It’s been a busy year for the hemp industry, to say the least. Hemp Grower spoke with a few of its editorial board members to get a better idea of what’s happened, what’s to come and what to look forward to.
Following the Farm Bill’s passage, what’s something that has surprised you?
Filippone: “That the stalk of both CBD [cannabidiol] flower shrub-grown methods and historically grown is not clearly defined as not intended for human consumption therefore should be excluded from the THC [tetrahydrocannabinol] limit.”
Hermann: “Lack of support for the banking sector.”
Smart: “I have been surprised that there are still some states that have not engaged in developing hemp programs despite the widespread support and interest across the country. It has been fantastic to see the interest in plant science and agriculture among folks not trained in those fields based on their curiosity about hemp.”
What single most important piece of advice do you have for someone who is new to the industry?
Smart: “Do your research and forge collaborations with people you trust.”
Filippone: “Identify what part of the supply chain is of interest. Educate yourself to better understand the values of CBD hemp and industrial hemp and what is required to create long-term, value-added supply chains. Protect farmers, have buyers contract farmers with assurance their crop will be sold, [have] seed and LOI [letters of intent] agreements in place that include nonrefundable deposit for the costs [of] growing.”
Hermann: “Since hemp is such a robust plant and can offer so many opportunities, the key is to hone in on what they are passionate about and follow that path instead of trying to do it all at the same time.”
3 Tips for Insuring Your Hemp Business
Features - Insurance
Following passage of the 2018 Farm Bill, hemp businesses
may be eligible for the first time ever for coverage under the U.S. Department of Agriculture’s federal crop insurance program. What does this mean for farmers in the short and long term, and what insurance options will be available?
Contrary to popular belief, the 2018 Farm Bill did not, through its enactment, free the U.S. hemp industry from volatility and uncertainty. State regulations still vary widely. Law enforcement authorities can still crack down on hemp businesses without much warning, as Big Sky Scientific learned earlier this year. In the case of Big Sky Scientific LLC v. Idaho State Police, et al., police seized nearly 7,000 pounds of industrial hemp the company was transporting because hemp remains a controlled substance under state law. The business of growing hemp in these times of unpredictable and severe weather brings ever-increasing costs and risks. And don’t forget: While farmers across the country may be rushing to harvest hemp, the regulations within the Farm Bill (formally named the Agriculture Improvement Act of 2018) have only just been released for public comment.
Still, little doubt exists that the new law will have a huge impact on hemp growing—and hemp insurance—in the U.S. While the 2014 Farm Bill authorized states to launch pilot industrial hemp research programs, the 2018 Farm Bill took legalization a giant step further by removing hemp from its Schedule I Status under the Controlled Substances Act. Hemp with no more than 0.3% tetrahydrocannabinol (THC) is now a permissible agricultural crop for commercial production.
That designation means that for the first time ever, hemp is eligible to be covered under the U.S. Department of Agriculture’s (USDA) federal crop insurance program. Growing crops do not constitute “covered” property, so farmers who want to insure their most precious assets while they’re still growing in the ground must purchase crop insurance. Thanks to the 2018 Farm Bill, hemp growers will be able to purchase federally subsidized crop policies based on yield or revenue to cover the loss of crops brought on by drought, freeze, disease and most other natural causes (save for hail).
As of press time, according to the draft rules released for public comment by the USDA, the Federal Crop Insurance Corporation (FCIC) must offer hemp farmers coverage under the whole farm revenue protection insurance policy by the 2020 crop year.
Some hemp growers are already eligible, however. Farmers producing hemp for fiber, flower or seeds can obtain crop insurance coverage under the Whole-Farm Revenue Protection (WFRP) program for the 2020 crop year—but it is only available to those who are part of state or university research pilot programs as authorized by the 2014 Farm Bill. Everyone else must await final USDA regulations implementing the 2018 Farm Bill.
This all sounds complicated, right? And we have not even delved into crop hail insurance, which is not government subsidized and is sold by private insurers.
For all these reasons and more, preparing insurance budgets and finding cost-effective policies remains a daunting task.
