Kentucky Hemp Industry – Business Plan Templates

Kentucky Hemp Legalization

Kentucky authorized hemp cultivation in 2013. The Kentucky Department of Agriculture (KDA) conducted an Industrial Hemp Research Pilot Program as authorized by KRS 260.850-260.869, and 7 U.S.C.§ 5940 (also known as Section 7606 of the 2014 Farm Bill). Kentucky’s State Plan was submitted and approved by USDA in 2021, establishing the Industrial Hemp Program. The state requires separate licenses for cultivation and processing hemp.

On March 23, 2023, Governor Andy Beshear signed House Bill 544, directing the Cabinet for Health and Family Services (Cabinet) to regulate delta-8-THC and other hemp-derived CBD products. Consequently, the Cabinet issued emergency administrative regulations on August 1, 2023. These regulations establish that any person in Kentucky who wants to process, manufacture, store or distribute hemp-derived cannabinoid products must receive a permit from the Cabinet.

What Types of Hemp Products are Legal in Kentucky

According to the Hemp Farming Program, licensed growers, handlers, and processors cannot sell or market hemp flower products, including all of its smokable forms, such as CBD cigarettes, cigars, and pre-rolls. However, living plants, viable seeds, leaf material or floral material can be transferred to other hemp license holders in Kentucky or in other states where laws allow for this transfer.

Legal hemp-derived and CBD products in the state include oils, tinctures, capsules and other edible forms, topical products and pet care products.

Hemp Licenses and Permits Available in Kentucky

The state requires separate licenses for cultivation and processing of hemp.

Grower

A hemp grower license allows to grow and handle hemp produced by the licensee, as well as broker, store and market “publicly marketable hemp products” in the Commonwealth of Kentucky. The license is issued by KDA.

In addition to cultivating and processing of hemp, a grower licensee can also broker, store and market hemp products (produced by the grower licensee) that are classified as a “publicly marketable hemp product” which is a hemp product that meets one or more of the following descriptions from Kentucky’s law:

The product does not contain any living hemp plants, viable seeds, leaf materials, floral materials or delta-9-THC content higher than 0.3%. The product can include bare stalks, bast fiber, hurd fiber, nonviable roots, nonviable seeds, seed oils or plant extracts that have delta-9-THC content lower than 0.3%.
The product is hemp-derived CBD.
The product is CBD approved as a prescription medication by the United States Food and Drug Administration.

Application fee: There is no application fee but there is a $200 service charge if application is submitted on paper. No application fee if submitted online.

License fee: $400 for each growing address.
Renewal fee: same as license fee.
Grower licenses expire on March 15.

Processor/Handler

A hemp processor/handler license allows to process, handle, market and store hemp that does not fall within the definition of a “publicly marketable hemp product” in the Commonwealth of Kentucky. The license is issued by KDA.

Application fee: There is no application fee but there is a $200 service charge if application is submitted on paper. No application fee if submitted online.

License fees for processing:

Grain component of hemp: $500
Fiber component of hemp: $500
Floral material component of hemp: $3,000

If a processor or a handler licensee processes different harvest components, then a license fee must be paid for each harvest component.

License fee for a handler who does not process: $500
Processor/Handler licenses expire on December 31.

Other Permits

Permits for processing, manufacturing, storing and distributing certain hemp-derived cannabinoid products allow to process, manufacture, store and distribute specific cannabinoids listed in these regulations.

Fees:

Hemp processing permit: $3,000
Hemp manufacturing permit: $1,000
Hemp cannabinoid wholesale warehouse and distributor permit: $1,000
Hemp cosmetic permit: $200

In addition, a product registration fee of $200 should be paid per cannabinoid product.

Permit period: Must be renewed annually.

In order to be able to sell approved cannabinoid products listed in 902 KAR 45:021, a retailer or a food service establishment must first obtain a permit from the Cabinet.

