The U.S. Department of Agriculture (USDA) recently announced that industrial hemp growers can qualify for insurance coverage under the Whole-Farm Revenue Protection (WFRP) program for crop year 2020. WFRP allows coverage of all revenue for commodities produced on a farm up to a total insured revenue of $8.5 million. According to the USDA, additional insurance coverage options for hemp growers are also on the horizon.
As investment in the hemp industry continues to expand across the country, USDA’s announcement is timely. Martin Barbre, the Administrator of USDA’s Risk Management Agency (RMA), recently noted that a number of hemp producers are anxious for a way to protect their crops from natural disasters. According to Mr. Barbre, “[t]he WFRP policy will provide a safety net for them. We expect to be able to offer additional hemp coverage options as USDA continues implementing the 2018 Farm Bill.”
2018 Farm Bill Greenlights Hemp Production
The newly-available insurance coverage is made possible by the 2018 Farm Bill, which amended the Controlled Substances Act (CSA) to remove industrial hemp from the list of banned substances. The Farm Bill defines “legal” hemp as containing 0.3 percent or less tetrahydrocannabinol (THC) on a dry weight basis.
Under the 2018 Farm Bill, hemp may be grown (1) with a valid USDA-issued license, (2) under a USDA-approved State or Tribal plan, or (3) under the 2014 Farm Bill industrial hemp pilot authority. That pilot authority will expire one year after USDA establishes a plan for issuing USDA licenses pursuant to the 2018 Farm Bill.
While the USDA works on regulations to implement the 2018 Farm Bill, federal agencies are working to make resources available to hemp producers. In June, the USDA published guidance regarding the importation of hemp seeds, which previously required approval from the Drug Enforcement Administration (DEA). More recently, the National Credit Union Administration (NCUA) issued guidance giving federally insured credit unions the green light to provided financial services to the legal hemp industry.
Federal Insurance for Hemp Producers
The availability of federal insurance coverage is the latest development. Under the new USDA directive, coverage for hemp grown for fiber, flower or seeds will first be available to producers who are in areas covered by USDA-approved hemp plans or who are part of approved state or university research pilot programs. However, other hemp producers can’t obtain coverage until a USDA-approved plan is in place.
To be eligible, among other requirements, a hemp producer must comply with applicable state, tribal or federal regulations for hemp production and have a contract for the purchase of the insured industrial hemp. WFRP provisions state that hemp having THC above the compliance level will not constitute an insurable cause of loss. Additionally, hemp will not qualify for replant payments under WFRP.
The USDA’s Agricultural Marketing Service (AMS) is currently drafting regulations that will include specific details for both a USDA plan for the production of hemp and a process for submission of state, territorial or tribal plans to USDA. According to the USDA, the regulations will post to the Federal Register later this year.
Once rulemaking is complete, RMA, the Farm Service Agency (FSA), the Natural Resources Conservation Service and other USDA agencies will share eligibility information on their programs, which include safety net, conservation, farm loan and disaster assistance programs. The USDA further advises that the FSA looking at additional coverage options through its Noninsured Crop Disaster Assistance Program and through RMA-administered crop insurance.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Gregg Hilzer, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.