April 21, 2021
By Laura Wormuth

Senior faculty specialist in the Department of Agricultural and Resource Economics Paul Goeringer is leading a team of researchers and Extension specialists in an analysis of risk management tools and the development of educational outreach materials for small and medium-sized farmers interested in transitioning to growing industrial hemp.

According to a national survey, risk management options for recently legalized hemp production, as well as market access, were among the main concerns for farmers and hemp stakeholders. In light of this, Goeringer’s assembled team consisting of faculty from the University of Kentucky, the University of Tennessee, and Drake University in Iowa, were awarded nearly $500,000 through the USDA’s Agriculture and Food Research Initiative (AFRI) Competitive Grant Program to analyze available tools and develop standardized options for the farmers looking to add industrial hemp production into their rotations.

“We’re going to look at the current legal framework that exists and compare states to determine what works and what doesn’t,” said Goeringer, the principal investigator for the project. “And we’re going to look at the contracts farmers are signing with processors for the different hemp products -- fiber and CBD.”

U.S. industrial hemp production has increased from 0 acres in 2013 to over 500,000 acres in 2019, the team wrote in the 2020 proposal. But while demand has increased, economic sustainability is unclear, and lack of standardization in crop insurance and risk management tools for farmers creates vague contracts and uncertainty for the industry. 

Through an analysis of existing legal frameworks and crop insurance tools for the various states, Georinger’s team will begin to develop standardization in risk management products to protect farmers and the processors who buy the crops.

“We have this with every new crop,” Goeringer explained. “We need to explore the tools that work best to manage risks for that crop.”

In conjunction with the analysis and data development for the state, local and national advisory panels of stakeholders, farmers, processors, and vested parties will come together to develop risk management and crop insurance tools that will provide equivalent security to that of traditional crops like corn or soy. These advisory panels will be held regionally to focus on state needs, said Goeringer, but there will also be a larger panel looking at the national standards.

“We want to provide a contract guide for growers that will help them understand what they should look for in a contract,” said Goeringer. “At the same time, this will help provide information for attorneys. So if they’re working with a grower, the attorney can help them understand their contracts and negotiate better terms.”

The research piece of this project will help to eliminate the vague language that currently makes up the legal and insurance tools available for new producers, Goeringer said. It will also be translated into Extension educational programming to be delivered across the U.S. and assist farmers in making educated decisions about growing industrial hemp.

“We’ll develop a train-the-trainer model with a handbook and sample contracts, along with a PowerPoint or video series that can be used to educate farmers in Maryland and across the U.S.,” said Goeringer. “We can’t do outreach in each state, but we can train people across the country to help their farmers.”

This work is supported by the Agriculture and Food Research Initiative (AFRI) program from the U.S. Department of Agriculture, National Institute of Food and Agriculture.To learn more about the University of Maryland’s Department of Agricultural and Resource Economics, visit arec.umd.edu. To learn more about the USDA AFRI, visit https://nifa.usda.gov/program/agriculture-and-food-research-initiative-afri.