USDA releases details of hemp pilot crop insurance

(Photo by Jeff Cox, IDOA)

USDA has made every Illinois county eligible for two pilot hemp crop insurance programs. March 16 is the sign-up deadline for both programs because the original March 15 deadline falls on Sunday this year.

The pilot programs include a multiperil crop insurance (MPCI) for yield losses due to insurable causes of hemp grown for fiber, grain or cannabidiol (CBD) oil and a noninsured crop disaster assistance program (NAP) for lower yields, destroyed crops or prevented planting where no permanent federal crop insurance is available. “Interested producers should talk to their crop insurance agent for details,” advised Brian Frieden, director of Risk Management Agency’s Springfield regional office that serves Illinois, Indiana, Michigan and Ohio.

To be eligible for crop insurance, growers must be licensed to grow hemp and comply with all state and federal regulations or operate under a state or university research pilot as authorized by the 2014 farm bill. Click here for details.

MPCI eligibility requirements specify a grower must have at least one year of hemp production history and a processor contract for the insured hemp. Last year was the first year Illinois Department of Agriculture (IDOA) licensed hemp production for grain, fiber and CBD. Due to wet weather, not every licensed grower was able to plant or harvest a crop, causing the lack of a year of production history.

In addition, MPCI eligibility requires a grower to plant a minimum 5 acres of hemp for CBD production and/or 20 acres for grain and fiber production.

To be eligible for NAP, a grower must have a processor contract for the hemp.

A farmer is required to provide a processor contract no later than the acreage reporting date. Default of a processor contract does not qualify as a loss for MPCI, whole farm revenue protection (WFRP) indemnity or for NAP payments.

In 2019, processor contracts proved to be elusive for some hemp growers. During IDOA’s hemp summit in late December, reports surfaced that a large part of the harvested hemp crop remained unsold.

MPCI catastrophic 50/55 coverage is available along with additional coverage up to 75/100. However, MPCI will not cover late or prevented planting, replanting, trend yield adjustment, yield exclusion, yield cups, yield floors or yield substitution. In addition, hemp with a tetrahydrocannabinol (THC) level greater than 0.3% on a dry weight basis is not an insurable cause of loss, and that hemp would be ineligible for production history purposes.

NAP covers yield loses from eligible disaster conditions for hemp grown for fiber, grain, seed or CBD. Basic 50/55 coverage is available at 55% of the average market price for crop losses that exceed 50% of expected production. Buy-up coverage is available in some cases up to 65/100. However, THC levels greater than the federal legal limit are an ineligible cause of loss, and the hemp production would be ineligible for production history.

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.

To be eligible for WFRP, a farmer must file either a Schedule F or other farm tax forms for farm revenue for the history period. The farmer must also have a sale contract for the insured hemp and no more than $8.5 million in insured revenue, which is the farm revenue allowed to be insured under the policy multiplied by the coverage level selected.

Under WFRP, hemp with THC levels greater than the federal legal limit is not an insurable 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.

WRFP will not offer a replant payment. However, it offers historic revenue adjustment options that include revenue substitution, revenue exclusion and revenue cup.

Signup deadlines for WFRP coverage vary by plan, but for calendar year and early fiscal year filers, it is Jan. 31, Feb. 28 or March 15 (by county). For late fiscal year filers, it was Nov. 20.

Answers to frequently asked questions may be found online.