With the growing popularity of hemp as an agricultural commodity, farmers are gravitating towards hemp production. When growing crops, corn for example, farmers are able to purchase crop insurance to cover or mitigate losses. However, crop insurance is not as accessible for hemp.  Prior to the recent regulatory changes implemented by the Agricultural Improvement Act of 2018 (“2018 Farm Bill”), hemp farmers have encountered obstacles locating and receiving crop insurance for their hemp fields. In response to this vacancy, a variety of private insurance providers have created crop insurance policies for hemp farmers.

Limited Insurance Programs for Hemp Producers

Beyond private insurance policies, the U.S. Department of Agriculture (“USDA”) has extended limited insurance programs to hemp producers with the goal of providing financial support and relief in the wake of crop loss and/or destruction. In August of 2019, the USDA’s Risk Management Agency (“RMA”) announced the extension of the Whole-Farm Revenue Protection program (“WFRP”) to hemp producers for the 2020 planting season. WFRP extends coverage to hemp produced for its fiber, seed and flower and is only available to producers located in states with USDA-approved hemp plans. This program will cover all revenue lost for all produced commodities up to $8.5 million.

Hemp Insurance Pilot Programs

In addition to WFRP coverage, RMA announced the Multi-Peril Crop Insurance program (“MPCI”) in February of this year. MPCI is a pilot program designed to provide coverage to hemp farmers whose loses are a result of insurable causes. Insurable causes does not include “hot hemp” (that is, hemp that tests over the 0.3% THC limit).  MPCI covers hemp grown for fiber, grain, and cannabidiol, or CBD. To be eligible, the farming operation must operate in one of the select counties of the 21 selected states for the 2020 season, possess at least one year of hemp-growing experience, have a contract to sell the insured hemp, and meet minimum acreage requirements. The MPCI program looks towards future development and further extends insurance coverage for the 2021 planting season under the nursery crop insurance program and the Nursery Value Select Insurance program. The 2021 addition indicates the USDA’s support of hemp farmers that are in compliance with the applicable USDA or state regulations.

Noninsured Crop Disaster Assistance Program

The third program USDA announced is the Noninsured Crop Disaster Assistance Program, or NAP. Although this is not a traditional insurance program, NAP fills the gaps of the MPCI program by providing coverage for crop losses of lower yields and crop destruction for hemp operations that do not qualify under MPCI. Notably, to be eligible to receive coverage under any of the USDA programs, the hemp must be produced in compliance with the applicable USDA or state regulations, including licensing, for the current planting season. If the crop is not produced under the governing rules, any suffered loss will not be covered.

The application window for MPCI and NAP closed on March 16, 2020, however, there are alternatives that are available if you missed the application window. When selecting an insurance policy, the insured must secure adequate protection for the assets and commodities produced. Some insurance companies have created policies that are curated for hemp farmers and producers, but are generic and do not provide complete coverage. Prior to entering into any crop insurance policy, we encourage you to contact the Hoban Law Group to discuss your unique insurance needs.

This article is authored by our managing attorney, Garrett Graff, with contributions from our law clerk, Haley Keefer.