Permit fee: $2,000
Permit period: Must be renewed annually.

Before planting, licensees must review the list of hemp varieties, strains or cultivars that have been approved for use in the Kentucky Hemp Program.

Licensing Process:

Grower

Eligibility criteria:

The applicant must be over 18 years of age.
The applicant’s proposed growing sites, handling sites and storage sites should be located in the Commonwealth of Kentucky.
The applicant’s main residence should be located in the Commonwealth of Kentucky or within 50 miles of at least one of the applicant’s growing sites situated in Kentucky. The applicant should be able to confirm that they reside in their main residence from May 1 to September 30.
The applicant should not have had a felony conviction or a drug-related misdemeanor conviction or violation within 10 years from the date of a criminal background check completed for the application.
The applicant’s proposed growing sites should comply with requirements established in Section 5 of 302 KAR 50:021.
The applicant should not have had a hemp license revoked within 5 years before the date of the application.

Application process:

Submit to KDA a complete application by the end of the application period established in the application, with all the required information and the service charge (if submitted on paper).
KDA will review the application and once a decision has been made, the applicant will be notified by letter or email whether their application has been conditionally approved or denied.
The applicant must then pay the license fee and complete a mandatory orientation session.
Once the fees have been paid and the orientation session has been completed, the license will be issued to the applicant and they will be fully approved as a participant of the Hemp Licensing Program.

Information required to be submitted with the application includes:

If the applicant is an individual, their full name, residential address, telephone number and email address (if available).
If the applicant is a business entity, the name of the entity, Employer Identification Number, business address in Kentucky as well as the full name, title within the entity, business address and other contact information of the individual who will sign on behalf of the entity. The full name, title within the entity, business address and other contact information of each key participant should also be provided.
The proposed acreage or square footage on which hemp will be planted.
The street address, location ID and GPS coordinates of each field, greenhouse or other site where hemp will be grown, handled or stored.
Maps showing each site where hemp will be grown, handled or stored as well as field boundaries.

The license must be renewed annually and the grower licensee must complete KDA’s requirements for license renewal before its expiration date as well as pay the annual license fee. The renewal application process is similar to the initial license application with some additional documents required to be submitted:

Field Planting Report and Greenhouse/Indoor Planting Report
Harvest Report
Any other reports deemed necessary by KDA.

After receiving a license, the licensee must:

Submit to KDA a complete Field Planting Report within 15 days of every planting.
Submit to KDA a complete Greenhouse/Indoor Planting Report within 15 days of establishing plants at an indoor location.
Before submitting the above mentioned planting reports, report hemp crop acreage to USDA’s Farm Service Agency.
Submit a Harvest Report to KDA at least 15 days before the intended harvesting date. Following submission of this report, an inspection will be conducted and samples of hemp will be collected to test for levels of THC. Within 30 days of the sample collection, the grower must complete the harvest.

Processor/Handler

Eligibility criteria:

The applicant must be over 18 years of age.
Any involved business entity should be registered and in good standing with the Kentucky Secretary of State.
The applicant’s processing sites, handling sites and storage sites should be located in the Commonwealth of Kentucky.
The applicant should not have had a felony conviction or a drug-related misdemeanor conviction or violation within 10 years from the date of a criminal background check completed for the application.
The applicant should not have had a hemp license revoked within 5 years before the date of the application.

Application process:

Submit to KDA a complete application by the end of the application period established in the application, with all the required information and the service charge (if submitted on paper).
KDA will review the application and if the application meets the criteria in the administrative regulations, it will be conditionally approved. The applicant will be notified by letter or email whether their application has been denied or conditionally approved.
The applicant must then pay the relevant license fee and complete a mandatory orientation session.
Once the fees have been paid and the orientation session has been completed, the license will be issued to the applicant and they will become fully approved as a participant in the Hemp Licensing Program.