“Hemp was only legalized federally in the U.S. with the passage of the 2018 Farm Bill, so 2019 will really be the first growing season for many farmers,” says Neil Hitchcock, an insurance broker and chief executive officer at Skyfront Bermuda Limited. That presents challenges for insurers, Hitchcock says.
“From an underwriter’s pricing standpoint, they want to look at the past performance of any book of business,” he says. “Underwriters and insurers want reams and reams of data—and if that data isn’t available, they get very nervous because they don’t know how to price it.”
In other words, if there’s no historic crop yield and no farming history to speak of, an underwriter can’t properly calculate the potential crop insurance risk. That could result in two unfortunate outcomes for hemp growers: the insurer decides not to write a policy out of fear of unknown risks, or the insurer prices the policy high as a conservative hedge against those unknown risks.
Not even Canada can help insurers gauge U.S.-based crop risk. Though industrial hemp has been legal in Canada since 1998, generating 20 years of insurance data from which to draw, Canadian weather is vastly different than what is seen in most of the U.S. and, as such, affects hemp crops differently, says Jonathan Miller, general counsel for the U.S. Hemp Roundtable, a coalition of hemp companies advocating for pro-hemp policies. So, U.S. insurers remain uncertain about how to mitigate risk to seeds, seedlings and mature plants.
Given that crop insurance is top of mind for many existing and emerging hemp companies, Hemp Grower spoke to leading experts to get their insights into options for insuring hemp businesses during the 2018 Farm Bill transition period. Here are three tips to ensure a profit by insuring crops.
One current challenge for farmers is that if there’s no historic crop yield and no farming history to speak of, an underwriter can’t properly calculate the potential crop insurance.
While federal crop insurance is still unavailable for many farmers, in the meantime, hemp companies are encouraged to secure traditional business coverage, says Corey Tobin, a cannabis and hemp insurance specialist with the brokerage Bolton & Company. Because every industry is different, the baseline of traditional business coverage varies widely. For hemp growers, the following list should be considered an essential (but non-exhaustive) checklist, according to experts surveyed by Hemp Grower:
property/casualty insurance;
product liability;
general liability;
inventory coverage;
employment practices liability insurance;
directors and officers liability;
cyber liability;
employee benefits; and
workers’ compensation.
Tobin notes in particular that a must-have for all hemp companies across the supply chain is adequate product liability coverage. Hemp finds its way into an expansive array of goods, from oils, fuel and paint to cereal, bread and protein shakes. Product liability would cover every manner of hemp businesses in the event that the hemp itself somehow causes illness or injury.
In addition to traditional business coverage, many hemp farmers purchase crop hail coverage from private insurers. (This is separate from federally subsidized Multiple Peril Crop Insurance, or MPCI, which covers loss of crop yields from drought, excessive moisture, freeze and disease.) Assuming you are one of the hemp farmers still ineligible for federal crop insurance, the private market is the only option, which can become a costly and frustrating proposition.
According to experts surveyed for this article, private crop insurance for all of the protections noted, including hail, is not widely available and is often prohibitively expensive. By Tobin’s calculation, annual premiums for a $1 million policy could be as high as $150,000. Regardless of whether business owners decide to stomach the high costs for crop insurance, Tobin advises that hemp farmers should still avail themselves of inventory coverage. “The second that crop is harvested and transferred into a warehouse, you can cover that product with inventory insurance,” he says. “Securing coverage for a crop that’s still planted and growing is very expensive.”
Josh Smart, practice leader and chief sales officer of Hub International Limited’s Agribusiness & Farm Specialty Practice, says some clients tend to be so focused on insuring the hemp they lose sight of what happens after the hemp is cut and harvested.
“Work with a broker that understands the seed-to-sale process,” Smart says. “There are transportation exposures, storage of the harvested and dried biomass and business income insurance exposures.”
Spencer Mahoney, an insurance adviser at CCIG and head of the firm’s cannabis practice, agreed that with the passage of the Farm Bill, there is now a clear-cut case for business insurance—not just everyday property and casualty coverage, but also a comprehensive lineup that can help ensure a hemp business stays in business. Mahoney has observed that many hemp growers still have gaps in their coverage and that few insurance carriers have flexible insurance products for the unique business challenges faced by the fledgling industry.
