Hot Springs CBD Maker Sells Farmers on Newly Legal Crop

New Age Hemp LLC’s leadership wants to make two things starkly clear: Grandma’s hemp-based CBD oil is legal, and it won’t make her high.

New Age, of Hot Springs, bills itself as the state’s first producer of the pure distillate of CBD, and it’s pioneering an Arkansas agricultural market for hemp, marijuana’s rope-making cousin that was legalized nationwide by the 2018 Farm Bill.

New Age CEO Nick Landers, Chief Scientific Officer Lejen Lotspeich and COO Jesse Trammel expect Arkansas farmers to commit thousands of acres to hemp, which lacks the intoxicating marijuana element, THC, but contains legal CBD, cannabidiol.

The oil is already a staple at stores around the country, used to ease pain, anxiety, insomnia and seemingly countless other maladies, though it has been little studied in the United States, where all cannabis products were strictly outlawed for decades.

But the U.S. Drug Enforcement Administration declared all hemp and hemp-derived products legal in a directive last year, and while the industry is careful not to violate Food & Drug Administration restrictions on cure-all claims, many consumers swear by the products, even giving them to pets. By conservative estimates, the total U.S. market for CBD could hit $16 billion by 2025, and Forbes reported in March that a 2,500-person survey by Cowan & Co. found that 7% of respondents had used CBD products, a percentage the investment bank found surprising.

While Arkansans have been following the burgeoning Arkansas medical marijuana industry, New Age Hemp has secured a stock of hemp seeds and is working with the Arkansas State Plant Board to develop best strains and growing practices for the soil and climate.

The startup also has a million dollars’ worth of high-tech distillation systems to process hemp oil — its most advanced unit one of only 20 of its kind in the world — extracting ultra-pure CBD from thick, black raw hemp oil stripped from the plant matter with ethanol. “We do bulk purification,” said Lotspeich, a California chemist who met Trammel in Denver’s cannabis industry a few years ago.

Together, they have two decades of experience in cannabis and hemp.

“This is a very exciting agricultural product,” Lotspeich said. “You can make protein, grain, seed oil, so many things from hemp, and it’s healthier for the environment. It doesn’t require many pesticides, and it requires less water.”

State’s Pilot Program

The state has licensed 101 farmers in 42 counties to grow hemp on about 3,200 acres, said Brett Dawson and Caleb Allen of the Arkansas Agriculture Department, though not all those acres will be used; some are under water in the wake of record Arkansas River flooding. Twenty-four processors are licensed under the hemp research project, said Allen, the Plant Board’s hemp program manager.

In Kentucky, initially most plants were grown in greenhouses, Allen said, but farmers have found “hemp wants to be out in the field, and yields have been better in field production.”

Dawson said Kentucky’s pilot hemp program, which licenses about 1,000 growers, has been Arkansas’ unofficial guide.

Trammel, the New Age COO, is a Hot Springs native who encouraged Lotspeich to consider Arkansas when he was looking for a warmer climate than Denver’s. He thinks hemp could become a replacement crop for soybeans, which now face market and tariff pressures. Some farmers doubt hemp will ever be more than a specialty crop grown in 20-acre plots or so, but Dawson said the state foresees hemp becoming a cash crop in Arkansas. “We just don’t know how big it will be.”

New Age Hemp first distilled CBD in pure form on April 10. “That was our groundbreaking event,” Lotspeich said. “If anyone in Arkansas was doing it before, they were doing it in their garage without a license.” It takes 10 pounds of hemp plant material to make a pound of CBD distillate, and more is lost in creating the final product. As New Age’s officers showed off their pristine labs in converted warehouse space near Lake Hamilton, they described the process.

“We worked with the Plant Board to get crude oil from other states, a pilot program in Kentucky,” the nation’s hotbed of hemp. (Overseas, hemp is grown largely in China.) “The raw oil is washed off the plants with ethanol, looking like black sludge; we take it to its completely pure state,” Lotspeich said.

“We use carrier oils, mostly MTC from coconut, for the final product. The body absorbs it rapidly, faster than just CBD by itself. That becomes the base for oils, salves, creams and sprays, etc.”

New Age will market its finished oil wholesale, focusing on in-state distribution and showcasing “Made in Arkansas” on its packaging, including dropper bottles and roll-ons. “We’re trying to improve availability of the product in Arkansas, and to help create a booming agricultural market,” Lotspeich said.

