OMAHA (DTN) -- Farmers who choose to grow hemp under USDA rules will have to face the risk that their crop could test "hot" and lead to the destruction of their crop without a crop insurance indemnity even if they have a license to grow hemp.
USDA on Tuesday announced its interim final rule for hemp will go into effect on Thursday when the rule and its various provisions are published in the Federal Register. Agriculture Secretary Sonny Perdue said the department had "all hands on deck" to get the rules out for the 2020 growing season, which will be used to "test drive" hemp production nationally.
"At USDA, we are always excited when there are new economic opportunities for our farmers, and we hope the ability to grow hemp will pave the way for new products and markets," Perdue said.
Perdue added, "I encourage all producers to take the time to fully educate themselves on the processes, requirements and risks that come with any new market or product before entering this new frontier."
Hemp farmers will also become eligible for a number of USDA programs, including loans, some whole-farm crop insurance policies, disaster assistance and conservation programs. All of these various programs will be available starting in the 2020 crop year.
Diversified producers will be able to buy whole-farm revenue protection if they have a five-year crop history, though veterans and beginning farmers can buy the insurance with three years of crop history. Hemp farmers will also be eligible to buy Noninsured Crop Disaster Assistance Program (NAP) policies as well, said Bill Northey, USDA's undersecretary for farm production and conservation, "which will give them essentially insurance coverage in an adverse weather event."
To tap into USDA programs, farmers will need licenses through their growing state or tribe to grow the crop and will need to file acreage reports at local Farm Service Agency offices with details on where the crop is being grown, including greenhouses. USDA also wants to know the intended use for the hemp in those reports, whether it's for fiber, grain, seed or cannabidiol (CBD) products.
The FSA acreage submissions will also provide better detail for actual production of hemp by state. Right now, USDA only has estimates from private sources. The group Vote Hemp issued a report earlier this year that more than 510,000 hemp acres were licensed this year in 34 states, but actual planted acres may have been closer to 230,000 acres.
Greg Ibach, USDA's undersecretary for marketing and regulatory programs, noted some of the key questions sent to USDA involve testing. USDA will require testing by labs registered with the U.S. Drug Enforcement Agency. Sampling will be one within 15 days before harvest by a USDA-approved sampling agent, or a federal or state law-enforcement agent. USDA will provide details for sampling, including how to collect a statistically valid sample from a field.
USDA will approve state plans with slightly different sampling protocols if officials think they will create comparable testing results.
Under the farm bill, the chemical Delta-9 tetrahydrocannabinol (THC) must be limited to 0.3% on a dry weight basis. USDA said measurement will take into account uncertainty and variations in sampling or testing procedures. Still, a test above 0.5% THC will translate into a negligent violation that will cause the crop to be destroyed.
An Oklahoma reporter asked USDA officials on a press call about the risks of high-THC tests because of weather variability in areas such as in the High Plains. That would lead to the crop being destroyed. Ibach and Northey said that is a risk farmers will have to face.
"Just like every other crop has its risks and rewards -- sometimes we have weather conditions that cause wheat to be low protein and not as valuable in the marketplace, or sometimes we have droughts that cause aflatoxin problems in other crops -- hemp is not without its production risks and difficulties either," Ibach said.
Ibach said farmers need to learn about hemp seed varieties to plant in their area that will be suitable. "So that is something producers need to be cognizant of as they move forward," he said.
Crop insurance also will not cover losses from hemp that has to be destroyed because of too much THC, Northey said.
The farm bill allows states to choose if they want to authorize hemp production. Four states right now have no legislation allowing hemp production: Idaho, Mississippi, New Hampshire and South Dakota. Farmers in states that do not allow hemp simply won't be allowed to grow it in those states.
Some states submitted plans to USDA several months ago. Ibach said USDA will review plans as soon as possible to get responses back to the states, and nearly all of them have placed their state department of agriculture as the oversight agency. Ibach noted there may be a few states that allow growing hemp, but decline to set up a program.
"In that case, the statute provides that USDA provide a way for those hemp producers to obtain their license through USDA," Ibach said.
While USDA now has its rules out, other agencies are moving slower at the moment. The big challenge lies with the Food and Drug Administration and how it treats the broad range of CBD oil products now on the market without FDA approval. The Grocery Manufacturers Association just Monday issued a report citing that consumers are confused about CBD products and whether they are safe. The trade association cited that one-in-three Americans have used a CBD product and the overwhelming majority, 76%, believe CBD products are already subject to federal regulations. GMA called on FDA to bring some clarity to the growth in cannabidiol products.
"It is the role of federal agencies to ensure a safe and transparent consumer marketplace -- but the CBD market is currently the Wild West," said GMA President and CEO Geoff Freeman. "Without a uniform federal regulatory framework in place, consumers lack the basic information they need to make informed decisions about CBD."
CBD is the big market for hemp in the U.S. right now with sales at just under $2 billion last year and a forecast that sales could top $20 billion in less than a decade, according to the Colorado firm BDS Analytics. It is the CBD market that is generating revenue for at least some farmers of $50,000 an acre or more to produce CBD oil in their plants.
EPA also closed a public comment period in September on 10 different pesticides that could be used on hemp and the agency is working through a pathway for pesticide registration.
More details on USDA's hemp program, including the interim final rule, can be found at https://www.ams.usda.gov/….
Chris Clayton can be reached at Chris.Clayton@dtn.com
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