Hemp growers are a new and growing part of our nation's agricultural industry. The 2018 Farm Bill reclassified hemp and it is now legal to grow industrial hemp. Recently, the USDA's Agricultural Marketing Service (AMS) announces a rule outlining how states and tribes can submit plans that will enable producers to grow hemp in those areas. This rule is a first step that enables USDA agencies administering farm programs - including the Farm Service Agency (FSA), Natural Resources Conservation Service (NRCS), and Risk Management Agency (RMA) - to provide guidance on eligibility for additional farm programs.
The USDA announced the availability of two programs that protect hemp producers' crops from natural disasters. A pilot hemp insurance program through Multi-Peril Crop Insurance (MPCI) provides coverage against loss of hyield because of insurable causes of loss for hemp grown for fiber, grain, or cannabidiol (CBD) oil. The Noninsured Crop Disaster Assistance Program (NAP) coverage protects against losses associated with lower yields, destroyed crops, or prevented planting where no permanent federal crop insurance program is available.
What are Hemp Producers Possibly Eligible For?
Crop Insurance
Several crop insurance plan options are available for the 2020 crop year and beyond. Hemp that has tetrahydrocannabinol (THC) above the 0.3 compliance level will not be covered by crop insurance. Additionally, hemp will not qualify for replant or prevented plant payments.
Whole Farm Revenue Protection (WFRP): Provides coverage of all revenue for commodities produced on a farm up to a total insured revenue of $8.5 million, including for hemp grown for fiber, flowers, or seeds for the 2020 crop year. Producers can purchase WFRP coverage if they have a contract for the purchase of the insured hemp and meet all applicable state, tribal, and federal regulations.
MPCI Pilot Insurance Program (MCPI): Provides Actual Production History (APH) coverage for eligible producers in certain counties in Alabama, California, Colorado, Illinois, Indiana, Kansas, Kentucky, Maine, Michigan, Minnesota, Montana, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Tennessee, Virginia, and Wisconsin. The MPCI coverage is for hemp grown for fiber, grain, or CBD oil for the 2020 crop year.
Nursery Crop Insurance (NCI): Beginning with the 2021 crop year, hemp will be insurable under the Nursery crop insurance program. Under both programs, hemp will be insurable if grown in containers and in accordance with federal regulations, any applicable state or tribal laws, and terms of the crop insurance policy.
Noninsured Crop Disaster Assistance Program (NAP):
Will be available for eligible hemp producers to provide insurance-type coverage due to adverse weather conditions for hemp grown for fiber, grain, seed, or CBD beginning with the 2020 crop year.
Farm Loans
Hemp producers may be eligible for FSA farm loans, such as operating, ownership, beginning farmer, and farm storage facility loans.
NRCS Conservation Programs
Multiple USDA conservation programs will be offered for eligible producers, including the Environmental Quality Incentives Program, Conservation Stewardship Program, Regional Conservation Partnership Program, and Agricultural Conservation Easement Program.
USDA Hemp Programs for Risk Management FAQ
1. What do the programs cover and what are the coverage levels?
MPCI: Multi-Peril Crop Insurance (MCPI) provides coverage against loss of yield because of insurable causes of loss for hemp grown for fiber, grain, or Cannabidiol (CBD) oil. MPCI Catastrophic (CAT) 50/55 coverage is available as well as additional coverage up to 75/100.
NAP: Noninsured Crop Disaster Assistance Program (NAP) provides coverage against loss of yield due to an eligible disaster condition for hemp grown for fiber, grain, seed, or CBD. NAP basic 50/55 coverage is available at 55 percent of the average market price for crop losses that exceed 50 percent of expected production. Buy-up coverage is available in some cases up to 65/100.
WFRP: Whole-Farm Revenue Protection (WFRP) allows coverage of all revenue for commodities produced on a farm up to a total insured revenue of $8.5 million, including hemp grown for fiber, flower, or seeds.