So when does the startup expect a return on its million-dollar equipment investment? “Our recovery goal is same year, which is pretty difficult to achieve in most industries,” Lotspeich said. “We’re looking at 2020. The market is already here; Arkansans are just getting CBD that’s made out of state. We’re giving people a domestic option that wasn’t available before.”

Landers, who also leads homebuilder and remodeler Landers Development LLC of Benton, noted that New Age is also licensed as both a processor and a seed dealer/labeler, part of a coordinated process to produce a product he believes in personally. “My part in this, as a pharmacist for 47 years and still keeping up my license, is to insist on standardization. We want a product that works the same way every time. With the pure isolate, that’s what you’re getting.”

CBD has not undergone extensive clinical testing in this country because all marijuana products were classified as Schedule 1 narcotics under federal law. Foreign studies have found anti-inflammatory and other benefits, and research is now proceeding in the United States.

The first step to a new market was the hemp seeds, so prized that New Age provides them to farmers under contract at or near cost: a dollar a seed. “Hold that bottle tight,” Landers, who is 70, joked as Trammel displayed a jar holding hundreds of the lentil-sized seeds.

“In order to improve our margins and our supply chain, we’ve helped some farmers with seeds and information, so when harvest comes around this October they will have someplace to process the material,” Lotspeich said. “The Plant Board wants the licenses to work together, seeds, growing and processing.”

“Here’s the cycle,” Lotspeich said. “The farmer makes the plant material. It goes to the processor, who purifies it. It goes into the products, which are shipped to store shelves. The market analysis of who’s buying what goes back to the farmer and the processor so that we’ll know how much acreage to grow, how much solvent like ethanol is needed, how much equipment should be on site, etc. So that’s what the pilot program is for, finding out how this is going to work.”

‘A Grain of Salt’

Asked about hemp’s potential in Arkansas, lawyer and farmer Nathan Reed of Marianna said that for now he’s sticking with cotton and non-GMO soybeans and corn. He’s studied production in Canada, where hemp has grown on a production agriculture scale for years, and said it has not been a game-changer.

“It strikes me as more of a specialty crop, not a competitor with soybeans and rice for thousands of acres in the Delta,” he said. “I’m always looking for a crop to get a premium on, anything above and beyond a normal commodity. But with hemp I have some concerns.”

Most worrisome is the lack of an established market, he said, something that Arkansas’ pilot program is addressing specifically. “If you don’t have a buyer, you’re in trouble,” Reed said. “CBD oil is now everywhere, but it’s all so new and experimental. Hemp is a specialty-type product, and highly technical. You have to have all male or female plants, for example. If they’re accidentally mixed, it can substantially hurt yields.”

Reed questioned whether the market will ever support hundreds of thousands of acres of hemp production. “I’m thinking that a big hemp field will be maybe 20 acres, and, remember, the farms in the Delta are often thousands of acres.

“Farming is a low-margin, high-efficiency endeavor, so growers are looking for a new, promising crop. But you also have to take trends with a grain of salt. I hope hemp takes off and gives Arkansas farmers another source of income, but I don’t see it challenging soybeans or rice on 50,000-acre farms in the Delta.”

Hemp has hundreds of applications in rope-making, textiles and even plastic production, but CBD oil is the cash cow, and patients and retail outlets are looking for consistent reliability, said Landers, the New Age CEO.

“This product helps people,” he said. “I know it, and have a personal story. As a pharmacist, I was skeptical, but I tried if for a few days on my stenosis in my back and arthritic joints, and all of a sudden I started feeling better. Now I don’t leave home without my CBD oil, and my wife is benefiting, too. She’s a classical pianist, and since she started putting CBD on her aching hands, she’s playing again.”

What about reports that grandmothers were plucked from lines at a Texas airport and Disney World and arrested when CBD was discovered in their bags? Those charges were eventually dropped, Lotspeich and Trammel noted, and erroneous arrests seem to be declining.

“We expect this to be sorted out quickly by the justice system,” Lotspeich said. “The best way to get a law enforcement agency to adjust its ways is to not get convictions. If they’re dragging in people, the materials are tested, and it turns out that it’s legal hemp, they’ve just wasted everybody’s money and time.”

Arkansas Industrial Hemp Research Program Growers
Licensed Growers as of May 30 (Voluntary List Only)^*

Arkansas Companies With Hemp Seed Licenses
As of May 29

Licensed Hemp Processors
As of May 30 (Voluntary List Only)^*

Source: Arkansas Department of Finance & Administration.
^* State listings of licensees’ contact numbers and email addresses are voluntary.