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There’s so much news coverage of recreational and medicinal consumption of cannabis that we often forget about the massive impact the legalization of hemp will have on society as prohibition ends. I’ve invited Wendy Mosher and John McKay of New West Genetics to help us understand the promise and technology of hemp right now. Wendy, John welcome to CannaInsider.
Wendy: Thank you Matt.
John: Thank you Matt.
Matthew: To give listeners a sense of geography, can you tell us where you are in the world today?
Wendy: Sure we are in beautiful Fort Collins, Colorado.
Matthew: Great. Home of Colorado State University.
Wendy: That’s right.
Matthew: Okay. Wendy can you tell us a little bit about your and John’s background and how you came to get into the hemp genetics business?
Wendy: Sure. So John McKay is a professor at Colorado State University in Plant Genetics. John and I are married. We’ve been together for almost 20 years now. My background is a lot more varied than his. I have degrees in both art and in education. So in our early years together, like the first eight years, I would try to plug my ears and black out all of the science and the genetic speak. I found it a bit too boring. That was against my will. I somehow absorbed it, at least the big ideas. So I’m decent at interpreting between scientists and non scientists which leads me to New West Genetics.
So when Amendment 64 passed we got excited. We thought oh this could be a really cool opportunity to use the skills that both John and our partner Rich, Dr. Richard Fletcher, who was John’s former grad students. So he’s our third partner. We thought this is a great opportunity to use those skills that both of them had been developing over the 15 to 20 years of their study and hence New West was born.
Matthew: Great and what specifically does New West do for a layperson to help them understand?
Wendy: Sure, so New West Genetics combines modern genomics with traditional breeding to create industrial hemp varieties that are adapted to the U.S. So we kind of intersect three large industries; agriculture, bio tech and cannabis. So we’re not only breeding into the seed desirable market traits like specific cannabinoid profiles, but we’re also breeding in desirable ag traits. So formity, good germination, high yield, etc. so that we can make this a scalable crop that can compete with the likes of corn and soy.
Matthew: John in your mind do you see a distinction between hemp and cannabis? I know a lot of people get very emotional when it’s the same plant and then other people say they’re the same and you shouldn’t have these distinctions. As a scientist, where do you weigh in on this?
John: Yes, I think there’s a distinction. It’s a manmade distinction but I think it makes sense. So the 2014 U.S. Farm Bill for the first time defines hemp in the U.S. as cannabis sativa having less than 0.3% THC. As you know, THC is the abbreviation for tetrahydrocannabidiol and that’s the psychoactive substance in cannabis. So 0.3% is a very low number. If you go into some of the dispensaries in Colorado, some of the marijuana they’re selling is labeled as being near 30% THC, so 100 times more potent than hemp. So cannabis plants have a large number of current and potential uses, and I think having this legal category of hemp that has no drug value and no recreational value allows us to take advantage of hemp and develop hemp without concerns that people might have about Reefer Madness or whatever you want to call it.
Matthew: Yeah good point, and that still exists. I travel around the country, I see the Reefer Madness. What a successful propaganda campaign that was. It still to this day lingers.
John: Yeah it’s pretty impressive, and yeah when you leave… after being in Colorado just a little while, when you go somewhere else you kind of notice that the stigma still exists in other places. So back in the 1950s or earlier, I don’t think there really was much of a distinction between hemp and higher THC varieties. Cannabis was used for robes, paper, fabric and some of it was also high in cannabinoids and had been used sort of recreationally for thousands of years. And then in the 1960s the Israeli scientists isolated tetrahydrocannabidiol and demonstrated that it is the psychoactive component. It wasn’t until then that we could actually use science or chemistry to sort the two types.
Matthew: Wendy, what kind of license do you need to grow hemp?
Wendy: In Colorado hemp is governed by the Department of AG. It’s very simple. You must apply to them for a permit to grow. You provide them with the GPS locations of all your crops. You agree to submit to random testing of the THC levels by them and you provide them planting and harvest reports. It’s a fairly straightforward system that has been working very well.
Matthew: Would you say it’s a functional market? How would you describe the market to somebody that’s not familiar with it?