However, Mahoney says growers often overlook directors and officers (D&O) liability, which protects the heads of companies from investor lawsuits for alleged operational failures and mismanagement. Hemp businesses may be overlooking D&O because many are small or independently run (a family farm, for example), and some have the perception that D&O is not really needed. But, as Mahoney explains, “D&O is important to protect the board and the investors and should be considered a top priority for any serious cannabis or hemp business.”
Another reason for the slow adoption of D&O insurance is its cost. Major carriers are waiting to get engaged in the market until they feel the hemp industry has matured from the standpoint of claims management, Mahoney says. That lack of competition means premiums are higher relative to other industries.
2. Manage risk one state at a time
In sections of the 2018 Farm Bill legalizing hemp, Congress struck a compromise between federal and state regulations: States can act as the primary regulators of hemp production within their borders so long as state regulations comply with the USDA’s federal requirements.
With this hybrid state-federal regulatory regime, hemp business owners must be intimately familiar with state regulations on hemp distribution, transportation, quality control, testing, reporting, record-keeping (track and trace), labeling/warnings, advertising and marketing, and disposal in states in which they operate. They must also make sure their insurance policies reflect these state-specific risks, says Ian Stewart, a partner with the law firm Wilson Elser and a co-chair of the company’s cannabis law practice.
The good news is that by now, this state-by-state strategy should be familiar to hemp growers who began cultivation following the 2014 Farm Bill. Both the 2014 and 2018 laws envisioned overlapping state and federal authority to regulate hemp. And until the USDA finishes writing regulations, the 2014 regulatory framework rules the day.
3. Don’t forget your risk mitigation roots
Because hemp was legalized only recently, major branded insurance companies have yet to offer products tailored to the unique needs and risks of hemp growing. That’s changing, Mahoney says, but it will take some time before competitive, comprehensive, turnkey solutions exist.
Until then, he says, hemp companies must take out lines of coverage where they can while maintaining a spirit of resourcefulness and risk mitigation by any means necessary.
“The people in this industry are used to people telling them ‘no’ or ‘we can’t do that,’” Mahoney says. “These people are very resilient. They’ve gone through a lot of regulation and change. Somebody tells them no, and they know they have to get it done themselves.”
To be sure, declining coverage is never advisable and should only be considered as a last resort, Mahoney says. In some cases, hemp business owners are declining private crop insurance because of the high costs, he says. But while the availability of insurance coverage for hemp businesses remains limited, there are insurers that are willing to underwrite such businesses, he says. And insurance will be critical in these initial legal growing years.
What do you have to lose? Great insurance salespeople never lose sight of what their customers have to lose—a house, a car, their life. Much in the same vein, hemp insurance salespeople should keep these numbers handy: According to the hemp advocacy group Vote Hemp, American farmers were licensed to grow 9,770 acres of hemp in 2016; 25,713 acres in 2017; 78,176 acres in 2018; and 511,442 so far in 2019. For hemp businesses, that’s a lot to lose.
Paul Barbagallo is a Boston-based writer and a former senior editor for Bloomberg News and beat reporter for Bloomberg BNA.
Almost Every U.S. State Has Enacted Hemp Legislation Since the 2018 Farm Bill Was Signed
Departments - Smart Start—And Counting
A breakdown of pertinent hemp figures, from the number of states that have legalized its cultivation to the acreage licensed so far.
We are excited to introduce you to the inaugural issue of Hemp Grower. Whether you are an experienced farmer or a novice, and whether you are growing hemp for fiber, grain or cannabidiol (CBD), Hemp Grower is here to help you and your business succeed.
We are excited to bring our passion and history to the North American hemp industry as it emerges from prohibition in the U.S. and reclaims its space as an agricultural crop. We plan to help you, the hemp cultivator, navigate a still-evolving regulatory framework and build profitable businesses around leading agricultural practices.
We are no stranger to launching and building media brands. Our parent company, GIE Media Inc., is a family owned and operated media company that has grown through product excellence and market leadership. Our Cannabis Media Group launched Cannabis Business Times in 2015, and Cannabis Conference and Cannabis Dispensary in 2017. Our Horticulture Media Group consists of Greenhouse Management, Nursery Management, Produce Grower, Garden Center, Lawn & Landscape and Golf Course Industry.
