mature stalks from the original version of the first federal law to regulate cannabis (H. R. 6385). The original bill, however, defined seeds and oil as marijuana. The seed and oil seed industries immediately objected. National Institute of Oilseed Products spokesman Ralph F. Lozier (a former judge and U.S. congressman from Carrollton, Missouri) protested, "No crusher, up to this good day, ever knew or even dreamed or suspicioned that in crushed hemp seed, he was dealing with a narcotic or habit forming commodity, nor is that now evident.''259 He told a House committee, "Never until the last 3 weeks was any suggestion made that they were handling a commodity that was carrying a deleterious principle that was contributing to the delinquency of the people of the United States.''260

Lobbying by the seed and seed oil industries exempted those parts and products of the cannabis plant from the legal definition of marijuana. H.R. 6385 was replaced by H.R. 6906 which excluded "oil or cake made from the seeds..., oil, or cake, or the sterilized seed of such plant which is incapable of germination." Moreover, commerce in viable seed was legal if persons involved paid a $24 annual registration fee and used the seed for "manufacture of birdseed or for the manufacture of seed oil, seed cake, or any compound, manufacture, salt, derivative, mixture, or preparation of such oil or cake.''261 No government order forms were required for such seed sales.262

Clinton M. Hester, assistant general counsel of the Treasury Department, who played a large role in drafting and passing the bill, assured Congress that

production and sale of hemp and its products for industrial purposes will not be adversely affected by this bill.... The hemp producer will pay a small occupational tax [$ 5 a year] but his fiber products will be entirely exempt from the provisions of this. Similarly, the manufacturers of oil and the byproducts of seed, such as hemp seed cake and meal, will pay an occupational tax, but their purchases of seed and sales of such oil, cake, and meal will be entirely exempt from the provisions of the .bill except that purchases of such seed will be subject to regulations designed to prevent diversion [for planting illicit marihuana]. Manufacturers of birdseed will also pay an occupational tax, but under the definition of marihuana, the bill will not apply to their sales of birdseed, if the hemp seed contained therein is sterilized so as to be incapable of germination.263

Hester urged Congress to regulate trade in cannabis, not outlaw it entirely. Otherwise you would put all of these legitimate industries out of business.... We have tried throughout this measure not to interfere materially with the production but to permit it.264 Federal Bureau of Narcotics Commissioner Harry J. AnsLinger confirmed that the proposed legislation bore no threat to hemp growers: "They are not only amply protected under this act, but they can go ahead and raise hemp just as they have always done it.''265 He pledged that a farmer need not worry about government agents snooping around farm property. The Bureau was "not going to supervise his crop. It would not be possible.... We would certainly know the sheep from the goats without any close general supervision."266

Anslinger emphasized that the nominal tax to be paid by hemp growers would simply be a means for the government to know who was raising hemp: "It is just an information return. That is all we would be interested in.''267 Hester agreed: The farmer here will not even have to go to the Collector's office. All he will have to do will be merely to mail in his $5...When he wants to sell his crop of seeds all he will have to do ...will be to obtain some evidence from the person to whom he sells it, that that person is entitled to the exemption. That is the situation with respect to the seed. Of course the fiber products are entirely out of the bill.268

Although substantial criminal penalties would apply to anyone who raised commercial hemp without registering with the Treasury Department, the registration .was not technically a license. A license can be refused by an issuing agency. Registration by the Treasury Department was automatic for anyone who sent in the fee. Anslinger noted that even known illicit drug dealers would be registered, although their cannabis crops would be closely watched.269 The point here is that federal registration was automatic upon receipt of the fee; no criteria existed by which anyone could be denied registration.

Congress passed the 1937 Marihuana Tax Act with the understanding that it would not interfere with the hemp industry.270 Production statistics given earlier in this report demonstrate no damage to the industry after the law went into effect.

Marijuana was just as illegal in the 1940s as in the 1990s, yet large industrial hemp crops were grown. During the 1940s farmers participating in the government-sponsored hemp program had to buy seed from a government agent, specify what part of their land would be used for hemp, and deliver all stalks to an approved breaking mill. Farmers had to register under the 1937 federal Marihuana Tax Act, obtain any necessary state license, and pledge to obey marijuana laws.271 War Hemp Industries, a private corporation owned in trust by the U.S. Agriculture Department's Commodity Credit Corporation, supervised hemp crops on behalf of the Federal Narcotics Bureau.272 Agriculture agents, rather than drug control agents, were responsible for marijuana law enforcement. War Hemp Industries agreed to cooperate with federal and local law enforcement authorities273 and to absorb any penalty applied to Commodity Credit for a marijuana violation.274 War Hemp thus had financial incentive for strict enforcement of marijuana laws.

