USDA Approves State Hemp Production Plans

For all its cachet as a potential moneymaking crop for American farmers, industrial hemp ranked midway between safflower and flaxseed in plantings, with an estimated 230,000 acres in 2019, and industry leaders disagree whether 2020 will be a year of expansion or retrenchment. But the USDA is approving state plans to regulate hemp production and offering crop insurance for hemp growers, steps that could help establish the crop.

The 2018 farm law legalized hemp farming and the USDA issued a rule last October 24 to assure consistency among states in the oversight of growers. In the final days of 2019, USDA's Agricultural Marketing Service (AMS) approved production plans by three states — Louisiana, New Jersey, and Ohio — and plans by the Flandreau Santee Sioux, Santa Rosa Cahuilla, and La Jolla Band of Luiseno Indian tribes.

Hemp has allure because of reports of high per-acre returns on sales to cannabidiol (CBD) oil processors during a time of tight margins for major crops, such as corn, wheat, and soybeans. Like those crops, industrial hemp thrives in many regions. However, market networks are rudimentary and processing capacity is limited, so it can be hard to find a buyer once the crop is harvested. The EPA has approved 10 pesticides for use on hemp so weed control will be easier this year.

"To produce hemp, growers must be licensed or authorized under a state, tribe, or USDA production program," said the AMS. "If a state or tribe does not have a plan and does not intend to have a plan, growers can apply for a license from USDA."

Seventeen state plans were under review and eight states were drafting plans for submission, said AMS. In addition, four states — Maine, Minnesota, Missouri, and New Mexico — will operate under the 2014 farm law, which authorized pilot projects and hemp research. In Maryland, "Growers will use the USDA hemp program," it said. Hemp is legal to grow in 46 states, according to the National Association of State Departments of Agriculture. The AMS said 11 tribal plans were under review, and five tribes were drafting plans.

Meanwhile, the Risk Management Agency announced a pilot crop insurance policy, available in select counties in 21 states this year, for hemp grown for fiber, grain, or CBD oil. To be eligible, growers must comply with state, federal, or tribal rules for hemp production, have at least one year's experience with hemp, and have a contract for sale of the crop. Hemp with too much of the psychoactive substance tetrahydrocannabinol (THC) cannot be claimed as a loss.

Hemp coverage also is available under so-called Whole-Farm Revenue Protection insurance, which covers up to $8.5 million of revenue from all crops on a farm. Specialty crop growers have complained that whole-farm policies don't provide enough protection for an entire farm and don't respond adequately to losses of a specific crop.

Hemp insiders Jillian Hinshaw and Scott Propheter told Hemp Industry Daily that they expect smaller plantings this year because of over-production in 2019; Hinshaw, who works with small farmers, said acreage could rebound in 2021. Three other industry leaders said they believe plantings will expand; Wesley Ray, of Combined Hemp in Bend, Oregon, said, "2020 will resemble 2019 with twice the amount of land."

Brent Willians of Highwater Financial, based in Nashville, took a more neutral view and said the industry would focus on expanding infrastructure in the year ahead. "With many farmers getting burned on production contracts in 2019, we also believe there will be a slower growth rate in the number of acres grown until there is a tangible increase in demand," he said.

Hemp acreage has grown rapidly since pilot projects were authorized by the 2014 farm law, but plantings remain comparatively small, at the level of crops such as safflower, grown on 153,000 acres, or flaxseed, planted on 355,000 acres, last year, according to USDA data. Growers planted twice as much land to chickpeas and lentils as they did to industrial hemp. All the same, proponents say hemp is a versatile crop with manifold uses in apparel, food, and bioplastics.

"They say hindsight is 2020," wrote Steven Hoffman of Compass Natural, a marketing and business development company, after reviewing the challenges facing the "burgeoning industry" created by legalization. "If so, what better year for the hemp industry to remain proactive on all fronts."

For USDA's status of state and tribal hemp plans, click here.

The USDA homepage for industrial hemp, including a link to the interim final rule, is available here.