2. Where in the country is coverage available?
MPCI: The MPCI pilot insurance program is available for hemp grown for fiber, grain, or CBD oil for the 2020 crop year in select counties of 21 states: Alabama, California, Colorado, Illinois, Indiana, Kansas, Kentucky, Maine, Michigan, Minnesota, Montana, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Tennessee, Virginia, and Wisconsin. Information on eligible counties is accessible through RMA's Actuarial Information Browser.
NAP: Nationwide.
WFRP: Nationwide.
3. What is the deadline to sign up?
The 2020 deadline to sign up has already passed, but is March 15, 2021 for the next fiscal year.
4. Who is eligible for coverage?
To be eligible, all growers must have a license to grow hemp and must comply with applicable state, tribal, or federal regulations according to the 2018 Farm Bill or operate under a state or university research pilot, as authorized by the 2014 Farm Bill.
MPCI: To be eligible for MPCI, the producer must have at least one year of hemp production history, have a contract for the purchase of the insured hemp, and have a minimum of 5 acres for CBD and/or 20 acres for grain and fiber.
NAP: To be eligible for NAP, the producer must have a contract for the purchase of hemp.
WFRP: Eligibility for WFRP coverage requires you to file either a Schedule F tax form or other farm tax forms for farm revenue for your history period. You must also have a contract for the purchase of the insured hemp, and have no more than $8.5 million in insured revnue, which is the farm revenue allowed to be insured under the policy, multiplied by the coverage level you select.
5. Is any documentation required to show the hemp producer can market their harvested crop?
A producer is required to provide a processor contract no later than the acreage reporting date. Default of contract by a processor does not qualify as a loss for MPCI or WFRP indemnity or for NAP payments.
6. What is the deadline for filing an acreage report?
It is in the producer's best interest to report their acreage to FSA and their crop insurance agent as soon as possible after planting to comply with federal and state law enforcement. For 2020, the final acreage reporting date for MPCI and NAP is August 15, 2020. The farm operation reporting date for WFRP is July 15.
7. What is needed to file an acreage report?
Acreage reports include the producer's name, location, acreage, share interest in the crop, license number, intended use, and contract.
8. What are the reporting requirements for THC testing?
MPCI: Producers must provide notice to their insurance company within 72 hours of the notification from the governing authority stating the results of the THC testing for the acreage or the harvested production.
NAP: NAP participants are required to provide testing results when production is reported for loss or history purposes.
9. What are the implications for my coverage if the hemp is tested and exceeds the legal THC level?
MPCI: Hemp having THC above the federal legal level is not an insurable cause of loss and would result in the hemp production being ineligible for production history purposes.
NAP: Hemp having THC above the federal legal level is an ineligible cause of loss and would result in the hemp production being ineligible for production history purposes.
WFRP: Hemp having THC above the federal legal level is not an insured cause of loss and would result in all expected revenue from hemp reported on the Farm Operation Report being considered revenue-to-count at claim time.
10. Are there any exclusions to coverage or yield adjustments?
MPCI: Will not cover late or prevented planting, replanting, trend yield adjustment, yield exclusion, yield cups, yield floors, or yield substitution. New Producer yield benefits do not apply, which is distinct from Beginning and Veteran Farmer and Rancher.
NAP: No, there are no exclusions.
WFRP: Will not offer a replant payment. Offers historic revenue adjustment options that include Revenue Substitution, Revenue Exclusion, and Revenue Cup.
11. What are the service fees?
MPCI: $655 per crop per county for CAT coverage. $30 per crop per county for buy-up coverage (plus premium).
NAP: $325 per crop per county. $825 per producer per county. $1,950 for a producer in multiple counties. (Note: hemp, grain, and seed are considered one crop; fiber is considered a separate crop; CBD is a separate crop).
WFRP: $30 per policy.
12. Are there any provisions for special groups?
MPCI: There are special provisions for beginning and veteran farmers and ranchers, which can be found on the Beginning Farmer and Rancher Benefits for Crop Insurance and Veteran Farmer and Rancher Benefits for Federal Crop Insurance fact sheets.