The Commodity Cooperative Association of Lexington, Kentucky, operated as the federal government agent in seed transactions, purchasing seed from cleaning mills and selling it to farmers for sowing. The Association had to keep strict records of all transactions in seed to assure that none was diverted for illicit planting of marijuana.275 Before being able to sell to a cleaning mill (which in turn sold to the Association) seed producers had to present their federal tax stamp or registration, demonstrating their compliance with federal marijuana law. Cleaning mills, in turn, had to post substantial bonds to guarantee compliance with contractual regulations supporting marijuana laws.276

Every step of hemp growing involved guarantees that no portion of crops would be, diverted for illicit marijuana use.

Toward the end of the war, the Federal Bureau of Narcotics decided to regard mature hemp stalks as marijuana if a single leaf remained on them, a stand later modified to permit 10% of the leaves.277 It was unclear who would count and record the original number of leaves on each stalk in order to calculate the percentage. Because marijuana taxes ranged from $1 to $100 an ounce, and stalk harvests were measured in tons, the effect would have been to extinguish the American hemp industry. Narcotics Bureau chief Harry Anslinger told the industry that the tax would include the entire stalk and come to about $32,000 a ton.278 Bureau Assistant Chief Counsel B.T. Mitchell stated that Anslinger personally decided to classify mature stalks as marijuana. "He handled that himself," agreed Deputy Commissioner Will S. Wood. Neither Mitchell nor Wood offered an explanation for Anslinger's action, nor apparently did Anslinger ever reveal one.279

The reason cannot have been diversion of industrial hemp crop leaves or flowers from the growing field into the illicit marijuana market. In 1937, when Anslinger urged federal regulation of cannabis commerce, he told the U.S. Senate that only one instance had ever been noted of such diversion, from a hemp crop in Texas. And that instance was theft from a field by two persons; the farmer had no involvement. Anslinger declared that hemp growers and processors "have not been involved in the illicit traffic at all. This case in Texas is the only case I know of."280 In 1945, a private Wisconsin mill operator declared, "In the 30 years we have operated and grown large acreages we have never heard of one instance where there was an illicit use made of the leaves of this hemp plant.... We have never heard of anybody trying to get into a field and take the leaves for illicit purposes."281 An Illinois hemp plant manager (who was a former school board member in his community) concurred, saying he was "on the alert and made considerable effort to determine if this hemp plant was being harvested by anyone for narcotic uses . . . [but] never observed anyone in the act of gathering the plant for this purpose."282

Nor can the reason have been diversion of residual leaves or flowers after harvest. Upon inquiry in 1991, a senior French hemp industry official dismissed the possibility of marijuana thieves attacking between time of harvest and delivery of stalks to mills: "There is never a theft between the harvest and utilization by industry for at this stage the foliage (leaves and flowers) have practically disappeared as dust.''283 As to conditions at mills themselves, in 1945 a senior U.S. Department of Agriculture official stated, "We have never had any difficulty at our own [government] mills. We have had no reports of anyone attempting to secure leaves or blossoms nor have I heard of such attempts being made at the privately-owned mills."284 The definition of "manure stalks" was discussed when Congress passed the 1937 Marihuana Tax Act, as hemp industrialists wanted to be sure fiber harvest was permitted before the plant reached biological maturity-and that regular cultivation, harvest, and milling practices would be unaffected by the law.285 The Treasury Department also accepted amendments to the bill that exempted oil, oil meal, oil cake, and seed cake products that happened to contain small residual quantities of "a few twigs, leaves, or portions of the flowering tops.''286

The definition of "mature stalks," the acceptance of small amounts of marijuana in hemp delivered to mills, and the absence of any illicit diversion of hemp crops were all well established in 1945 when the Bureau of Narcotics issued its ruling about residual leaves on stalks. Having failed to discover any reason for the ruling, Congress amended the anti-marijuana law to nullify the Bureau's action.

First, Congress exempted from the marijuana tax "any transfer of marihuana from one miller to another miller, or from a farmer to a miller.''287 Millers, like hemp growers, now had to register with the Treasury Department but Congress specified criteria for miller registration: The Secretary [of the Treasury] shall not permit the registration of any person...unless in the opinion of the Secretary such person (or if a corporation, each officer thereof) is a person of good moral character and unless in the opinion of the Secretary such person is a person of suitable financial standing, intends to engage in good faith in the business of manufacturing or producing fiber or fiber products from the plant Cannabis sativa L. on a commercial basis, and is not seeking registration under this section for the purpose of facilitating the unlawful diversion of marihuana. Any person who is registered under this section. shall afford agents of the Bureau of Narcotics ready access at all times to any part of the premises of the mill or other premises of such person and the right to inspect any and all books, papers, records, or documents connected with the activities of such person in dealing in, manufacturing, and processing Cannabis sativa L. and fiber or fiber products thereof, and the handling of marihuana. The Secretary may cancel or may refuse to renew...the registration of any such person.288

