Weather Risk Management 101 for Hemp Farmers, Processors and Investors

The hemp industry is experiencing a resurgence in the United States due to the signing of the 2018 Farm Bill. Hemp production across the country is on the rise and, seemingly, it is increasing on a daily basis. Hemp can be grown for fiber, seed, or flower (oil extracts) and hemp farmers should be concerned about protecting their livelihood from adverse weather events. Those who grow hemp are no different from those who grow the three basic crops in the United States: corn, soybeans, and wheat. The primary difference is that with the Farm Bill, hemp production is legal if the producer is properly licensed and follows all federal and state regulations. What does that mean for hemp farmers? It means that until a federal program is in place (with the assumption that it will be available in all counties in all 50 states), hemp farmers should protect their crops from weather related events, such as cyclones, droughts, hail, frost, freeze, floods, excessive precipitation, excessive heat, hurricanes, tornadoes, fire, wildlife damage, earthquakes and volcanic eruptions. No one knows when the federal program will be implemented; however, there is a tremendous amount of political push to fast-track a program.

Keeping THC levels Low
The level of THC determines whether your plants are hemp or marijuana. To be considered hemp, the THC level must be 0.3% or less. Every state has its own “HEMP POLICE” most likely associated with the State Department of Agriculture. Rules and regulations for reporting and testing plants are handled on a state-by-state basis, but any plants that test above 0.3% THC are considered controlled substances and are required to be destroyed.

In December 2017, a fourth-generation farmer in Colorado had to mow down eighty acres of hemp that had THC levels of 0.47%. While it was arguably the most difficult days of his life, failure to abide by the requirement could have resulted in fines or prosecution.

According to the North Carolina Cooperative Extension, there are numerous plant stresses that can contribute to THC spikes. These contributors include, but are not limited to, heat, drought, flooding and cold weather. Stress from excess heat poses the biggest risk to elevating THC levels, while lack of rainfall and a damaging fall freeze can also stress the plant and increase THC levels. It will likely take several years of data analysis and research to determine the “best practices” farmers should employ to avoid such spikes.

What Can Hemp Farmers, Processors and Investors Do Now?
Currently, a federal crop insurance program is unavailable. However, private multiple peril weather risk management products are available that offer protection against the following weather perils:

• Drought
• Excess Rain
• High Heat
• Hail
• Other Weather Perils of Concern

How It Works
A hemp farmer, processor or investor can select the weather peril(s) they wish to protect against and the timeframe during which each of those elected weather perils are most threatening to their operation. Program participants even have the flexibility to choose the amount of coverage they wish to purchase for each peril. Premium rates are determined by historical weather data, which is derived from independent governmental sources, such as the National Oceanic and Atmospheric Administration (NOAA). Protection must bound at least 15 days before coverage begins and sales closing for Fall risks such as excess precipitation at harvest and early Fall freeze is August 15th. Earlier starting risks must be bound at least 15 days before coverage begins. Join us on the webinars to understand how critical it is to protect these risks. Claims are determined by using weather data at chosen land-based weather stations or synthetic weather grids meaning claims can be paid much quicker – typically within 30 days of the close of the coverage window.

For more information about weather protection programs for hemp farmers, processors, and investors contact Brian O’Hearne, President/CEO eWeatherRisk, Inc. at (913) 749-7738 or Brian.OHearne@eWeatherRisk.com. To register for one of the upcoming educational webinars where you can learn all about the available weather risk management programs for hemp, visit:

https://register.gotowebinar.com/rt/4163799257445317635

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

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 since 2009, contact Jim Marty, CPA, Founder and CEO of Bridge West LLC at 303-651-0304 or jmarty@bridgewestcpas.com.