Crop Insurance for the Organic Farmer

The federal crop insurance program was designed to help farmers recover some portion of expected income in the advent of a crop loss or failure. As wholesale-scale organic vegetable farmer Atina Diffley notes (see box), crop insurance helps even out annual income and can reduce the stress of worrying about possible losses.

Changes in 2013 | Crop Insurance Programs

Delayed Planting Update: June 2013

Prevented Planting Insurance Provisions
This year's late spring in most parts of the upper Midwest has delayed planting to the point where crops could be planted well after the final planting date specified in a farmer's crop insurance policy. This fact sheet from the USDA Risk Management Agency explains a farmer's options when delayed planting occurs.

University of Minnesota explains delayed planting options for farmers in Minnesota

Iowa State University provides a 4-page document on "Delayed and Prevented Planting Provisions."

"Having AGR-Lite insurance

revolutionized our farm

planning and management

and drastically reduced our

financial risks. We no longer

need to tiptoe through the

majority of the season until the

books finally say we've

successfully gotten through the

danger zone, only to go back

on tiptoe again a month later

as the money flow reverses out

for the next seasons start-up."

Atina Diffley,
Organic Vegetable Farmer
Gardens of Eagan, Farmington, MN.

Changes to Organic Crop Insurance

Read "Changes Improve Organic Crop Insurance," by MOSES Organic Specialist Harriet Behar from the May-June 2013 Organic Broadcaster

New: Secretary Vilsack's vision (May 2013)
In remarks to the Organic Trade Association, Agriculture Secretary Tom Vilsack said the USDA's Risk Management Agency's (RMA) federal crop insurance program will increase coverage options for organic producers this year and provide even more options in 2014, including a contract price addendum as well as new premium price elections for organic crops. Additionally, RMA will remove the current five-percent organic rate surcharge on all future crop insurance policies beginning in 2014.

March 7, 2013: The RMA just released a fact sheet outlining the changes to its crop insurance coverage.

March 6, 2013: Changes to Organic Crop Insurance announced by Risk Management Agency
The 5% premium surcharge previously assessed against organic farmers who purchase federally subsidized crop insurance has been removed. Organic farmers will continue to receive conventional prices for some organic crops, although the USDA is working to add special “organic price selections” in the next two years for organic wheat, barley, oats, almonds, blueberries, and a few other fruits. RMA currently offers organic price selection for corn, cotton, and soybeans, as well as processing tomatoes, avocadoes, and fresh freestone peaches, fresh nectarines and plums in California. The farmer pays a higher insurance premium to receive these higher organic prices in case of crop failure. Organic farmers currently are required to share the organic inspection report with their insurance providers, so the provider can assess if good organic practices were used to grow the insured organic crop.

Crop yields for 2014 will be figured differently for organic farmers than for conventional farmers, with yields of up to 35% less than conventional used for some organic crops, depending on current USDA data for regional or national yield averages for a specific organic crop. The insurance premiums paid by the organic farmer would be less than conventional if they are insured at those lower yield projections. If an organic farmer has 10 years of crop yield histories for their own organic production, those actual figures can be used. Organic farmers insurance premiums paid and any payment by the insurer could be tied to the farmers' historical organic yields but at conventional prices, unless they choose to pay extra if there is an organic price selection available for that organic crop.

The full RMA audit report and a Q and A document detailing these changes, implementation and background can be found here:
http://www.usda.gov/oig/webdocs/05601-0006-KC.pdf

http://www.rma.usda.gov/pubs/rme/2013q&a.pdf

From the National Sustainable Agriculture Coalition blog:
Beginning with the 2014 insurance year, RMA will now use actual transitional yields for organic crops.  While this is the appropriate policy, it remains highly problematic because the data being used is RMA’s own data and is based necessarily therefore on very thin evidence.  Only a quarter of organic farmers are enrolled in federal crop insurance and many of them have enrolled relatively recently.  Given the historic surcharge penalty, and given that most crop insurance policies still pay out at conventional rather than organic prices, it is likely that those enrolled, as a general rule, either had higher risks or were more risk averse.  Hence, current transitional yield data may very well be skewed in a way that still disadvantages organic farmers.  Until more organic farmers are enrolled and have accumulated actual production histories that are recorded with USDA, this will be a continuing problem.  However, the removal of the five percent premium surcharge should help considerably in this respect.