Wendy: This is the $100 million question. Hemp Industries Association, their most recent data is from 2014 and they estimated that about $620 million were sold of retail sales of hemp products. So what is unclear is whether they’re tracking imported CBD and there’s not a lot of data to track that market because it’s so emerging. So there’s three main markets. There’s hemp for cannabinoid extraction. There’s the grain market for consumption and fiber use and of those three I would say that fiber is in its greatest infancy in the U.S. There’s people were having some really innovative applications but they still need to be maybe commercializing and if they are commercializing, they need to be made a little more competitive. There is a market for CBD from hemp and other cannabinoids and it’s sort of growing in fits and starts.
One of our major pains in the U.S. is that we have to compete with foreign imports. I can tell you over 2015 I saw prices between $1,000 a pound and $25 a pound. So I would classify that market as slightly volatile. The grain market is a little more stable and better studied of course. Canada has been growing hemp for grain for a while. And the majority of the hemp grain products that we consume come from Canada. We import 90% of what they grow there. They’ve been steadily increasing their acreage to meet the demand and the majority of that is for human consumption. What’s interesting is that we’ve had here in Colorado surprising success in the grain for animal feed market. So there are new markets opening as we speak and as people become more and more aware of the benefits of hemp and as regulation looses up. So I just like to plug the Hemp Business Journal out of Canopy and Boulder. They’re actively working on tightening up the data for this market so keep an ongoing eye out for their reports.
Matthew: John looking at the imports from Canada, why is the seed sterilized? I’ve heard that it is but is that true and why is it?
John: That is true or that’s at least what the law requires. So we’ll go back again now to the 1960s. So as I mentioned in 1964 THC was discovered. Just before that there was something called the Single Convention on Narcotic Drugs that was implemented through the United Nations. It listed cannabis sativa as being an illegal narcotic but allowed in Article 28 for the production of hemp for industrial purposes and this is where you start seeing this industrial hemp term come. So you could still grow cannabis for fiber and seed, but then the U.S. rolled out Controlled Substances Act which lists as a Schedule I drug the species name Cannabis Sativa which is rather unusual. There’s not other species listed there, usually just extracted compounds such as opium and heroin.
So this caused basically hemp, THC free hemp plants to be in the same controlled category as heroin. Over time there rules were relaxed to allow imports of hemp fiber and grain for animal feed. And then up in 2001 the DEA published a news release saying that they had changed the rules, effective immediately, and that hemp seeds were not back as a Schedule I drug. This hemp industry’s association, which was spearheaded by the companies Nutiva and Dr. Brawner’s Soap sued the DEA and won and since that was settled in 2004 and since then they’ve been importing sterilized grain or extracted protein and oil and selling them largely as human foods in places like Whole Foods. So it’s kind of a complicated story but that’s why the hemp has to be sterilized to enter this country still.
Matthew: Interesting. John what’s it like on the university setting there at Colorado State University? Is the university helpful in your research and study? What’s the relationship like?
John: So I’m a professor in the College of Agriculture at Colorado State University. I have a 75% or 9 month appointment there. I’ll say the university is helpful. I work there so I’m not going to complain about them on the air. But part of the reason that we started New West Genetics is that the university is risk adverse and was slow to come into research on hemp even after the farm bill was passed. In addition universities mostly do the research part of R&D and not much on the development side. For example, my colleagues at the university here do very detailed studies of diesel engines and can actually visualize the combustion inside the engine, but they don’t make new engines and sell them.
So it’s a similar thing on the plant genetics side. Eventually, with regard to CSU, the lawyers did investigate all of the details, consult with various agencies and decided it was not a major risk for us to pursue research in industrial hemp. And all along it was clear that there were interesting research opportunities in hemp for many different types of researches at the university from the College of Ag all the way to Engineering and Textiles.
Matthew: John when you’re looking at the study of hemp at a high level what gets you most excited? Where do you see the biggest opportunities?
John: Well I’m a geneticist so genetics gets me most excite. This species has a lot of unique traits such as cannabinoids, but it also shares a lot of core processes with other plants. And so we can then investigate what’s similar and different about the genome and the genetics of this species. A few years ago our Canadian colleagues published a draft genome. This was largely of the Purple Kush strain of marijuana. That’s a great start and gives us a glimpse of what’s in there. That genome is highly fragmented and we still don’t know what genes are in that DNA sequence. So there’s a lot of work to be done in just characterizing the genome and how much that varies within the species. But then as we do with other crop species, once we have all of that we can take this genomic approach to predict what particular genes and/or which particular varieties or genotypes of the species might have traits that would make it most suited for a particular market segment be that grain or fiber, etc.
