The Agriculture Improvement Act of 2018 – signed into law December 20 – legalized the growth, sales and transportation of industrial hemp across state lines. Although it looks identical to marijuana, this cannabis plant contains less than 0.3 percent THC, and can be used to make building insulation, beauty products, car dashboards, and more. Most significantly for farmers, it can serve as an ideal rotational crop because of its ability to reduce soil toxicity.

Until this update to the Farm Bill, hemp was considered a controlled substance and few U.S. farmers were granted rights to plant and harvest it. Now, the agricultural commodity is expected to raise the crop’s already growing GDP to that of liquor and beer sales and estimate it should reach $20 billion in as little as five years.

Agribusinesses and farmers alike will now be looking to secure processors and other commodity buyers ahead of planting the crop and purchasing the necessary equipment for its harvest. Because hemp can be grown in any climate, it may be especially attractive to tobacco growers and dairy farmers whose markets are less profitable as of late.

Now that industrial hemp is legal, what’s the risk?

As more agribusinesses and farmers look to confirm viability of industrial hemp growth, potential liabilities will surface. The 2018 Farm Bill left many questions unanswered. Here are a just a few FAQs:

Q: Can I just add hemp to my crop rotation, or is additional insurance required?
A: A farm’s liability and property insurance should not be affected when adding industrialized hemp to their your crop rotation. However, when it comes to harvesting and selling hemp, you must add the commodity to your crop insurance;, otherwise, you won’t be covered for its growth, harvest and sales. There’s a strong push to get Industrial Hemp into the MPCI program as early as Crop Year 2020.

Q: Will adding hemp to my crop rotation put my existing crop insurance policy in jeopardy, or raise premiums?
A: It’s possible. The answer will depend on what your purpose is in growing the commodity, and its ultimate end use. Discuss all of the above with your insurance broker before planting. If you have Whole Farm Revenue Protection you will need to make adjustments in this Crop Year.

Q: How will the FDA regulate industrialized hemp?
A: The FDA will develop rules and regulations on industrial hemp throughout 2019, and will be ready for rollout during the 2020 crop year. Because it’s impossible to distinguish a marijuana THC plant from an industrial hemp plant in the field, crop lifecycle testing and documentation will likely be required. The question remains if this testing and documentation will be incumbent on the farm/agribusiness, or FDA agents. Some states are further along in this process and have already hired testing and compliance officers.

Q: Can I transport hemp across state lines to a processor in another state?
A: Unlike marijuana with active THC that has been legalized in some states but not others, industrial hemp is now legal across all 50 states, and therefore can be transported across state lines and sold as any other commodity.

Contact your HUB Agriculture Specialist to transfer your potential risk to insurance, in advance of planting industrialized hemp.