The USDA Insures Industrial Hemp Production

By Halderman

06 /12 /20

Amazingly adaptable, industrial hemp works well for products as diverse as the original US flag, rope, and other fiber-based products.

Recently legalized by the 2018 Farm Bill, industrial hemp took another step toward becoming a mainstream crop. As such, the USDA authorized the crop as eligible for multi-peril crop insurance. Hemp grown for fiber, seed, and CBD oil is eligible.

Hemp is an adaptable and environmentally friendly product whose fibers are comprised of short inner fibers called hurds and longer outer fibers called bast. Processing the raw fiber can yield a variety of fabrics, including yarn, bedding, and industrial batting. Because of its make-up, the fiber is strong and offers many positive characteristics.

Production obstacles to growing hemp

Recognizing that the production of industrial hemp has threats from multiple perils, the USDA now backs up farmers who attempt to grow this historic crop via crop insurance coverage.

For the absent processors who can take harvested hemp and spin it into the fiber, demand will likely be on a slow growth curve in the near term. Multi-peril crop insurance covers a wide range of potential crop disruptions including:

  • Extreme weather events such as hail, unusually heavy rain, and flooding.
  • Exogenous shocks to the market such as trade wars.
  • Insect damage.

The insurance comes in the form of a floor price in terms of dollars/ton. For the time being, the USDA is limiting its industrial hemp production coverage to 21 states, including the two largest growers (Kentucky and California). Applicants must also have at least a year of experience growing hemp. In addition to the multi-peril insurance, the USDA is also offering Noninsured Crop Disaster Assistance Program (NAP) insurance that covers unexpectedly lower yields, destroyed crops, or prevented planting in areas where there is no permanent federal crop insurance.

Products derived from industrial hemp

Unlike its THC-containing cousin marijuana, industrial hemp does not have mature domestic processing infrastructure, along with having limited wholesale and retail demand for the product. Marijuana is legal to grow in some states, but not on a national level.

Industrial hemp has tiny amounts of THC and has no hallucinogenic properties. Nonetheless, one of its primary uses is for CBD oil, which has beneficial topical properties for skin wounds, lesions, and other problems. Hemp seeds provide significant nutrition and can be used for baking and cooking in many applications. However, industrial hemp is hardly limited in its use and may add value to an estimated 50,000 products.

Common industrial hemp applications are for animal feed, construction materials, nutritional products, and a variety of commercial food and beverage products. Hemp is a nutritional powerhouse that contains significant amounts of both Omega-3 and Omega-6, along with protein and amino acids.

Hemp is naturally fibrous, and its large amount of biomass makes it appealing for manufacturers of products like carpeting, textiles, and animal bedding.

When spun and woven, hemp is an extremely durable and useful fabric, and it can be blended with other fibers to achieve different degrees of finish. Hemp that is coarsely woven makes durable bags and accessories, while hemp blended with cotton or wool creates versatile fabrics for all types of clothing.

To date, the vast majority of hemp bedding and clothing is imported from China since it has longstanding production facilities. US growers are eager to see the industrial processing of hemp begin to take hold to stimulate demand for the raw product here in the US.

Since 1930, Halderman Real Estate and Farm Management has advised farmers and farmland owners about innovations in growing and crop development. We look forward to helping you understand if and how industrial hemp and other new crops can benefit you.