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Guidelines For Hemp Growers: Licensing and Federal Loan Applications

June 22, 2020 in General News

Last October 29, 2019 the USDA released its much awaited list of regulations for hemp growers. The 2018 Farm Bill legalized the production of industrial hemp, removing it from the list of controlled substances. It is now legal in 46 states but still remains banned in Idaho, Mississippi, New Hampshire and South Dakota. In this article I will list all the requirements for hemp growers to apply for licenses to cultivate industrial hemp and to receive federal loans.

Who Can Grow Hemp?

1. A grower must be licensed to grow hemp or be authorized in accordance with the USDA hemp program, under a state or tribal hemp program or for research purposes under Section 7606.
2. Those growers in states or on tribal lands in which they choose to have regulatory authority over their hemp production may submit a plan to the USDA which outlines how they plan to monitor and regulate it.
3. In states where a plan had previously been submitted, the USDA is allowing them to reaffirm their original plan or submit a new one for evaluation.
4. In states or regions where no approved plan has been established, these new USDA rules apply to those who wish to grow hemp.
5. Anyone convicted of a felony of a controlled substance within the last decade is excluded from receiving a hemp production license.

Growers Must Report Their Business Plan, Location, Acreage and Intended Use

Hemp growers are required to submit their operating business plan to agency officials for review to substantiate the feasibility of their proposed production information for their location.

Hemp growers must submit the location of their land information to their state or tribe as well as reporting their hemp crop acreage to the Farm Service Agency (FSA). This will give the USDA and the growers a good idea of the location of and the acreage of hemp being cultivated in the US, previously underreported. The following is required:

1. An acreage report must be filed with the FSA. This includes the grower’s license/authorization number and identification of each field, subfield, and greenhouses, known as a lot, where hemp is cultivated.
2. Growers must indicate the intended use of their crop from the following categories:

  • Fiber
  • CBD
  • Grain
  • Seed

THC Limits and Testing Procedures

Any plants that test at a THC concentration above 0.3% must be destroyed. A big problem for hemp growers is the lack of uniformity across states when it comes to testing practices. In some states, they test the top 8 inches while in others they test the top 6 inches. There is also no agreement across the states on what constitutes a significant sample of a grower’s crop. Even more troubling is the fact that the same seeds grown in different regions of the US can produce one crop above the 0.3% threshold and another below that same threshold.

The regulations stipulate that the crop be tested within 15 days of the expected harvest. Even this is problematic. THC concentrations typically increase as the plants mature, so it is possible for plants waiting to be tested for an extended period of time may test above the threshold. In addition, it is also unclear what this means for farmers for whom it takes several days to complete the harvest.

All the testing is done under the auspices of the Drug Enforcement Administration (DEA)

Disposal of Crops Over The THC Limit

Any plants that test over the THC limit are considered to be cannabis  and must be destroyed by a DEA authorized distributor or a federal, state or local law enforcement officer. Farmers are responsible for the documentation of the disposal of their crop. They must provide the USDA with a copy of the disposal document provided by the authorized agent or adhere to the established USDA reporting requirements. Hemp farmers were hoping for a relaxation of this rule by the USDA by allowing them to dispose of the plants for composting or to add them to the soil. Unfortunately, that was not granted.

Interstate Commerce Regulations

Now that industrial hemp production is legal in all but 4 states, there are no longer any restrictions of the transportation of hemp across state lines as long as it does not include Idaho, Mississippi, South Dakota and New Hampshire.

Financing For Hemp Growers

Financing for hemp growers is still very difficult and many financial institutions simply refuse to provide services for them. However, applicants are required to ensure that they have access to a banking institution that is authorized to conduct financial transactions for their expenses and debts.

Federal Loans

Hemp businesses may qualify for direct and guaranteed federal loans. One of the requirements is to enter into a contract with FSA which shows the ability of the grower to repay the loans and cites termination policies. However, if a grower is licensed, with enough cash without their hemp income, the FSA may issue a loan without a contract.

Felony Background Check on Workers

Anyone with a state or federal felony conviction for a controlled substance is not eligible to produce hemp except for those who were already legally growing hemp under the 2014 Farm Bill. Growers are requir<h3>ed to supply their complete criminal report with their application. Thankfully, this requirement only applies to those with a direct or indirect financial interest and excludes managers and workers.

Crop Insurance and Other Programs

In 2019, Congress included a provision in the Disaster Relief Act requiring the Federal Crop Insurance Corporation to offer coverage under the Whole Farm Revenue Protection Plan (WFRP) for hemp in the 2020 reinsurance year. It is available for those growing hemp for fiber, flower or seeds. In order to qualify, a farmer must certify their acreage with the FSA and identify every lot in which hemp is grown. They are also required to provide a purchase contract for their hemp crop prior to purchasing insurance. Any crop that exceeds the 0.3% THC limit is not considered a covered loss by the WFRP even if it is the result of weather conditions. The good news is that Congress recently passed legislation that offers federal coronavirus relief programs to hemp farmers through the Small Business Administration (SBA).

In light of these recent developments, the USDA is inviting farmers and investors to participate in this ongoing process by leaving public comments. If you are a hemp grower or investor, please speak up!

Sources:, USDA Unveils Guidelines For Federal Loans To Hemp Business, May 4, 2020, Kyle Jaeger, USDA Provides Federal Lending Guidance For Hemp Growers, May 6, 2020, USDA Releases Long-Awaited Industrial Hemp Regulations, Oct. 31, 2019, Hemp and Farm Programs, The States Where It Is Legal To Grown Hemp Sept. 4, 2019

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