Lack Of Federal Crop Insurance Sows Uncertainty For Cultivators

By William Sumner, Hemp Business Journal Contributor

Among the most significant reform benefits of the 2018 Farm Bill's passage was the ability for hemp cultivators to obtain federal crop insurance. Yet, more than 10 months after the measure's passage, no such policy has been available to the hemp industry.

The lack of coverage has been acutely missed by many cultivators, including several in Oregon who lost approximately $25 million in damaged crops due to a late-summer hailstorm in the state's central region. The subsequent losses led many to wonder about the federal government's delay in crafting its plans, though clear answers have not been forthcoming. Meanwhile, some market forecasts now call for gloomy results as inexperienced farmers fail to convert anything close to 100% of their permitted acreage to sales in the market.

United States farmers' crop insurance is handled by the Federal Crop Insurance Corporation (FCIC), a wholly owned government corporation managed by the Risk Management Agency of the United States Department of Agriculture (USDA). While the FCIC is responsible for oversight, private companies are contracted by the FCIC to individually administer the program.

Foundational policies are based on a given farm's Actual Production History (AHP), a formula based on average yield and crop prices to protect against yield losses. Growers select a level of coverage based upon their crop's average yield over a 4-10-year period. Should the harvest fall below that average, farmers are reimbursed for a certain percentage of the yield, typically up to 75% or 80%.For most agricultural commodities, the development of an APH is relatively simple, but that is not the case for hemp, explained Kim Harris, a senior policy analyst with AgriLogic Consulting, one of the private companies assisting the FCIC in developing its APH insurance plan.

According to Harris, a fundamental obstacle has been the lack of data: Since the federal government only recently legalized commercial hemp production, very little data exists regarding historical yields. While some states legalized research pilot programs for industrial hemp under the 2014 Farm Bill, the crop is new to most cultivators.

"If growers don't have four years of data, we have to come up with the county's average yield, which is based on historical data," Harris said. "Where are we going to get that data for hemp?"

Genetics pose another issue. Currently, there are countless hemp strains and seeds, each capable of different yields depending on various circumstances. For those responsible for creating insurance policies, it is a daunting challenge to set a value and yield for a particular hemp crop without knowing the details and history of its genetics as one would for other crops.

"When I plant corn, there are years and years of testing and science behind it," Harris added. "If I plant a certain variety of corn on a certain patch of land, and nothing goes wrong, I can be fairly certain about what kind of yield I will get. We don't yet have that with hemp."

Cannabidiol (CBD) also presents a problem. When cultivating hemp for fiber and seed, the growing and harvesting methods are relatively standardized. However, there are several different ways to grow hemp for CBD, and even more ways to extract it.

"When you get into the CBD realm, the amount of production methods are all over the place," said Harris. "No one knows what's best, yet."

Despite such difficulties, the USDA announced in the summer that in 2020, hemp crop insurance would become available for cultivators of hemp fiber, flower, or seeds in areas covered by USDA-approved hemp plans or those involved in approved state or university research pilot programs.

Still, the devil is in the details: According to Harris, farmers must apply for insurance before planting. If the FCIC does not publish and approve its hemp crop insurance plan before January 2020, cultivators will likely be unable to gain coverage until 2021.

William Sumner

William Sumner is a writer for the hemp and cannabis industry. Hailing from Panama City, Florida, William covers various topics such as hemp legislation, investment, and business. William's writing has appeared in publications such as Green Market Report, Civilized, and MJINews. You can follow William on Twitter: @W_Sumner.

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