USDA Expands Insurance Options for Hemp Growers

Editor’s note: In this article, Kight Law attorney Kamran Aryah discusses two new USDA risk management programs for hemp producers to protect their crops from natural disasters. Given the current uncertainty and risk that hemp producers currently face these new programs provide some much needed assurance. Let’s just hope that the USDA continues to expand its programs. -Rod Kight

Today, the USDA announced the availability of two programs aimed at protecting hemp producers against crop loss due to natural disasters. While crop insurance has existed to some degree for hemp since 2018, the establishment of these two programs represents an effort to bridge the gap between traditional insurance programs, which aren’t always adequate to cover important risks that are unique to the hemp industry. 

The two programs are called “Multi-Peril Crop Insurance” (MPCI) and the Non-insured Crop Disaster Assistance Program (NAP).

The MPCI is labeled as a “pilot program” aimed at protecting against loss of yield for hemp grown for fiber, grain, or cannabidiol (CBD), and has certain eligibility requirements. Currently, MPCI is only available in select counties in the following twenty-one (21) states:

Alabama, California, Colorado, Illinois, Indiana, Kansas, Kentucky, Maine, Michigan, Minnesota, Montana, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Tennessee, Virginia and Wisconsin. 

The eligibility requirements are as follows:

1. A hemp producer must have proof of at least one (1) year of hemp production;
2. Must meet or exceed a threshold minimum acre requirement of five (5) acres for CBD production, and twenty (20) acres for production of fiber. 
3. Must have a contract already in place for the sale of the insured hemp.

NAP provides coverage against loss for hemp grown for fiber, grain, seed or CBD for the 2020 crop year where no permanent federal crop insurance program is available. This insurance program works by offering coverage when greater than fifty percent (50%) of the expected yield is lost. This policy pays out at fifty-five percent (55%) of the average market price for the losses that exceed 50% of expected yield, so we’re talking about pretty catastrophic loss. While 50% crop loss is certainly not the norm, we have definitely witnessed growers experience greater than 50% crop loss where this policy would have at least helped to recuperate some losses. 

Both of these programs have an application deadline of March 16, 2020. Of course, all growers must have a license to grow hemp and must comply with applicable state, tribal or federal regulations or operate under a state or university research pilot, as authorized by the 2014 Farm Bill. More information can be found on the USDA website, or at the FAQ page at https://www.farmers.gov/manage/hemp/FAQs .

The impact of these programs could be a steadying force on an industry desperately in need of certainty. We execute many Agricultural Services Agreements, and Cultivation Agreements for our hemp clients, especially at the beginning of the growing season. Between now and the application deadline of March 16th, 2020 we expect to encourage many of the clients we broker contracts for to apply for these novel insurance programs. 

The insurance options for hemp cultivators will only continue to expand. Beginning with the 2021 crop year, hemp will be insurable under the Nursery crop insurance program and the Nursery Value Select pilot crop insurance program.

Contact us and mention this article if you would like to schedule a consultation with Kamran and the hemp lawyers at Kight Law. We can discuss your contractual and insurance needs for the upcoming hemp cultivation season. Finding the right insurance package for your grow operation, and properly memorializing your contractual obligations with your growing partners, can save growers time and money come harvest season.

February 6, 2020

This post was written by Kight on Cannabis attorney Kamran Aryah. Kight on Cannabis is a law firm founded by attorney Rod Kight that represents legal cannabis businesses. You can contact us by clicking here.