The Farm Credit Administration will issue guidance as soon as next week to system institutions on lending to producers who are clamoring to get financing for industrial hemp, but the commodity’s future remains clouded by regulatory hurdles.
FCA’s chairman and CEO, Dallas Tonsager, told reporters on Tuesday that the guidance will tell the 69 regional Farm Credit associations that they need to begin lending to prospective hemp growers “and be cognizant that it’s a market with extreme interest, and make sure you understand that market.”
The 2018 farm bill legalized the production of industrial hemp nationwide and authorized coverage of the commodity under federal crop insurance. However, crop insurance policies will not be available this year and a major regulatory hurdle remains - FDA has not legalized the use of a key hemp product, cannabidiol, or CBD, in food or supplements.
FDA Commissioner Scott Gottlieb has told lawmakers that regulatory consideration of CBD is likely to take an extended period of time. FDA Commissioner Scott Gottlieb has told lawmakers that regulatory consideration of CBD is likely to take an extended period of time. On Tuesday, he announced several actions related to consumer products derived from cannabis, including a May 31 hearing and the formation of a high-level internal agency working group to explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed.
At a House Agriculture Appropriations Subcommittee hearing on Tuesday, a senior Republican lawmaker questioned Tonsager why the Farm Credit System would start making loans for hemp, given the uncertainty about CBD.
“It’s a little disconcerting now that we may be loaning money to farmers who might find out six months from now that when FDA regulates it … that the vast marketplace goes away?” Maryland Republican Andy Harris asked. “If you’re producing just for the … the fiber, it’s probably not a profitable crop for a lot of farmers.”
Tonsager said he had not evaluated the CBD issue itself. He told Harris that Farm Credit associations will have to “evaluate the risk for themselves.”
At least one major association, Farm Credit Services of America, which serves Iowa, Nebraska, South Dakota, Wyoming and part of Kansas, is likely to hold off making loans.
“We’re not going to do anything until the legal and regulatory hurdles are cleared,” the association’s president and CEO Mark Jensen, told Agri-Pulse after the hearing.
He said there has been significant interest in hemp throughout his region. A loan officer in western Nebraska has contacted the association office three years in a row on behalf of a farmer who wanted to borrow money for hemp production. “We certainly hope that we don’t have a whole bunch of people jump in it, flood the market, outstrip the demand that’s out there. Those are conversations we’re going to have with customers,” he said.
Jeff Hall, chairman of the Farm Credit System Insurance Corp., told the subcommittee that there was significant uncertainty around hemp because of the FDA hurdle, and he noted that USDA won’t implement the farm bill provisions for hemp until 2020.
In the meantime, hemp restrictions vary between state and sometimes between counties. About half the states have pilot projects, and some are considering authorizing them, but some states haven’t allowed its production at all, he said.
The broader farm economy remains fragile due to depressed commodity prices and rising production costs, Tonsager told lawmakers. "Many farmers and ranchers are facing declining financial conditions," he said.
Jensen and Paxton Poitevint, who is president and CEO of Southwest Georgia Farm Credit, said federal disaster assistance is critical in their areas. Producers in southern Georgia lost cotton crops and pecan trees to Hurricane Michael last October, while western Iowa and eastern Nebraska were swamped by flooding in March. A supplemental appropriations bill that would authorize up to $3 billion in agricultural disaster aid for 2018 and 2019 losses is currently stalled in the Senate.
"It’s a very critical situation at this time in our territory," said Poitevint.
Jensen is urging lawmakers to add provisions to the disaster bill to cover damage to corn and soybeans while being stored on farms. Those losses aren't covered by crop insurance and private insurance is too expensive, so few producers have it, he said.
The flooding was "a disaster that I don’t think any of us were ready for or anticipated," he told the subcommittee.
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