Hemp is fast becoming a major — even feature — cash crop in our country. From fiber and industrial hemp to CBD/floral hemp, seed hemp, and grain hemp for food or therapeutic uses, this tall green annual is here to stay as an important crop that requires protection and coverage for commercial growers.

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In 2021 the USDA finally responded to hemp grower feedback and implemented better crop insurance options for the plant than existed before. In 2022 it was reported that Industrial Hemp was valued at $824 million in total, both in open fields and under protected cover. Of these, floral hemp for CBD production topped the charts, valued at $623 million.

It’s clear that hemp producers are vital contributors to agriculture and our country’s economy. However, leading up to these years (starting in 2018 when hemp production was legalized in the 2018 Farm Bill), crop insurance policies for growers were either unsubstantial or too rigid for hemp growers — especially regarding how they worked with hemp processors…that is, until recent years.

With hemp growers playing a bigger and bigger role in the agricultural economy, how is crop insurance changing and opening up to this relatively new crop? Here is an outlook on crop insurance in the hemp industry and where crop insurance policies may be headed.

Multi-Peril Crop Insurance (MPCI) for Hemp

For 2020 and onward, the USDA Risk Management Agency (RMA) finally implemented Multi-Peril Crop Insurance (MPCI) policies for commercial hemp growers, starting with a pilot program and offering Whole-Farm Revenue Protection (WFRP) for the 2020 season back in 2019. In its provisions, Hemp MPCI would only be eligible for coverage if contracts were established between a hemp producer and a hemp processing company.

If floral hemp was to be produced, it could not have THC levels exceeding .3. At least 5 acres for CBD and 20 acres for grain or fiber are required for federal coverage — through private insurance has different limits. There would also be no replant or prevented plant payments.

But keep in mind: coverage for crops going above this THC level (called “going hot”), and how crop insurance kicks in to cover you for this incident, varies from state to state. There are also alternatives such as private crop insurance policies that can enroll you in different coverage for this event (including our coverage).

Via Farm Progress, as of now MPCI coverage still only applies to very specific areas of the country, and it has been that way since the 2021 growing season: counties in only 25 states around the nation can enroll. However, with the rate at which federal crop insurance is expanding, it is not unlikely to expect there will be a greater expansion of states and counties in coming years with these policies and as the needs and economic size of hemp operations continue to grow — though seeing no new implementations for 2023 could also mean these crop insurance limitations will all around remain the same. As for THC levels and other crop insurance provisions, it’s likely that these will stay the same.

Small Hemp Growers are Specializing – Mainstream Hemp Getting Bigger

While reports around different states may vary on this, changes in the hemp industry within the state of Kansas may be telling of where hemp production is headed— and thus where crop insurance policies to protect it around the country may be headed, too.

According to the Kansas Reflector, there is an overall shrinking number of licensed hemp growers in the state. This may sound like a bad thing at first, but in the long run, it may be beneficial to the entire industry: helping both producers and crop insurance companies dial in higher standards, more reliable outcomes, and thus better-suited policies to match these outcomes. After what could be called the 2019 hemp “gold rush” (a huge influx of new producers when hemp was legalized), establishing a more predictable (and stronger) status quo for hemp crop insurance could be right around the corner. This could mean new and different policies that match and cover different revenue levels or product qualifications.

Small-scale hemp growers and family farms are pivoting in ways to bring in stronger income streams by specializing only in certain hemp products: not only CBD, but also products in the food industry; there are also greater markets for animal feed with grain hemp, plus building materials utilizing hemp. On the other hand, as more and more small-scale growers have dropped out of the business, well-established mid- to large-sized hemp commercial growers are expanding— though trends show that total hemp acreage (in Kansas specifically) remains low, around 1000 acres.

Both federal insurance and private companies may find changes on the horizon soon that can tailor themselves better to both the needs of small growers and large commercial operations. This could mean more expansive and more flexible crop insurance programs.

Whole-Farm Revenue Protection (WFRP) for Hemp

Before hemp MPCI became available federally, the USDA offered a Whole-Farm Revenue Protection (WFRP) program leading into the 2020 growing season that was set to be available to any hemp grower nationwide (regardless of location or acreage). This had similar provisions for the MPCI coverage that would soon be rolled out later for the same year: .3 THC content limits, protection against weather events, etc. However, it is available nationwide as opposed to only in specific counties.

However, this policy only insures the grower against revenue loss — not from direct weather events or perils, such as with MPCI. While it is a more “inclusive” policy (allowing any grower to insure up to $8.5 million and file Schedule F taxes) for obvious reasons, growers will find MPCI more and more desirable.

Actual Production Coverage (API) for Hemp

After the 2021 growing year, the USDA also offered Actual Production History (APH) coverage for hemp once the industry yield and revenue trends had been established. This policy would also have similar provisions to the above plans for fiber, grain, and CBD oil production, and cover yield losses — but also extend to a wider range of possible perils. It is only available in a limited number of counties, like MPCI, and covers the value of production rather than revenue.

For more information on different hemp crop insurance policies be sure to visit the USDA website. While many of these programs are offered federally, we at Colville Crop Insurance have our own private options that could be a better fit for you and your hemp business. Give us a call!