Matthew: Okay that makes sense. Wendy, what customers is New West serving now and what customers do you hope to serve in the future?
Wendy: So we’ve had great success, as I said before, in the animal feed market and the food market in general actually. There are some novel uses coming out over the next couple of years that I think are going to be surprising and exciting for consumers. I can’t talk about them yet as we’re under NDAs with our collaborators, but that’s going to be some fun development. And of course we’re also active in the cannabinoid extraction market. We have both raw flower and extracted cannabinoids. Remember those are sort of short term goals for us. Our main goal is to create seed cultivars for sale to the Ag community who would then sell their crop to those end use markets that I just referred to because it’s a nascent market, we need to set up and foster that value chain and have those end use processors ready for our farmers so they see the reason to grow.
So we’re initially greasing those wheels, but our ultimate product will be seed genetics and other intellectual property. We see our customers for that as either larger Ag companies or even more recently we’re seeing some larger cannabis companies that are interested in looking at intellectual property acquisitions. And by the way we are entering Colorado Department of Ag’s hemp certified seed trials this year, and if that goes well our first variety will be available for our foundation seed growers for the 2017 season.
Matthew: And what’s their primary motivation, Wendy? Are the cannabis growers looking or hemp growers looking for better yields, less pests? When they’re coming to you they’re saying I need to solve a problem or I just want to have a better yield or is it both?
Wendy: So you mean farmers? Is that what you’re asking?
Wendy: So farmers are looking for an additional crop option actually in Colorado. So we’re working with more conventional farmers in both conventional crops and organic crops, but they’re looking for another Ag option. The prices and the commodities market is out of their control and a lot of times those prices are not enough to sustain unless you’re a gigantic farm. So it would be very helpful for them to have another option to turn to when wheat prices are down or corn is down.
Matthew: Yeah a little more speculative though in that there’s no futures market to hedge hemp currently.
Matthew: But maybe that’s an opportunity at the same then.
Wendy: Yeah someone not so risk adverse, yeah.
Matthew: John do you see any way that plants respond differently from the inside, being grown inside versus outside and what are some of those differences?
John: In terms of the plants themselves, there would be some differences. There’s a lot less light inside no matter how hard you try. If you buy the most expensive, high intensity lights, you might approach about 40% of the radiation of sunlight. So the plants will be overall probably branchier and less dense in the form that they grow in. But really there’s not going to be giant differences depending on at least between those two categories of inside and outside because there will be variation depending on how you grow them outside and how you grow them inside.
I think the biggest difference in terms of production is just the sustainability of it. So hemp can be grown outside. It can be bred to be locally adapted to the local conditions so you eliminate the need to have greenhouses, heating, cooling, lights and all of these other imports that make the carbon footprint and economics of indoor growing very costly. In addition, because people invest so much in indoor production, the one big advantage of indoor production is that you can do year-round production. And so once you make that investment, people do back to back production resulting in a resident population of insects and diseases that are only a problem in the greenhouse setting. So these are organisms that can’t survive outside in Colorado. For indoor production you end up, you have this venin environment year-round where you start building up some of these pests and diseases that you hear about in marijuana production and then people end up trying to save their crops by using dangerous pesticides in some cases. I think that’s not a sustainable approach and I think that almost all goes away when you move to an outdoor production system.
Matthew: John can cover what crop uniformity is and why it’s important in your mind and why perhaps maybe farmers or others should be considering it?
John: Sure, yeah so for a given plot of a given crop species, say you’re growing corn or wheat or soy beans on your farm, uniformity is almost all advantageous. So if all of the plants in a plot are at the same height and at the same level of maturity, then you can go in and mechanically harvest that. You’ve set your cutting bar, are the plants are the same height and you can efficiently harvest all of that grain or whatever you’re trying and in the end that’s an economic efficiency that translates into economic efficiency for the consumer.
