It wasn't long ago that I wrote about how the two biggest Canadian marijuana producers, Aurora Cannabis (NYSE:ACB) and Canopy Growth (NYSE:CGC), couldn't enter the U.S. market. And they can't. At least they can't as long as cannabis is illegal at the federal level in the U.S. and both companies' stocks are listed on major exchanges.

But something big happened on Thursday of last week. This development is so big, in fact, that it could result in a $22 billion cannabis market within the next four years. This market is totally separate from the already-expanding medical and recreational marijuana markets in the U.S. And it's one that Aurora and Canopy should be able to jump into headfirst. 

U.S. map made of $100 bills.

Image source: Getty Images.

E-i-e-i-o

Old McConnell had a farm bill. Yes, it's a play on the well-known children's song, but it's also the big story that could open the barn doors for a sizable new market in the U.S.

Senate Majority Leader Mitch McConnell was a major supporter of fully legalizing hemp in the 2018 Farm Bill. By definition, hemp is cannabis that contains no more than 0.3% of the psychoactive ingredient THC. McConnell's home state of Kentucky already has a thriving, albeit relatively small, industrial hemp industry, thanks to a provision in the 2014 Farm Bill that allowed states to authorize hemp production for research.

The 2014 Farm Bill expired on Sept. 30, 2018, and McConnell steered a replacement bill through the Senate. Another bill with language that also would legalize hemp passed the U.S. House of Representatives. So was the legislation a shoo-in? Not so fast.

Key differences between the Senate and House versions included proposed food-stamp program changes and cuts to conservation programs that some GOP representatives in the House wanted. Those differences were serious enough that Democrat and Republican members from both legislative houses assigned to reach a compromise haven't been able to do so. Until now.

On Thursday, there was a breakthrough. While no details were announced, the four leading Farm Bill negotiators from the House and Senate released a statement that they had reached an "agreement in principle." Because there wasn't a major disagreement on the hemp issue between the two bills, it's highly likely that the language to legalize hemp will be in the final compromise version.

A really big market awaits

Marijuana Business Daily projects that the U.S. marijuana market will reach $22 billion by 2022. That's close to the $23.4 billion marijuana market projected by Arcview Market Research and BDS Analytics. But the separate hemp-based cannabidiol (CBD) market could be just as big.

The entire U.S. hemp market last year was around $820 million. Cannabis market research company Brightfield Group thinks that the hemp CBD market in the U.S. will increase dramatically, to $22 billion by 2022. Brightfield Group recently stated that the 2018 Farm Bill "will change the game entirely."

But will Aurora Cannabis and Canopy Growth be able to profit? It looks like a good bet.

The companies still will be prohibited from selling marijuana in the U.S. because it will continue to be illegal at the federal level. However, the Farm Bill differentiates hemp from marijuana. The bill even will change the Controlled Substance Act to specifically state that the definition of marijuana doesn't include hemp.

Aurora Cannabis has gone on record stating that the company is anxious to enter the U.S. market. When Aurora Chief Corporate Officer Cam Battley was asked earlier this year how quickly the company would enter the U.S. market if federal laws were changed, his response was: "Do you have a stopwatch?"

The big cannabis producer already has made key acquisitions related to hemp. In May, Aurora boosted its stake obtained last year in Canadian hemp grower Hempco to more than 50%. In September, the company acquired Europe's largest hemp producer Agropro and its sister hemp processor and distributor Borela.

Canopy Growth also is highly likely to jump into the U.S. hemp CBD market. Founder and co-CEO Bruce Linton hinted a few months ago that there could be "mechanisms of action" that Canopy could take to enter the U.S. market after alcoholic-beverage giant Constellation Brands invested $4 billion in the company. Constellation CEO Rob Sands stated in the company's Q3 conference call that both it and Canopy could produce CBD for beverages to be marketed in the U.S. through Constellation's distribution network if hemp is legalized.

Like Aurora, Canopy Growth has been active in building its hemp operations. The company acquired Canadian hemp producer Green Hemp early this year. And in October, Canopy bought the assets of U.S.-based hemp company ebbu.

Just a few more hurdles

The 2018 Farm Bill isn't a done deal yet, however. House and Senate negotiators need cost estimates from the Congressional Budget Office. They also have final tweaks to make on language in the compromise bill. After that, the bill must be voted on again in both legislative chambers. Assuming the bill passes, it will go to the president for his signature.

That's a lot of work that must be completed very quickly. If the legislation isn't passed by the end of the year, the new Congress that will be sworn in in January will have to restart the process.

However, the hard part is over. The smart money would certainly be on a new Farm Bill becoming law in 2019, with hemp becoming legal at the federal level in the U.S.

Look for Aurora Cannabis, Canopy Growth, and probably several of their peers to move quickly to claim a share of the potentially huge U.S. hemp CBD market. This horse appears to be out of the barn.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.