NAP: There are special provisions for limited-resource, beginning, socially disadvantaged, and veteran farmers and ranchers, which can be found on the Noninsured Crop Disaster Assistance Program for 2019 and Subsequent Years fact sheet.
WFRP: There are special provisions for beginning and veteran farmers and ranchers, which can be found on the Whole-Farm Revenue Protection fact sheet.
13. How will my production guarantee be determined?
MPCI: Production guarantees will be based on your approved APH yield and the coverage level you select and will be calculated using actual yields based on your reported production history. If you have less than four years of actual yields for the crop in the county, your approved APH yield will be based on a combination of actual yields, if any, and the county Transitional Yield (T-Yield). The county T-Yield is provided in the actuarial documents and is based on the historical county average yield per acre. If you have one year of actual yields, your approved APH yield will be based on your reported production history and three years of 80% of the county T-Yield. If you have two years of actual yields, it will be based on your actual yields and two years of 90% of the county T-Yield. If you have three years of actual yields, it will be based on your actual yields and one year of 100% of the county T-Yield. If you do not have any actual yields, the approved APH yield will be based on 65% of the county’s T-Yield.
NAP: Production guarantees will be based on your approved APH yield and the coverage level you select and will be calculated using actual yields based on your reported production history. If you have less than four years of actual yields for the crop in the county, your approved APH yield will be based on a combination of actual yields, if any, and the county Transitional Yield (T-Yield). The county T-Yield is based on the historical county average yield per acre. If you have one year of actual yields, your approved APH yield will be based on your reported production history and three years of 80% of the county T-Yield. If you have two years of actual yields, it will be based on your actual yields and two years of 90% of the county T-Yield. If you have three years of actual yields, it will be based on your actual yields and one year of 100% of the county T-Yield. New producers may have a yield guarantee based on 100% of the county average yield.
WFRP: WFRP insured revenue is determined by using the lesser of the producer’s whole-farm historical average revenue and the current year’s expected revenue multiplied by the elected coverage level.
14. Where can I find my county T-Yield data?
Producers can access T-Yield data through RMA's Actuarial Information Browser. On this webpage, producers can search for their specific state and county to access T-Yield data.
15. Is there a maximum amount of indemnity/NAP payment that can be received?
MPCI: Indemnities are based on elected coverage levels.
NAP: Yes, NAP is subject to a payment limitation. The maximum payment is $125,000 for basic 50/55 coverage or $300,000 for buy-up coverage.
WFRP: Indemnities are based on elected coverage levels, with an overall policy cap of $8.5 million in insured revenue.
16. Are there any adjusted gross income restrictions?
MPCI: No.
NAP: Yes, the maximum historical adjusted gross income is $900,000. More information is available on the Average Adjusted Gross Income Certification and Verification, 2019-2023 fact sheet.
WFRP: No.
17. How should hemp production be reported for MPCI and NAP?
As pounds.
18. Are there any crops after which hemp cannot be planted and still be insured or have coverage?
Hemp cannot follow acreage that was planted to any of the following in the prior year: cannabis, canola, dry peas, mustard, rapeseed, or sunflowers. In addition, hemp cannot follow acreage that was planted to soybeans in the prior year in northern states. For further details, contact a crop insurance agent or your local FSA office.
19. Where can I find more information on the U.S. Domestic Hemp Production Program?
For more information on the U.S. Domestic Hemp Production Program, visit USDA's Agricultural Marketing Services' website and read their frequently asked questions.
Have questions? We have answers.
Call us at (515) 281-1475 or email us at akanne@2501grand.com.
This Wandro & Associates Update is intended to inform firm clients and friends about legal developments, including recent decisions of various courts and administrative bodies. Nothing in this Practice Update should be construed as legal advice or a legal opinion, and readers should not act upon the information contained in this Update without seeking the advice of legal counsel.
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