AGR-Lite Insurance
In the past few years farmers in WI, MN and several other states (see list below) have gained access to a new type of insurance coverage that can be very beneficial for their organic systems. Adjusted Gross Revenue- Lite (AGR-Lite) insurance takes into account a five-year history of farm production and sales to determine potential loss values. This "whole farm" insurance system allows organic producers to include the value of any organic premium gained for their products. AGR-Lite insurance was developed in Pennsylvania several years ago, and is slowly spreading into other states.

Other Kinds of Federal Crop Insurance
Organic farmers may choose to insure their crops using one of the other Federal Crop Insurance offerings. However, as of now, indemnities (compensations) are based on conventional rather than organic prices. Hopefully at some point in the future organic premiums will be recognized. The USDA Agricultural Marketing Service (AMS) has for the past year been collecting data on organic prices, yield and loss experience in a move to eventually develop an actuarially sound crop insurance system for organic production. As with AGR-Lite, insurable damage caused by insects, disease or weeds is covered if recognized organic farming practices fail to provide effective control. Premiums for crop insurance on organic lands are an average of 5% higher than those for conventional crops due to a presumption of additional risks involved with organic production.

Currently RMA provides crop insurance coverage for:
1. Certified organic acreage,
2. Transitional acreage being converted to organic in accordance with an organic plan and,
3. Buffer zone acreage.

Contamination on certified, transitional or buffer land due to drift or application of prohibited substances is not considered an insured loss. Any loss due to failure to comply with the organic standards is considered an uninsured cause of loss.

• Sign up is generally by March 15th each year. A few crops have other sign up dates (ie: cranberries, apples, forage, winter and spring wheat, etc., so please check with your Agent for the exact deadline for your crop.)


• Insurance is sold though private insurance agents. Contact your area Farm Service Agency for a listing of local agents that carry crop insurance. You may also find a listing of agents on the USDA Risk Management Agency website at www3.rma.usda.gov/apps/agents/.


• Insurable damage caused by insects, disease or weeds is covered if recognized organic farming practices fail to provide effective control.


• Other perils such as excess moisture, drought, freeze, storm damage and significant hail damage are also covered.


• AGR-Lite Premiums are calculated based on your previous five years of IRS Schedule F forms. You will need to have these with you in order to sign up for a policy.
  

Resources for Crop Insurance for organic systems:

Updated May 2013: Organic Farming Practices: Insurance Fact Sheet (USDA- Risk Management Agency)
http://www.rma.usda.gov/pubs/rme/2013revisedorganicsfactsheet.pdf

Adjusted Gross Revenue-Lite: Fact Sheet (USDA- Risk Management Agency)
www.rma.usda.gov/pubs/rme/agr-lite.pdf

The Center for Agricultural and Rural Development at Iowa State University has released a paper on organic crop insurance, including finding from analyses conducted on organic crop prices, yields, and revenues.  The full report is available here.

The Price of a Good Night's Sleep: Why AGR-Lite insurance is in the Gardens of Eagan farm budget (Organic Broadcaster Article)
www.mosesorganic.org/broadcaster/other16.1agrlite.html

The AGR Program: Crop Insurance for Diversified Agriculture
A fact sheet by the University of Vermont Extension
www.uvm.edu/vtvegandberry/factsheets/agr.html

Crop Insurance for Organic Farmers in Pennsylvania (Newsletter from PA Dept of Ag)
www.agriculture.state.pa.us/agriculture/lib/agriculture/fooddistributionfiles/ELI-103-07_PA_Organic_DM_F.pdf

What is AGR-Lite? Answers to common questions from the Pennsylvania Department of Ag.

List of Independent Insurance Agents selling Federal Crop Insurance policies
www3.rma.usda.gov/apps/agents/