Information required to be submitted with the application includes:

If the applicant is an individual, their full name, residential address, telephone number and email address (if available).
If the applicant is a business entity, the name of the entity, Employer Identification Number, business address in Kentucky as well as the full name, title within the entity, business address and other contact information of the individual who will sign on behalf of the entity.
The street address, location ID and GPS coordinates of each building or site where hemp will be processed, handled or stored.

The license must be renewed annually and the processor or handler licensee must complete KDA’s requirements for license renewal before its expiration date.

The requirements for license renewal include:

The submission of an annual criminal background check for the signing authority of record.
Complete a mandatory, annual program orientation session hosted by KDA.
Pay the annual license fee.
Update all licensed addresses, location IDs and GPS coordinates if necessary.

All of the lots intended for harvest of hemp must be inspected and sampled by KDA before harvest.

One licensed processor can transfer hemp extract material with more than 0.3% of delta-9-THC concentration to another processing location in the Commonwealth of Kentucky if:

The hemp extract material will move directly from one licensed processing location to another AND
The licensed processor will provide a written notice to KDA of the planned movement at least 24 hours before it occurs.

Other Permits

Both permits for processing, manufacturing, storing and distributing certain hemp-derived cannabinoid products as well as permits for selling hemp-derived cannabinoid products must be obtained from the Cabinet.

Information required to be submitted when applying for a permit to process, store, manufacture and distirbute certain hemp-derived cannabinoid products includes:

Name and address of the applicant.
Name and address of the brand or company whose name will appear on the label, if different from the applicant’s.
Name of the product.
Name and address of the origin of the adult-use cannabinoid product that was used to manufacture the final product.
A complete copy of the front and back of the label that will appear on the product.
A certificate of analysis from an accredited third-party laboratory for the lot for each product.

Kentucky Hemp Industry Statistics

Though Kentucky authorized about 12,800 acres for hemp in 2017 and 12,018 acres in 2018, the Vote Hemp reported that only 3,271 acres and 6,700 acres of hemp were grown correspondingly. In 2019 there were about 26,500 acres dedicated to hemp in the state according to the Kentucky Department of Agriculture, while 32,000 acres and 4.6 million square feet of greenhouse space have been licensed for 2020. According to a search of the Kentucky Department of Agriculture database, there were 970 growers and 170 processors in 2020 comparing to 978 and 200 correspondingly in 2019. Production Reports revealed that licensed hemp processors paid Kentucky growers $51.3 million in 2019, up from 17.75 million in 2018 and $7.5 million in 2017. The licensed processors and handlers also reported gross product sales of $193.9 million for 2019 compared with $57.75 million in 2018.

In 2021 the amount of approved acreage significantly declined as a result of oversupply and market correction across the industry and totaled 11,500 acres with about 1,800 acres planted. There were 450 growers and 140 processors/handlers registered in the state. The effect of the oversupply could also be seen in the gross sales revenue reported by hemp processors as there was a fall from $193 million in 2019 to $130 million in 2020. In 2021, gross sales revenue fell to $43.4 million. According to Julie Lerner with PanXchange, the price for hemp biomass dropped by more than 80% from July 2019 to early 2020.

In 2022, this trend continued with the state granting licenses to 240 growers and 93 processors and about 5,530 acres approved for hemp cultivation with 1,300 planted. Hemp processors and handlers reported $43.5 million in gross product sales in 2022.

In 2023, the number of grower and processor/handler licensees fell to 170 and 70 respectively. Around 4,550 acres of land were approved, of which 87% was used to grow hemp for CBD, 11% for fiber production, and 2% for grain or seeds.

There were 137 growers and 60 processors/handlers in Kentucky in 2024. The number of approved acres rose to 5,500 and according to the recent National Hemp Report, 2,700 acres of hemp were planted, and 2,500 acres were harvested of which 46% for floral hemp.

Kentucky Hemp Industry Infographics

Hemp CBD Solventless Extraction Lab Business Plan Sample, Kentucky

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