From our humble beginnings publishing one magazine 39 years ago, our company now has more than 100 employees and serves 18 markets in horticulture, food processing, pest control and technology through print and electronic media, custom content and face-to-face events. We are successful because we believe in investing heavily in the industries we serve and being an integral part of those industries. We are especially dedicated to helping businesses succeed through our quality standard based upon editorial value. Helping you run your business is what we are passionate about, and we have a team of people specifically dedicated to the hemp marketplace.
I also want to thank all of our advertisers for supporting the launch issue of Hemp Grower. Their support enables us to bring you this publication at no cost to your business and to continue our tradition of investing in industries and professionals we believe in. Please check out their products and services as you engage in this inaugural issue; they, too, are dedicated to serving hemp businesses in North America.
To stay up to date on the latest industry news impacting your business, as well as to access additional business and agricultural strategies you can implement, I encourage you to visit HempGrower.com and to sign up for Hemp Grower’s e-newsletter.
You also will not want to miss our industry-leading Cannabis Conference, which unites plant-touching cannabis businesses. Next year (April 21-23), we are introducing a hemp education track specifically geared to you, the hemp grower. Here is a glimpse at some key sessions:
Expand Your Greenhouse Operations or Farm Into Cannabis (Including Hemp);
Embarking on the Hemp Journey, in which Marguerite Bolt, hemp extension specialist at Purdue University’s Department of Agronomy, will explore the types of hemp production, risks associated with a new crop, and where you can find resources to help you on this wild hemp journey;
Protect Your IP and Create Licensing Agreements Where You Don’t Lose Out;
The Diagnosis and Management of Hemp Pathogens, presented by Dr. Janna L. Beckerman, professor and extension plant pathologist at Purdue University’s Department of Botany and Plant Pathology, to help you identify and treat (and try to prevent) pathogens affecting your hemp crop to minimize damage and widespread affectation.
So, again, welcome to the premier edition of Hemp Grower. We look forward to bringing you the highest-quality editorial content in the industry and helping you succeed.
Welcome to the first issue of Hemp Grower! We have much to talk about since U.S. hemp prohibition is finally over (though some states continue to lag behind in welcoming the opportunities the plant’s legalization presents).
While 2018’s Farm Bill passage has been cause for celebration, it also has not come without hurdles. This year has given rise to challenges for hemp farmers, such as banking and access to capital; insurance; seed supply and quality issues; and supply and demand adjustments amid rapid growth. We address many of those challenges in this issue and look forward to helping you succeed—whether you are growing for grain, fiber or cannabidiol (CBD), and for any of the reportedly 25,000 hemp-based products out there—as the U.S. hemp industry develops its sea legs in a global market.
While Hemp Grower launched its website in August, this issue is our first “meeting” in print, and I think it’s important for you to understand the inspiration, editorial strategy and people behind the magazine. Hemp Grower is brought to you by GIE Media Inc., the company that launched the award-winning Cannabis Business Times (CBT), which the American Society of Business Publication Editors named as “Magazine of the Year” in 2018, among other awards. This is not to toot our own horn; these awards reflect our passion, hard work and dedication to creating the highest-quality editorial content to best serve our readers. And as the co-founder of CBT, I have witnessed the quagmires faced by a federally illegal cannabis industry with a state-by-state patchwork of shifting regulations and the need for sound education to help the businesses in that industry thrive.
Hemp was a natural extension of our desire to advance businesses surrounding the Cannabis sativa L. plant and to lift the North American cannabis market as a whole.
But CBT and Hemp Grower have much more in common. They also share an editorial strategy that relies on experts, researchers and academics. We are grateful to have the generous support of our Editorial Advisory Board, whose insights helped guide this issue. And we are thrilled to introduce in this issue the first of what will be many columns by Marguerite Bolt, hemp extension specialist at Purdue University.
We hope you enjoy your first issue of Hemp Grower. We look forward to growing with you and your business and to seeing the sure-to-be-nothing-short-of-amazing impact this wonder crop will continue to have on the planet and humankind.