Cost Concerns and Shrinking Acreage Prompt SD Lawmakers to Hand Hemp Regulation to USDA

Northeast Radio SD News – South Dakota - South Dakota is officially stepping away from managing its own industrial hemp program. Senate Bill 39, which has successfully navigated the state legislature and received final legislative approval this month, will shift the oversight of the state’s hemp growers to the United States Department of Agriculture (USDA).

Backed by the South Dakota Department of Agriculture and Natural Resources (DANR) and introduced by the Senate Agriculture and Natural Resources Committee, SB 39 overhauls the state’s approach to the crop. The measure officially repeals state-level licensing and regulatory requirements for hemp cultivators and processors.

The shift comes as state officials point to the financial unsustainability of the state-run program. According to testimony from the DANR, licensing fees from hemp farmers covered only about 11% of the program’s operating costs in 2025, leaving the remainder to be subsidized by the state’s general fund. By transitioning to USDA oversight, state officials estimate South Dakota will save taxpayers roughly $200,000 annually while simultaneously eliminating state license fees for local growers.

The legislative change also follows a contraction in the local hemp industry. Despite being the nation’s leader in hemp acreage in 2024 with 3,900 planted acres, South Dakota experienced a 70% drop in 2025, falling to just 1,128 acres. South Dakota’s hemp sector has historically leaned heavily into grain and fiber production, rather than cannabinoids.

Under the provisions of SB 39, only hemp producers licensed directly by the USDA or an approved tribal program will be authorized to cultivate hemp within state lines. While the state is relinquishing control over cultivation and processing, it will maintain its strict jurisdiction and laws regarding hemp-derived intoxicating products.

With the passage of this bill, South Dakota becomes the third state in the nation to abandon its own industrial hemp plan, following similar moves by Wisconsin and Ohio. The new framework under Senate Bill 39 will officially take effect on January 1, 2027, giving state and local farmers time to prepare for the federal transition.