So at the scale of the farmer, say with multiple plots, then uniformity and the ability or the availability of seed that produces a uniform crop allows a farmer to predict how much yield they’re going to get from a given acre. So they have so many acres to produce on every given year. They’re small businesses with a single shot at production a year. So farmers spend a great deal of time considering what to plant. So hemp if they know there’s a variety that produces X pounds per acre and they know the cost of the inputs and the value of that crop, then they can make the best economic decisions for their given farm for that year. If you have a non-uniform crop, you can’t make those predictions.
John: Just to be thorough, you want uniformity at the local scale in a given year but you also want to maintain crop diversity. So over year after year you need to be rotating different crops in there and similarly it’s necessary to have a diversity of genotypes of a given crop species. So for corn for example, each growing region has different locally adapted cultivars. In addition, as acreage increases, the insects and pathogens will adapt to whatever resistance mechanisms the plants have. And so it’s necessary to have a diversity of genotypes out there that slows down the evolution of resistance.
Matthew: John I know that some of the combines get kind of gunked up with the hemp resin oil. Is that a problem you hear about often and what do farmers do with that?
John: I think at the combine level the resin isn’t a problem. The fiber can be more of a problem for these European fiber types that are three or four meters tall in some cases. Hemp is famous for its long, strong fibers. Those are not particularly friendly to pieces of harvesting equipment. As far as the resin if you cut up some floral tissue off of hemp, you’ll get resin on the scissors for example, but if you think about the whole plant; leaves, stem, seeds and the floral tissue, it’s only a few percent cannabinoids when you take it as a whole. And so in Canada and Europe they are using combines and other mechanical harvesting approaches for hemp. Some of those are engineering designs around the morphatype or the shape of the plants, the genotypes that they have. And then the solution we’re working on is to actually breed the plant so that it’s in a form that is most optimal for existing harvesting equipment.
Matthew: John you mentioned the difference between hemp and cannabis is a manmade distinctions. However, there’s people that still say well I want CBD oil from hemp or I want CBD oil from a cannabis flower. Why do you think there’s some of that persistent conflict? Is it because there’s more refinement needed when it comes from hemp or to get like a clear oil? What is that exactly? Why is there some tension between those two communities at times?
John: That’s an excellent questions maybe for a philosopher. Some people don’t believe in evolution or that manmade greenhouse gas emissions accelerate global warming. I was looking at… I saw a recent article in the Washington Post that about 30% of Americans think Barak Obama is Muslim. So it’s hard to know why people say things that usually doesn’t necessarily have anything to do with facts. There might be some motivation to distinguish the two markets because of competition, but the fact is cannabidiol is a molecule with a defined structure. So if it has that molecular structure, it’s cannabidiol. So all the same cannabinoids exist in hemp and marijuana and it’s just the amount of THC that distinguishes them. The forms of the molecules are identical in both forms of the species.
Matthew: Okay. And John what are some of the most innovative uses you see with hemp right now? I know I’ve heard about I think it’s Mercedes or some German auto maker using hemp resin to make fibers or some sort of composite for a door panel or something like that. Do you hear about things like that and what’s exciting you the most right now?
John: Yeah so I think there are a lot of innovative uses. Hemp has been used for a long time traditionally for rope, textiles, paper. It’s unique in that it has these very long, strong fibers that are resistant to rotting and organisms digesting it. So it was used for rope and sails because it lasted longer than any of the other natural fibers that people were using. There’s also been, and I think things will continue in the more high tech end of textiles. Colorado has a sort of high tech outdoor clothing industry that I think would be very amenable to incorporating the benefits of hemp textiles. There’s also cosmetics. Hemp oils have been used in cosmetics. I mentioned Dr. Brawner’s earlier. They’ve been sort of activists and advocates for hemp production but they use it in their soap products.
There’s a large existing market of food and feed of the grain for animals and humans. If you go into Costco you can find Nutiva Organic hemp heart type products, the crushed grain or the oil or protein and then as you mentioned moving forward there’s been more high tech stuff like composite materials where the fibers are molded with polymers. There’s interests for airplane wings and other types of uses to replace carbon fibers with hemp. There’s some industry in Europe in building materials. It’s added to concrete to make a light concrete or to use in insulation. So I think there’s a lot of emerging markets. Some of these are going to require a lot of research and development before the market develops. Some are really just about developing the consumer market with existing technology.
