Hemp Insurance Helps Farmers With Multiple Liability Coverages

Now that industrial hemp has been legalized federally, large agribusinesses and small farmers alike are embracing this new opportunity. From building materials to food, beauty and health products, America’s newest commodity has high earning potential.

At more upwards of $10K/acre, though, hemp is expensive to plant. Taking care of it can be even harder. For one, farmers must ensure that the THC content of the plant doesn’t get too high. Anything over .3% is considered legal cannabis, and therefore a federally-controlled substance. Farms must have a contingency plan for monitoring their hemp’s THC content regularly.

Ideally, farmers want to employ a seasoned agronomist who can institute controls, keep plants properly hydrated and create a plan to maintain optimal THC levels. Because hemp plant growth is new to most U.S. farmers, an experienced agronomist is essential to applying the right fertilizer, water and herbicide — all critical to an optimal return on investment.

In the heat of the summer, THC levels typically remain low, but increase with cold and rain. Should there be a local cold spell, high rainfall, or if the hemp plant was seeded late in the season and the harvest runs into the fall, THC levels could rise quickly. When this happens, farmers will have to chop down the plant to control the level and harvest the plant’s flower before it’s considered cannabis.

Another challenge that hemp farmers must deal with is the storage and transportation of their product. Because hemp is undistinguishable from cannabis to the naked eye, the entire biomass can’t be shipped directly from the field across state lines, for fear of it being confiscated. Alternatively, farmers are shipping their hemp in smaller, unmarked loads, which is forcing them to hold onto product for longer than usual.

When hemp is confiscated on the side of the road — even if it is eventually returned — there could be significant lag in delivery, storage is uncertain and quality control can’t be maintained.

With so much uncertainty, and the high cost of planting, farmers are looking to insure their risk with hemp insurance. Again, it’s not as simple as it sounds.

Hemp Insurance: What’s available?

Just as hemp is expensive to plant and harvest, so it is to insure — for now. As with any emerging market, there’s a lot of uncertainty surrounding the crop’s growth and sales. Many risks are still unknown. Therefore, the standard federal farmer’s policy doesn’t provide hemp insurance coverage for planting hemp, or endorsements for storage and transportation yet.

Instead, hemp insurance consists of separate policies for harvest, extreme weather and crop storage, and transportation. Farmers will need to make sure they are covered with these individual hemp insurance policies for each aspect of their plant’s lifecycle. As hemp planting, harvesting, storage and transportation become more understood and predictable, new policy options will likely become available. Stay in touch with your broker and inquire about new hemp insurance coverage options annually.