Administrative regulations supplemented the law. For example: Investigation shall include a comprehensive inquiry to determine whether the applicant is equipped with technical facilities and technical skill adequate to establish and maintain the proposed milling operation with a reasonable degree of efficiency; whether the applicant has a market for the prospective fiber products; and whether there are or will be appropriate safeguards against diversion of marihuana while en route to, or at, the mill premises.289

Upon learning of plans to exempt hemp stalks from the marijuana transfer tax even if they had residual leaves or flowers, the Federal Bureau of Narcotics declared that upon passage of such legislation the Bureau would require mills to erect high fences and to hire guards to patrol the premises.290 Apparently no such requirement resulted, however.

In May 1945 the Bureau's Deputy Commissioner Will S. Wood told Congress that the Bureau did not wish to destroy the hemp industry.291

In the 1940s, as in the 1930s, when hemp industrialists protested anti-marijuana measures that would harm the hemp industry, Congress took decisive action to guarantee continuance of the industry. Clearly Congress intended to encourage hemp growing, not discourage it. Hemp producing states took a similar attitude. Growing marijuana was illegal in Iowa in 1946, but the anti-marijuana law said "Any person, firm, or corporation engaged in growing cannabis for the purpose of obtaining therefrom seed or fiber or engaged in the processing of hemp for either of such purposes under contract and holding a federal license therefor shall be .exempt from the provisions of this section.''292 In the 1960s Congress provided further protection to hemp growers by ratifying the Single Convention on Narcotic Drugs, which took force in the United States in 1967. The treaty explicitly protects "cultivation of the cannabis plant exclusively for industrial purposes (fibre and seed) or horticultural purposes.''293 Under long standing judicial doctrine, treaties supersede any conflicting federal or state legislation. By ratifying this treaty Congress protected the hemp industry against any subsequent national or state prohibition attempt. Although hemp farming declined dramatically in the late 1940s, a half dozen private hemp companies remained active. In 1952 the U.S. Department of Agriculture published a pamphlet advising farmers how to grow hemp, and in 1953 124 growers were still registered. By 1958, however, commercial hemp farming no longer existed in the United States. When federal anti-marijuana laws underwent a major revision in 1970, Congress deleted mechanisms for registering growers and processors.294 Commercial hemp production and processing remained legal, but federal registration mechanisms under which the industry had operated since 1937 were abandoned, apparently as irrelevant to the production agriculture scene of 1970. When the federal government abandoned regulation of commercial hemp, regulatory authority passed to the states. Each state has authority to establish a mechanism by which producers and processors of hemp can register as legitimate business enterprises, with such state certification allowing them to operate even though marijuana remains illegal--just as was done under the federal system.

UNITED STATES--LAW IN 1991 The current federal definition of marijuana still keeps the hemp industry legal: The term "marihuana" means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative. Such term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.296 Missouri statute language is almost the same: "Marihuana", all parts of the plant genus Cannabis in any species or form thereof, including, but not limited to Cannabis sativa L., Cannabis indica, Cannabis americana, Cannabis ruderalis, and Cannabis gigantes, whether growing or not, the seeds thereof, the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin. It does not include the mature stalks of the plant, fiber produced from the, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture or preparation of the stalks (except the resin extracted therefrom), fiber, oil or cake, or the sterilized seed of the plant which is incapable of germination.''297

Hemp growing in Missouri is as legal as it has always been. The grower, however, must be able to prove that the crop is not being used illicitly for marijuana. Although technically a state certificate is not necessary for such proof, state registration would officially identify a grower or processor as pursuing legal hemp commerce. Without a registration system, anyone interested in growing or processing hemp will likely fear prosecution for cultivating or transacting in marijuana. A state registration system would benefit hemp farmers and simplify marijuana law enforcement. Any grower without a state certificate would be hard pressed to claim that the crop is legitimate.

Because hemp commerce is legal and is exempt from drug control laws, interstate commerce in hemp is legal. Missouri farmers and processors would have a right to engage in interstate and international commerce.

Note: The federal government has not relinquished its regulatory authority over drugs. State registration as a hemp grower or processor would not give the registrant permission to grow or process cannabis for medicinal purposes.

Also: Holders of a state registration certificate would be allowed to produce hemp, not marijuana. Holders would not be exempt from obeying anti-marijuana laws. Holders could not lawfully permit someone to strip leaves from fields or otherwise divert any part of the crop for illicit purposes. Such conduct would be liable to harsh criminal penalties, and we may be confident that law enforcement authorities would take keen interest in observing the fate of hemp crops.

