In early August, hemp farmers in central Oregon confronted a dilemma that every crop farmer fears. Severe thunderstorms – showering golf ball-sized hail – rolled through nearly five hundred acres of farmland, severely damaging the hemp crops in its path. Early estimates tallied the storm’s damage at nearly $25 million (~ $50,000 an acre), though losses now appear to be less than initially believed. Nonetheless, the destruction witnessed in central Oregon, one of the United States’ most densely planted hemp regions, elucidates a key challenge to the industry’s continued growth and profitability; namely, a lack of access to affordable crop insurance.
Put simply, the status quo for many hemp farmers, especially small-scale operations, is simply too burdensome. Most farmers engaging in hemp production do so at their own risk since the private insurance that is on the market is often too expensive. And even if hemp farmers too are willing to purchase an expensive policy, many cannot overcome the private insurance industry’s self-imposed barriers to coverage. For example, many private insurers require that operations have at least 25 acres of hemp crop.
Fortunately, the United States Department of Agriculture (USDA) is beginning to take steps to protect some hemp farmers. Pursuant to its authority under the 2014 Farm Bill, the USDA’s Risk Management Agency announced on August 27 that insurance would be available to farmers who are part of a state or university research pilot program. Further, the insurance will be provided under the Whole-Farm Revenue Protection (WFRP) program for crop year 2020. (See, 2020 Whole-Farm Revenue Protection plan https://www.rma.usda.gov/en/Policy-and-Procedure/Insurance-Plans/Whole-Farm-Revenue-Protection.) The WFRP is a common specialty for organic commodities, nontraditional crops, and specialty crops and provides coverage for all revenue for commodities produced on a farm up to a total insured revenue of $8.5 million. In addition to providing financial security to eligible farmers, the WFRP and future insurance opportunities serve to legitimize hemp as an agricultural crop. Hopefully, the future legitimacy and predictability of the hemp sector will increase participation among farmers throughout the U.S., especially from states that haven’t grown hemp in the past. While difficult to quantify, the economic ripple effects of increased market participation have the potential to benefits consumers and countless other operators throughout the supply and manufacturing chains.
Even with these new developments, the USDA is still in the process of drafting regulations that will include specific details for a USDA plan for the production of hemp, and a process for submission to territorial, state, or tribal plans. The USDA has stated that it will aim to have hemp regulations in effect by the fall of 2019 in order to accommodate the 2020 planting season. (See, the 2018 Farm Bill’s statutory requirements for hemp plans. https://www.ams.usda.gov/rules-regulations/farmbill-hemp.)
Following the release of the USDA’s hemp rules, other USDA agencies (including the Natural Resources Conservation Service and the Farm Service Agency (FSA) will share eligibility information on their programs with respect to farm loans and disaster assistance. Newly offered programs will also include RMA-administered crop insurance and Noninsured Crop Disaster Assistance Programs. And while these developments come too late for central Oregon’s uninsured farmers, hopefully, they will have recourse when disaster next strikes.