The Importance of Proper Crop Insurance

Over the past year, Bridge West has been working closely with many hemp and CBD clients on setting up their businesses and financial projections. The demand for CBD has sky-rocketed and farmers and business owners are very interested in supplying that demand. Although there are notable differences, and each industry has unique challenges, our expertise and significant experience in the cannabis industry transfers well to the hemp/CBD space. One of the benefits of hemp and CBD businesses is the increased access to traditional business services, like banking, insurance, payroll, etc.  Our clients are investing a significant amount of time and resources into their hemp and CBD operations.  It is important to protect those investments by obtaining the proper crop insurance.

Recently, AgriLogic presented a listening session for the development of a Federal Crop Insurance Policy for Industrial Hemp and Gerald Klein and I attended. Kim Harris led the session and gave an update as to where the process is and what additional information they are looking for from both growers and processors. She provided an overview of how they are attempting to structure the policy.

The remainder of the session was Federal Crop Insurance 101 for Hemp, explaining how the program would work.  Kim made it clear that all proposed policy provisions and examples are subject to change during the development process, and the proposed program will not be a final product until if/when it is approved by the Federal Crop Insurance Corporation (FCIC) board of Directors.

To follow are some takeaways:

1. They are looking to have a policy in place for the 2020 Crop Year. To do so they have requested feedback from growers and processors by the end of July 2019. Moreover, they will need to submit the developed program to FCIC board for approval by October 2019.

2. The initial policy will only be available in the following 12 states:

California, Colorado, Kentucky, Michigan, Minnesota, Montana, Nevada, New York, North Dakota, Oregon, South Carolina, and Tennessee.

3. Insureds who wish to purchase coverage must be licensed by a governing regulatory authority (e.g. applicable state, Indian tribe, or USDA).

4. There may be possible rotation requirements, minimum distance between fields for CBD crops, and a minimum acreage requirement.

5. Hemp must be grown under a valid processor contract executed by the acreage reporting date (ARD=July 15), and meet regulatory requirements of the governing regulatory authority, e.g. approved varieties with THC delta-9 no greater than 0.3%. The hemp must be planted for harvest as industrial hemp in accordance with the processor contract. Hemp must be field grown (greenhouse grown hemp is not covered until transplanted to the field). Types included are CBD, fiber, and grain.

6. 6-Covered causes of loss are similar to most other Federal Crop Insurance Policies, which include adverse weather; fire, insects, but not damage due to insufficient or improper application of pest control measures; Plant disease, but not damage allowed because of insufficient or improper application of disease control measures; wildlife; earthquake; volcanic eruption; or failure of the irrigation water supply due to insurable causes.

7. Excluded causes of loss:

• Mandatory destruction (exceeds THC delta 9 of 0.3% or higher, etc.);
• Mold;
• Quality Deficiencies;
• Failure to follow requirements in processor contract;
• Inability to market unless due to covered cause of loss (e.g. quarantine, boycott, or refusal of processor to accept); or
• Seed contamination or quality (e.g. non-feminized CBD seed, etc.)

8. Price Election established by region

They are actively seeking price data by intended use (CBD, fiber, and grain).

Markets developing on a regional basis are largely driven by processor availability and regional market demand.  The use of contract price with a cap is being explored.

The data collection form below is intended to collect historical data which will be critical in the development of the program. Everyone is encouraged to provide as much feedback as possible, no matter your location.

For more information about Bridge West LLC, the nation’s leading CPA and advisory firm solely focused on serving the cannabis and CBD/hemp industries, contact Brandon Van Asten, CPA, Manager with Bridge West LLC at 651-287-6313 or bvanasten@bridgewestcpas.com.

If you are interested in learning more about crop protection, please contact Gerald Klein to schedule a consultation call and discuss specific information related to your operation. GK Crop Insurance Agency LLC is an independent family owned crop insurance agency, with over 35 years of sales and service dedicated to the Federal Crop Insurance Program. Gerald Klein and his team are specialists to the farming industry. They have helped many growers create many risk management plans and can help you create a risk management plan that will be tailored to your needs. For more information, please contact Gerald at (917) 699-2640 or gkcropins@yahoo.com.