A certificate would merely shift the legal "burden of proof." Currently, without a registration system, a Missouri hemp cultivator would be presumed to be cultivating marijuana. Upon such accusation, the hemp farmer would have to prove otherwise. If a cultivator is a registered hemp producer, however, the legal assumption is that the crop is lawful hemp, and the prosecutor has to prove otherwise. Without a registration system, criminal charges against a hemp cultivator would be automatic (although the farmer might eventually prevail in court). With a registration system, criminal charges would never be filed unless a prosecutor believed the farmer was diverting part of the crop for use as marijuana--and authorities never detected even one such incident while the federal registration system was operating. Under state registration hemp farmers could go about their business unmolested, just as corn or hog farmers do. Although a registration system would not change anti-marijuana laws, the shift in legal burden of proof would make hemp production a viable agricultural proposition.

There is nothing contradictory about encouraging hemp while discouraging marijuana. Although they come from the cannabis plant, they are different products. While the federal registration system operated, agriculture agencies encouraged cannabis growth while law enforcement agencies destroyed unregistered cannabis acreage. This policy is documented by government records:298

Year Registered Growers Legal Cannabis Harvested Illegal Cannabis Destroyed

19 8 371 1,400 acres 12,900 acres 19 9 174 1,650 6,500 19 0 219 2,600 19,300 19 1 566 9,600 23,300 19 2 8,929 43,800 6,600 19 3 14,913 186,700 150 19 4 -- 54,600 110

Experience suggests that the following elements would help a state hemp registration system to succeed. 1. Evidence that grower has identified a buyer for crop, or that processor will receive raw materials from identified growers. 2. Evidence that applicants have sufficient financial backing for their enterprise. 3. Posting bond to guarantee compliance with anti-marijuana laws. A percentage of such bond might be returned annually if good conduct continues. 4. Strict record keeping by which farmers identify exact areas used for raising crops and report disposition of crops, and records by which processors account for all raw materials received. 5. Periodic renewal of registration, and means for revoking registration. 6. Regulating agency should be one that encourages cannabis hemp commerce (such as Agriculture, Conservation, Natural Resources) rather than one oriented toward restricting cannabis marijuana commerce (such as Public Safety, Mental Health).

Examination of old federal statutes and regulations, noted above, could benefit discussion of a Missouri hemp commerce registration system. The systems of Minnesota, France, and Canada may also be of interest.


Minnesota has a system for hemp commerce. For many years registered persons could harvest wild hemp as well as cultivated crops,299 but in 1969 the law was changed to allow only commerce in cultivated crops.300 As of 1981 Minnesota law read as follows:

18.321 Growing hemp (Cannabis sativa L.) for commercial purposes; licenses Growing or maintenance of hemp, Cannabis sativa L., is permitted only for commercial uses, as herein defined. Commercial uses are such adaptations of hemp as are necessary and proper for the manufacture of rope, sacks, and other sisal hemp products and such other non-injurious commercial products, including the manufacture of harts, yarn, thread, cordage, merchandise, cloth, and such other products as may be made from linen fiber, as have been or may be developed; submitted to the commissioner and approved by him. The commissioner is hereby authorized, and it shall be his duty, to license and authorize the growing of hemp when the derivatives thereof are to be used solely for the commercial uses herein defined. Any person desiring to grow hemp for commercial purposes, as herein defined, shall file an application for a license therefor with the commissioner, giving a description and the area of land intended to be so used. The commissioner shall issue a license to the applicant for the growing of such hemp for such commercial uses as are specified in the application, and license, and the growing of hemp, pursuant to the terms of the license issued by the commissioner shall be lawful to the extent granted by the license. 18.322 Licensee to notify commissioner Any person to whom a license for commercial growing of hemp, Cannabis sativa L., is issued shall notify the commissioner of the sale or distribution thereof, and the names of the persons to whom such hemp is sold or distributed. 18.323 Penalty Any person violating any of the provisions of sections 18.321 to 18.322 is guilty of a misdemeanor.

Those statutes remained essentially unchanged into 1991, except for modifications designed to remove gender prejudice in Minnesota statutes. Apparently Minnesota had no registered commercial hemp growers in 1991.


Although marijuana is prohibited, hemp is protected as a textile plant throughout the European Economic Community.301 In France a farmer who wishes to raise hemp must first obtain a contract for the crop. A person cannot simply grow hemp on speculation. Crop yield is estimated and a price for the crop is set before field production begins. The producer must notify the Ministry of Health and Ministry of Agriculture. Only seed certified for producing cannabis with low drug content can be used. Crops are tested during the growing season to be sure drug content remains low. In 1991 a senior hemp industry official described anti-marijuana regulations as "very strict."302

259 Citations available in original document.