A year after the U.S. Department of Agriculture (USDA) and Farm Credit Administration (FCA) officially declared hemp a federally legal crop, the agencies have taken steps that suggest their views on the cannabis plant may be changing.

The U.S. Department of Agriculture (USDA) is taking a critical look at the Farm Credit System’s (FCS) lending to the hemp industry. The agency’s recent review of the industry could potentially affect the industry in two ways. First, if the agency concludes that the FCS violates the Controlled Substances Act (CSA), the agency could recommend the FCS move away from lending to hemp businesses, or even to stop lending to hemp businesses altogether. Second, because the FCS provides lending to other businesses that may compete with hemp businesses, the agency could cause the FCS to take steps that could reduce the amount of lending it provides to other businesses.

The USDA announced recently that it is allowing six states to grow hemp. However, the hemp industry is concerned with the lack of attention to the financial services industry, which is why many of the hemp industry’s leading players are rallying behind a bill to direct the USDA to work with the Farm Credit Administration to improve the loan servicing and financing for industrial hemp producers.

Farm-Credit-USDA-actions-on-lending-have-hemp-industry-concerned

 

A major hemp industry organization is worried that a new letter from the Farm Credit Administration to farm credit institutions and groups on hemp financing would make it impossible for many farmers to get the loans they need to develop their operations.

FCA, on the other hand, claims that this was not its intention, and that the informative memo, written by FCA Director of Regulatory Policy Kevin Kramp, is only intended to offer advice to banks considering financing to hemp businesses.

According to the National Industrial Hemp Council, which represents hemp farmers, processors, and other businesses in the supply chain, the Farm Credit Administration is urging its four banks and 67 organizations not to lend to hemp growers unless they are in states that have USDA-approved programs.

However, according to NIHC, this excludes farmers licensed under state programs approved by the 2014 agricultural bill’s hemp pilot program. Before Congress authorized hemp more widely in the 2018 agriculture bill, which requires states and tribes to submit their plans for USDA approval, that program allowed hemp cultivation for state-administered research and marketing programs. Farmers who live in states that do not have a 2014 pilot program plan or a 2018 USDA-approved plan must apply for a license directly from USDA.

However, following considerable concern regarding testing and disposal standards and enforcement, Congress granted states the option of continuing to operate under the 2014 program, which provides them with more regulatory freedom than the USDA rules and was extended until the end of 2021. The House approved the FY22 Appropriations bill last week, which extends the 2014 authority through the end of 2022.

According to USDA, 20 states are still operating under the 2014 farm bill authority as of July 27, including four of the five largest programs by acreage — Colorado, Oregon, Kentucky, and New York — which account for roughly three-quarters of all hemp production in the United States, according to NIHC Government Affairs Committee co-chair Rick Fox.

Lori Markowitz, senior policy analyst at FCA’s Office of Regulatory Policy, said, “What we wanted to express in this letter was that if you as an institution are going to finance hemp, these are things you should consider.” “It isn’t a hard and fast rule.”

Because hemp is linked to marijuana, which is still illegal under federal law, there are still concerns about financing to hemp growers. Both are cannabis plants, however hemp is classified as having a THC content of less than 0.3 percent.

In a statement published in the Columbus (Ohio) Dispatch, an American Bankers Association spokesperson said, “From a lending perspective, this slim margin of error presents risk that may make some banks hesitant to serve these businesses, particularly banks that lack the resources to ensure a business is complying with that threshold.”

Mark Hayes, a spokesperson for the Agricultural Credit Council, a trade organization that represents farm credit institutions, said the letter had not raised any concerns about lending to farmers in states that are participating in the trial program. 

The memo’s focus on the 2018 farm bill program and USDA regs, as well as its “silence about producers in 2014 states (i.e., not subject to USDA clearance), would certainly discourage lenders from funding any such hemp producers out of perceived risk,” according to Fox, a hemp farmer in Vermont.

“If your institution decides to fund hemp, you should consider collecting, analyzing, and documenting the following information from each applicant,” according to the memo, which includes “a copy of the USDA-approved plan issued by the state or tribe” and “a copy of the producer’s license or authorization number issued by the state.” If your state or tribe doesn’t have a USDA-approved program, you need get a copy of the USDA-issued producer’s license.”

The National Industrial Hemp Council is also worried about USDA Rural Development funding programs that are restricted to hemp growers operating in states without USDA-approved plans. “Given the lack of federal oversight or regulations governing the 2014 Farm Bill pilot program, Rural Development will not award funds to any project proposing to produce, procure, supply, or market any component of the hemp plant or hemp-related by-products, or provide technical assistance related to such a project,” RD said in rules for value-added grants and the Rural Energy for America program.

“Once again, the vast majority of all permitted hemp cultivation acres are ineligible for Rural Development funding,” Fox stated. “And we’re not aware of any legal foundation for that conclusion.”

According to Fox, the USDA is inconsistent in its supervision of hemp, permitting crop insurance and export promotion money for all licensed farmers regardless of their state’s status in 2014 or 2018, but not REAP or Value-Added Producer Grants. Other anomalies, he claims, remain, such as hemp’s ineligibility for specialty crop financing, despite the fact that the majority of hemp produced non the United States is grown as a horticulture crop that satisfies the legislative criteria for speciality crop classification.

“Congress has indicated repeatedly that hemp is an agricultural commodity deserving of USDA’s full support as the main authority for hemp cultivation in the United States,” Fox claims. “The USDA’s hesitancy and risk aversion are reasonable after decades of prohibition, but it’s stifling capital and limiting access to banking services, and it’s time to move on.”

Markowitz recommended that NIHC contact FCA to address the situation.

The U.S. Department of Agriculture (USDA) recently announced that it will delay until March the deadline for getting federal lending approval for loans for industrial hemp farming. The decision has left the hemp industry worried about their ability to obtain the capital they need to grow the crop.. Read more about new mexico hemp program growers list and let us know what you think.

This article broadly covered the following related topics:

  • hemp farm bill
  • hemp grants 2021
  • usda hemp grants 2021
  • usda grants for hemp
  • usda hemp loans
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