The 2020 fire season started early, with multiple fires raging throughout Washington, Oregon, and California, three states where hemp farming has proliferated. Hemp Industry Daily profiled the damage, highlighting California farmers who lost their entire crop to the flames as well as Oregon farmers who doubted the retail value of hemp flowers damaged by wildfire smoke. These unfortunate stories highlight how important it is for farmers to invest in hemp crop insurance. There are no guarantees when it comes to farming, and the best way for farmers to manage their risk is through hemp insurance.
However, with industrial hemp still newly legalized, what hemp insurance coverage is available for farmers? How much does it cost, and what do the available plans cover? In this article, we review the current state of industrial hemp crop insurance, including new insurance programs announced by the USDA.
Why Farmers Need Hemp Crop Insurance
Imagine what would happen if a wildfire ripped through your farm, destroying your entire crop. Don’t have wildfires in your area? What about hurricanes, floods, tornados, droughts, early frosts, diseases, or infestations? Even farmers who grow their crops in greenhouses are at risk of an equipment failure that can demolish their crops overnight.
Every farmer faces the risk that their yields will disappoint, or they won’t get their crop to market due to an unforeseen disaster. For this reason, crop insurance can be a literal financial lifesaver, compensating farmers if the worst should happen. Crop insurance isn’t cheap, which is why some farmers continue to roll the dice and plant without insurance. However, with the threat of ever-increasing extreme weather patterns, more farmers are investing in crop insurance—that includes hemp farmers.
The 2018 Hemp Farm Bill paved the way for hemp farmers to qualify for government-supported insurance. Currently, the federal government allows 15 private insurance providers to offer crop insurance to farmers, ranchers, and growers against certain types of crop loss. The government also helps subsidize premiums for many of these policies.
Hemp Crop Insurance Options
Today’s hemp farmers have a variety of insurance options to consider. In February 2020, the United States Department of Agriculture announced two insurance programs for hemp producers as well as two future programs to roll out in 2021. These USDA hemp crop insurance programs come with other certain caveats, but they represent a growing effort to offer insurance to hemp farmers.
It’s important for farmers to do their homework to understand what insurance options they qualify for, the value vs. the cost of each option, and how much insurance they need. The current range of hemp insurance includes:
- Multi-Peril Crop Insurance (MPCI)
- Non-Insured Crop Disaster Assistance Program (NAP)
- Nursery Crop Insurance and Nursery Value Select Crop Insurance
- Whole-Farm Revenue Protection (WFRP)
- Private hemp insurance
Multi-Peril Crop Insurance
In early 2020, the USDA announced a pilot Multi-Peril Crop Insurance program. As New Frontier Data explains, this USDA crop insurance “offers protection against various natural causes, including drought, excessive moisture, freeze, and disease.” The site also mentions that “MPCI often includes yield protection and price protection against market fluctuations.”
This particular program provides 50/55 coverage, which means that if a farmer loses more than half of their average yield, losses are paid out at 55% of the average market price for that crop. Farmers can also seek additional coverage of up to 75/100 for an additional cost. One thing to note is that the MPCI does not cover prevented plant or replant payments.
Not every farmer can take advantage of this USDA crop insurance. Currently, the pilot program is only available in select counties in the following 21 states:
- New Mexico
- New York
- North Carolina
- North Dakota
To determine if your county is eligible, use this tool from the USDA.
If you do live in a county where the USDA’s MPCI insurance is available, you’ll need to meet additional standards to qualify for the insurance. You’ll need to provide proof that:
- You have a license to grow hemp in your state
- You’ve been growing hemp for at least one year
- You have a contract with a buyer for your crop
- You are growing at least five acres of hemp for CBD and at least 25 acres for grain and fiber
- You are not growing a prohibited variety of CBD hemp
- Your hemp meets the strict compliance guidelines set out in the 2018 Farm Bill, meaning it must test below 0.3% THC.
Non-Insured Crop Disaster Assistance Program
What if you aren’t located in one of the participating counties covered by the USDA’s MPCI program? Then consider signing up for the second hemp insurance program announced by the USDA called the Non-Insured Crop Disaster Assistance Program (NAP). As described in a press release by the USDA’s Risk Management Agency (RMA), 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.”
Like the MPCI program, the NAP offers 50/55 coverage as well as buy-up coverage in some cases. This particular RMA hemp insurance also covers prevented planting in certain situations. Also, like the MPCI, farmers who wish to gain NAP coverage must have a license to grow hemp, show proof of a contract to sell their product, and test below 0.3% THC. Learn more about the NAP.
Nursery Crop Insurance
Farmers who grow hemp indoors don’t have to worry about extreme weather destroying their crop, but what if the electrical system short circuits or their thermostat malfunctions? In 2021, the USDA plans to roll out two programs to support nursery farmers. According to the agency’s press release, both the Nursery Crop Insurance Program and the Nursery Value Selection pilot program will insure hemp grown in containers. Specific qualifications or requirements for this program have yet to be released.
Whole-Farm Revenue Protection
Many farmers plant more than one crop throughout the year. Rather than taking out an insurance policy on each individual crop, you can instead choose Whole-Farm Revenue Protection (WFRP) through the USDA. As the name implies, WFRP insures against the total income of your farm. WFRP can provide protection up to $8.5 million as long as you meet the program’s eligibility requirements, which includes having two or more commodities on your farm.
Take a look at this helpful fact sheet to learn more about WFRP.
Private Hemp Farm Insurance
The USDA supports a large number of farming and agricultural insurance policies, but they aren’t the only insurers around. A private hemp insurance policy may be the right choice for you if you:
- Don’t qualify for USDA hemp crop insurance
- Would like a more customized hemp farm insurance plan
- Want ancillary coverage beyond what the USDA offers
- Want to compare costs and features
- Want a policy that will offer protection in the event that your crop runs hot (above 0.3% THC) and must be destroyed
- Want more coverage than what the USDA offers
You might need to do more legwork to find an insurance company willing to develop a customized policy for you. Be ready to provide a wide range of information on your farming operation. According to an article on hemp insurance by PennState Extension, one private insurance company took location, end-use, and quality of the crop into consideration when pricing its policy. It also provided a policy cost ballpark of $200 to $500 per acre.
What Hemp Crop Insurance Is Right for You?
If you want to protect your future hemp profits from the unknown with hemp insurance, you have several different options to choose from. Whether you decide to enroll in MPCI, NAP, WFRP, or seek out private insurance options, do your homework. Look closely at the fine print of every policy and the history of the company you are working with, especially if you are solicited by an insurance agent.
Another great way to lower the risk of an unsuccessful harvest is to invest in the highest quality hemp seeds. Our hemp strains are known for their robustness, and all of our seeds are strenuously bred to stay in compliance so you can easily qualify for and retain your hemp crop insurance.