Now used in foods and beverages, body oils and even building materials, industrial hemp is expected to expand into a $270M industry by 2025.1 In order to guide and govern this explosive growth, the USDA released interim regulations in November 2019.
Requiring states to submit their plans for crop testing and enforcement, and hemp producers to apply for a production license, the USDA interim regulations will remain in effect until the final rule is released in November 2021.
The new rule requires hemp to be tested by each state to ensure the plant remains below .3% THC, within 15 days of harvest (i.e. the reason for licensing requirement). It also bans states and local authorities from prohibiting the transportation or shipment of hemp produced in accordance with the rule through its borders.
Applying for a Hemp Producers License
Producers applying for a USDA license can do so until December 1, 2020. After this initial period, applications will be accepted only between August 1 and October 31 annually. Licenses will be valid for three years.
Applications require “key participants,” aka, C-suite executives or others in a management position, to include their criminal history. Those convicted of a state or federal felony involving controlled substances within 10 years of the report are ineligible for a license.
Applications require “key participants,” aka, C-suite executives or others in a management position, to include their criminal history. Those convicted of a state or federal felony involving controlled substances within 10 years of the report are ineligible for a license.
Licenses can be suspended if the licensee engages in conduct violation of provisions of the interim regulations or has failed to comply with a written order related to a negligent violation. A suspended license is prohibited from removing, handling or producing hemp for one calendar year. Licenses will be revoked for violations including felonies related to a controlled substance or having grown hemp above the acceptable .3% THC level with a certain level of intentionality.
Insuring Your Hemp Crop
As state regulations take shape and the USDA begins to monitor production, hemp producers are looking to insure their crop. The federal crop insurance program that backs most commodities is currently piloting a hemp program, insuring multiple counties in 22 states.
Coverage levels in this pilot program are from 50% to 75% and insurable types are limited to: plants for CBD either directly seeded or transplanted including whole plants and/or the flower, fiber and seed. Growers cannot interplant with another crop, plant into an established grass or be grown in a greenhouse.
Unfortunately, the pilot program’s rules can be hard to meet for many producers, as the Multi-Peril Crop Insurance (MPCI) program will only cover hemp crop that meets the following criteria:
- Hemp type must be declared at the onset, not upon harvest.
- The crop must have an executed contract with a processor who has committed to purchasing the entire crop.
While the MPCI program can be a good option for hemp producers farming a significant amount of hemp with a committed processor, the program will not be applicable for all. Alternatively, hemp producers can purchase parametrically rated crop insurance, or retail hail insurance. While more costly, and only ensuring the product for specific weather-event triggers, these coverages are also successfully backing current hemp producers.
Contact your HUB Agribusiness expert to find out how you can transfer your risk to the right insurance policy for your farm and what you need to do to secure a hemp license today.