A Look at USDA’s Guidance on Hemp Producer Loans

In a new Hemp Market Insider post, Hemp Benchmarks and Colorado State University’s Daniel Mooney provides some perspective on the U.S. Department of Agriculture’s (USDA) guidance to state and county offices on hemp-producer loans.

RELATED: USDA Releases Loan Guidance for Hemp Producers

“Starting with the 2020 crop year,” USDA’s memo states, “FSA [Farm Service Agency] will be able to consider applications to grow hemp beyond the provisions of the 2014 pilot program.”

Mooney, assistant professor of agricultural and resource economics at Colorado State, told Hemp Benchmarks in an email that the memo “falls in line with other hemp-related USDA provisions around products like crop insurance and shows a desire to harmonize policies and programs so that hemp can be fully integrated into the U.S. commodity landscape. That said, some additional regulatory requirements like registration, acreage reporting, and field sampling will remain and continue to set hemp apart in certain respects for some time.”

The FSA guidance is likely to help with finances in the hemp industry in the long term, Mooney told the data company. “Many hemp growers are primarily producers of other agricultural crops or specialty products, and lenders have so far been unable to address capital and credit needs specific to the hemp enterprise,” Mooney said. “If growers are successful in executing their hemp business plans under FSA financing, it is likely that some conventional lenders who are sitting on the sidelines will begin offering similar services.”

But FSA and hemp insurance rulings don’t protect everybody in the industry against every situation, Mooney told Hemp Benchmarks. For instance, he said, “default of a purchase contract by a processor or testing above legal THC limits are not insurable causes of loss under the insurance programs.”

The hemp market has “likely reached an excess supply,” Mooney said, and as product sits in storage, prices have become volatile for inputs and equipment, as well as certain products derived from the hemp plant, such as fiber and seed.

“Then there are other considerations like storage, grading and standards, and import and export possibilities that can also greatly affect markets,” Mooney told Hemp Benchmarks. “These aspects are likely to continue fluctuating for some time as the hemp industry, innovation pipelines, and policy environments mature.”