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Riley Esser of Perham, Minn., cut his CBD hemp crop with a chainsaw and then hung the branches in a shed. He is selling much of the 2019 crop to Prairie Products LLC, in Fargo, on a “split contract,” meaning, he gets a share of the crude oil the company markets. Photo taken in October 2019, near Perham, Minn. Photo courtesy Riley Esser

USDA sets hemp insurance pilot program

FARGO, N.D. — North Dakota State University agricultural economist David Ripplinger wants everybody to get one thing straight: hemp is a niche crop.

U.S. hemp acres are less than one-tenth of national sugar beet acres, also a specialty crop. Total U.S. total production is equal to only 10 average-sized North Dakota farms (1,500 acres average each).

But Ripplinger says it could get bigger, and government actions may play a role.

U.S. Secretary of Agriculture Sonny Perdue on Feb. 10 announced the continuation of a federal Hemp Production Program, designed to support new economic opportunities for the crop. Separately, on Feb. 6, the USDA announced a new hemp insurance program through Multi-Peril Crop Insurance pilot program for “insurable” yield loss for fiber, grain or cannabidiol (CBD oil) and the Noninsured Crop Disaster Assistance Program coverage for losses where no permanent federal crop insurance program is available.

Producers can apply now and the deadline for both programs is March 16. Traditionally, the Risk Management Agency has always provided 60 days for the sales season on the new programs. This time, RMA released the hemp program on Feb. 6.

The MPCI pilot program is available in certain counties in Montana, North Dakota, Minnesota and Wisconsin, among 21 states. County information is available at: Actuarial Information Browser. Users must have had one year of producing, and must produce at least 5 acres for CBD or 20 acres for grain and fiber. It is not eligible for prevented-planting payments or replanting payments.

The pilot insurance coverage is available to hemp growers, in addition to revenue protection for hemp offered under the Whole-Farm Revenue Protection plan of insurance. Also, beginning with the 2021 crop year, hemp will be insurable under the nursery crop insurance program and the Nursery Value Select pilot crop insurance program. Under both nursery programs, hemp will be insurable if grown in containers and in accordance with federal regulations, any applicable state or tribal laws and terms of the crop insurance policy

 CBD boom

Ripplinger, a North Dakota State University Extension bio-energy economics specialist, speaking at a crop insurance conference in Fargo in mid-January, said that globally there are only a few hundred thousand acres of hemp. Europe and Canada are the main producers.

In the U.S., the U.S. Department of Agriculture and states permitted a total of 300,000 acres, nationally, in 2019, but only about 150,000 acres were planted. There are no reliable estimates of what was harvested.

Ripplinger judges CBD as a “long-term viable crop” that is going through a “boom” phase.

About of 80% U.S. production is for CBD oil. Some new CBD producers in 2019 had little experience in production or processing. “A lot of those folks are starting to have some economic realizations of them not having a crop, of them not having a marketable crop, them not marketing in time, as well as processors not being well-positioned,” he says.

In 2019, there were some acres permitted for fiber and grain, used for food or cooking oil.

Kentucky is the leading state and Colorado ranks second, as that state also increases marijuana production.

North Dakota had roughly 1,000 acres in 2019 -- about two-thirds the size of a single average-sized farm in the state. Most seed food and fiber crops matured in late summer and early fall, so likely reached maturity.

Of the 70 to 80 permitted growing operations in North Dakota, about half were involved in CBD oil production. Some CBD production didn’t make harvest, which was common for North Dakota crops this year.

The CBD starts as a sticky resin. Producers typically hand-harvest and take the product to a shed to hang and dry. Later, they take the crop to a processor to extract CBD for wholesale markets.The workload is more akin to a horticultural crop.

CBD starts accumulating halfway through summer when the day length increases.

 Timing is everything

“You physically remove that part of the plant, let it dry, take it to a processor -- different than what most North Dakota production is like,” Ripplinger says.

”We saw a lot of those acres harvested at the last-minute, and some not making the cut, like many other crops in the state,” Ripplinger says.“

In 2019, high prices prior to planting influenced farmers to plant the crop. “To some extent we’re suffering both from it being a young market, and to some extent to oversupply,” he says. There are possibilities of returns per acre in the thousands of dollars per acre, or even tens of thousands. But that can drive production that can quickly overwhelm the market and drop the price.

North Dakota hemp acres are spread across the state, with perhaps more concentration in the Carrington area where a hemp seed crushing plant exists, and near Langdon, which is close to Canada, where producers have been growing hemp for 20 years.

There is also some grain production for food, as well as “a thought” about a fiber market, although so far there is “no commercial-sized” fiber processors in the area, Ripplinger notes.

Despite its scale, Ripplinger sees the crop as a “long-term opportunity.” It could grow to 100,000-acre to even a 1 million acre crop, nationally. Specialty and mainstream food retailers have given it significant and growing shelf space.

Hemp fiber can be used for ropes and other commercial applications, but there are no commercial processors in the region.

“North Dakota is really well positioned, climactically, agronomically,” to capitalize, in part because of a tradition of adopting new crops.

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