Wendy mentioned the cannabinoids. So obviously THC is the psychoactive one. There’s a lot of interest in non THC cannabinoids and it’s really wide open at this point. My first question is how many cannabinoids are there. We don’t actually really know that. Some of them are quite rare and haven’t been characterized at the molecular level. The next question is how do they effect humans. How do they interact with human physiology? We know some of the binding sites for THC and a little bit about binding sites for CBD, but we don’t really know how any of the rest of them interact with human physiology.
Matthew: Wendy, how do you see the intellectual property aspect of your hemp research evolving over the next few years? I should say the intellectual property around hemp in general. Do you see it changing or morphing or evolving in any ways?
Wendy: I see it becoming intellectual property will play the same role that I plays in any other crop. It’s going to bring clarity to who created what, who owns what. There won’t be any more arguments about who created Girl Scout Cookies, the likes of that, which in turn brings some stability to markets. There’s numerous opportunities, not only on the breeding side which we’re on, but in engineering in general. We just talked about all those applications and products and just plant discovery in general. I think Hemp Industry says that there’s a potential 25,000 uses for hemp.
So I think the cool thing is that we have so much technology to improve at right now. It’s not like those other big crops in the latter half of the last century where they had to improve slowly as technology advanced along with them. We have incredible technology available to us now and because of prohibition we couldn’t use it on cannabis. So over the next few years I predict we’re going to see an explosion of discovery in intellectual property activity. I think that’s exciting.
Matthew: I hear that hemp is being used quite effectively for insulation in housing and building too. That’s really a promising development I think.
Wendy: Yeah, construction in general. Places like Hawaii are very vested in creating their own construction materials on site because it’s so expensive to get them there. So they have a very active hemp program and they’re looking at those applications. Things like Hempcrete and also replacing drywall with some kind of hemp composites. So yeah.
Matthew: Now Wendy you recently pitched at ArcView. Can you tell us about that experience, what it was like?
Wendy: Sure. In general ArcView was fun. It was a very fun conference. There was a lot of energy. It was a little bit younger of a crowd than other pitch events we had participated in. So throughout 2015, we fundraise in a variety of ways, not just with ArcView. We worked with Rockies’ Ventures Club with our advisors at the Innosphere and we worked a deal through Rocky Mountain Hemp Association which is now National Hemp Association. Fund raising in general takes time. You have to kiss a lot of frogs as people say, and nobody was awful. Just in some cases, in many cases it wasn’t the right match. So we chose carefully. People are kind of aligned with our culture. Every single one of those avenues was unique and interesting and certainly a tremendous learning experience. If anybody out there is thinking about fundraising, I would highly recommend utilizing your local accelerator whether it’s the Innosphere. If you’re in Denver, Rockies’ Venture Club. They were just invaluable in getting us pitch ready and I give them a lot of credit for our fundraising success.
Matthew: Are you open to new investors Wendy?
Wendy: We are not actively fundraising right now.
Matthew: Okay, and in closing, how can listeners learn more about New West Wendy and follow what you’re doing?
Wendy: Please go to our website www.newwestgenetics.com. That’s www.newwestgenetics.com and hopefully if this airs before we’ll see some listeners at the Northern Colorado Hemp Expo in Loveland, Colorado on April 1st and 2nd.
Matthew: Great, well Wendy and John thanks so much for being on CannaInsider. We really appreciate it.
Wendy: Thank you for having us Matt. That was fun.
John: Yeah, nice to talk to you.
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Wendy Mosher and John McKay PhD are the founders of New West Genetics.
New West is leading some interesting innovation in the hemp arena.
What are the five trends that will disrupt the cannabis market in the next five year?
Find out with your free guide at: http://www.cannainsider.com/trends
[1:51] – Wendy and John’s background
[3:01] – What is New West Genetics
[3:50] – John talks about his opinion on cannabis and hemp plant distinction
[6:13] – Wendy talks about the licensing to grow hemp
[8:47] – John talks about the seed sterilization
[11:24] – John discusses the support he gets from the University of Colorado
[13:05] – Biggest hemp opportunities
[14:37] – Who is New West’s customer base
[17:09] – John talks about the differences between inside and outside grown hemp
[19:48] – John discusses crop uniformity
[24:25] – Differences in CBD oil from hemp and from cannabis flower
[25:55] – Innovative uses for hemp
[29:15] – Wendy talks about intellectual property’s future evolvement
[32:19] – Contact details for New West Genetics