On December 23, 2019, the Risk Management Agency (RMA) issued a press release announcing a new crop insurance option for hemp growers in select counties in 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. https://www.rma.usda.gov/en/News-Room/Press/Press-Releases/2019-News/USDA-Announces-Pilot-Insurance-Coverage-for-Hemp-Growers.
Coverage is provided under an actual production history (APH) program “under 508(h) Multiple Peril Crop Insurance (MPCI).” RMA states that the 2018 Farm Bill amended the Controlled Substance Act to address how industrial hemp is defined and regulated at the Federal level. RMA states the 2018 Farm Bill defines hemp as having 0.3 percent or less of tetrahydrocannabinol (THC) on a dry weight basis. To be eligible for insurance hemp producers must; 1) comply with applicable state, tribal or federal regulations for hemp production; 2) have at least one year of history producing the crop; 3) have a contract for the sale of the insured hemp; and 4) be a part of a Section 7606 state or university research pilot, as authorized by the 2014 Farm Bill, or be licensed under a state, tribal or federal program approved under the USDA Agricultural Marketing Service (AMS) interim final rule issued in October 2019. Further, the hemp must be grown in containers.
RMA states that hemp is insurable under the Nursery crop insurance program and the Nursery Value Select pilot crop insurance program. RMA states that hemp having a THC level above the amount allowed by statute is not an insurable cause of loss and replant or prevented planting coverage is not available.
ANALYSIS – RMA cannot stress enough the need to comply with all applicable state, tribal or federal regulations for hemp production. This past year a hemp producer in South Carolina, who was licensed to plant the crop, but due to water issues, he had used acreage not officially permitted for hemp by the state agriculture department. https://www.washingtonpost.com/national/this-farmer-had-a-million-dollar-hemp-crop–until-south-carolina-bulldozed-it/2020/01/11/33df5118-3341-11ea-9313-6cba89b1b9fb_story.html. The producer realized that the water supply for his permitted field was insufficient and with a limited planting window, he utilized an adjacent field and another two acres in a field owned by a colleague 100 miles north. He says he called the state agriculture department and was told to submit an amendment form but the agency claims he did not complete the forms until after officials inspected his property. The agency reported him to the law enforcement division that handles state-level drug crimes for willfully planting on an unpermitted field. As a result, the state bulldozed his crop. This should serve as a cautionary tale. Whether insured or not, producers need to be fully aware of their obligations under the applicable regulations and ensure strict compliance.
On a more mundane note, RMA statement refers to “under 508(h) Multiple Peril Crop Insurance (MPCI).” This suggests that the hemp insurance program may have been approved as a section 508(h) of the Federal Crop Insurance Act (FCIA) submission. However, it is not clear from RMA’s website and the reference is certainly unusual because 508(h) is a mechanism for private persons to submit policies, provisions or policies or rates of insurance to the Federal Crop Insurance Board for approval for reinsurance and subsidies. MPCI generally refers to a majority of the crop insurance program that covers multiple risks as the name suggests. However, there have been section 508(h) submissions approved by the Board that would not qualify as MPCI because they cover single risks, such as the weather index policies. While it doesn’t change or affect the coverage for hemp the reference is certainly baffling.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.