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Crop Insurance Archive

Crop insurance for vegetable and fruit farmers

August 1, 2016


The New Food Economy
has the best article we’ve seen in a long time on crop insurance for vegetable and fruit farmers. According to the article, while 3/4 of commodity grain growers are covered by a federal crop insurance policy, only 1/4 of fruit and vegetable growers have insurance.

If you are a fruit and vegetable farmer that is uninsured, give us your feedback on why you have not opted-in to a policy.

Insurance Options for Organic Farmers

July 10, 2014

by Jack Hornickel

The USDA’s Risk Management Agency (RMA) is on its way to providing insurance coverage for all organic crops, but farmers may have to wait another growing season before their investment is accurately protected by federal insurance programs. The trouble is that certified organic crops fetch higher sales prices than conventionally-grown crops; yet most organic crops only can be insured at conventional rates because the data for organic pricing remains limited. Previously, only three organic crops were priced: corn, soy, and cotton. The 2014 Farm Bill instructed RMA to determine pricing for all organic crops “as soon as possible, but not later than the 2015 reinsurance year.” While the beginning of the insurance year varies per crop, the RMA is nowhere near establishing price rates for all organic crops.

A recent RMA update tracks its progress and strategic plan moving forward. In addition to corn, soy, and cotton, the RMA has now established price rates for organic:

  • almonds (only in California),
  • apples, fresh (Idaho, Oregon, and Washington),
  • avocados (California),
  • blueberries (all types in California; Early to Late Highbush type in Oregon and Washington),
  • grapes, Concord (Oregon and Washington),
  • oats,
  • pears (Oregon and Washington),
  • peppermint,
  • peaches, nectarines, plums, and apricots (California),
  • stonefruits, fresh (Idaho, Oregon, and Washington), and
  • tomatoes, processing (California).

Clearly, the RMA has a long way to go before all organic farmers are fairly protected. Those on the eastern seaboard are particularly out of luck. Until the RMA is able to collect more robust and regional data that establishes the true value of organic production, federal insurance programs will continue to cut short on organic farmers.

In the meantime, the RMA recommends the following insurance programs that organic farmers can use to protect themselves at full organic value:

  • Contract Price Addendum – If organic farmers are growing crops under contract, they can use the contracted sale price as a price rate for federal insurance programs. This method can even be used for organic crops that have established price rates, providing insurance that is more reflective of the actual crop value. Currently, this coverage is available for 62 organic crops.
  • Actual Revenue History – This pilot program offers insurance based on the farmer’s actual documented revenue, protecting against losses based on yield, price, and/or quality. Unfortunately, the program is only available for cherries, navel oranges, and strawberries and limited to the states of California, Idaho, Oregon, and Washington.
  • Adjusted Gross Revenue and AGR-Lite – Based on income reported on federal tax returns, organic farmers can insure any agricultural production. AGR is available selectively by state, and AGR-Lite is available almost everywhere.
  • Whole Farm Revenue Protection – Designed for diversified farms, this new pilot program allows farmers to insure an entire farm rather than a specific commodity. Whole Farm Revenue Protection uses the same calculation as AGR and AGR-Lite but increases coverage. More information will be available later this summer.

Due Diligence for Food Businesses

October 14, 2013

We’ve often been asked the question “How do I invest in a food business if I am not from the food industry?” The answer is that this building value in a food business requires a very particular knowledge base.

jarAny round of investment is preceded by due diligence, a type of audit that seeks to substantiate the value of a business. Compliance with regulation is a very big part of the budget of any food business. Regulatory costs are a particularly salient issue for investors looking to make a solid bet, or for entrepreneurs seeking equity funding. Food entrepreneurs need to appreciate the wealth they create by building businesses which internalize the costs of regulation, and investors need to be able to identify the gaps in compliance that may jeopardize the return on investment. No secure wealth can be created without paying heed to regulatory compliance.

On October 15, we are going to help shed some light on the situation. In conjunction with Slow Money NYC, tomorrow Jason and Lauren will be teaching a workshop entitled “Due Diligence for Food Businesses: What Investors and Entrepreneurs Need To Know”. We will be discussing the various laws and regulations central to our Food Law practice that can affect the value of a food business, such as:

  • Food and nutrition labeling requirements
  • Liability, indemnification, and insurance.
  • Food safety regulations such as the Food Safety Modernization Act.
  • Labeling and Marketing Claims
  • Agricultural lending, the Uniform Commercial Code, and secured transactions.
  • Chapter 12, Agricultural Bankruptcy.
  • Perishable Agricultural Commodities Act, the Agricultural Fair Practices Act, and the Packers and Stockyards Act.
  • Environmental liability and compliance.

Reserve your spot through MeetUp.

Bits and Pieces

November 20, 2012

A few things to pass along in this truncated work week:

1. Baylen Linnekin’s latest piece on the lapsed Fat Tax in Denmark over at Reason.com is a must read. He not only relishes the demise of the tax, he also takes a well-deserved shot at the gushing Mark Bittman in the meantime:

“Well lookee here: the inevitable move toward taxing unhealthful foods to raise income and discourage damaging diets has begun,” Bittman announced last year. He also predicted a wave of similar taxes would sweep across Europe and suggested the United States “needs these taxes more than any country in the world”—predicting “a serious celebration” if and when such laws come stateside.

Bittman hasn’t written about the law since it took effect around this time last year, hasn’t discussed its repeal, and didn’t reply to my email asking for comment.

I concur with Baylen’s enthusiasm over the demise of the fat tax, and I also concur that these are a dumb idea wherever they are implemented. I’ve always thought that our food culture isn’t necessarily over regulated or under-regulated. Most of the time, it’s just misregulate. The chemical process for creating high-fructose corn syrup was discovered in the 1950’s, but did not become an economical process for producing syrup until Earl Butz and the “fence-row to fence-row” policies of crop subsidies and subsidized insurance dropped the price of corn, the raw material for the process. So get this – taxes support the surfeit of production that makes it economical to produce and then over-consume sugar. The fad trend now is for local governments to try counterbalance that macroeconomic process through prohibitive consumption taxes. Why hit the citizen twice? Doesn’t make much sense to me, and I am glad to see such measures go down to defeat either in Denmark or in the last domestic election. Fat tax cheerleaders should recognize that governments and regulations can sometimes be the source of the problem. This kind of intellectual honesty will force us to correct our course at the point of production and not the point of consumption.

2. Now that the election is over, there are some who feel that the regulations to implement the Food Safety Modernization Act are about to drop any day now. I’m skeptical of the imminence of the date, but I am nonetheless preparing my clients for it as if it were a pressing reality. Processors, producers, and distributors should read the act through to see how it will affect their interests. I am sure it will precipitate some changes in the way they conduct business.

By the way some of the provisions of the Act like mandatory recall went into effect immediately after it was signed into law. Economic losses due to recall are almost always not covered by a standard insurance policy, so the Act might already have exposed businesses to risks that they are not aware of.

3. My good friend Ed Cox at Drake University’s Agricultural Law Center put together a fantastic guide on Sustainable Farm Leasing that you might want to peruse in between turkey fueled bouts of narcolepsy. Tons of good stuff in there that can change the way you think about a simple legal document like a lease. I promised Ed I would secretly plagiarize him but my conscience got the best of me and I’m sharing it instead.

4. A classmate of mine from the LLM Program in Agriculture and Food Law at the University of Arkansas, Cassie Peters, recently published a killer guide to local food systems which she prepared for the West Virginia Food and Farm Coalition. Anyone who has a serious interest in the look and feel of a dirt-up food system needs to read this.

Enjoy the days ahead. Try to buy a local bird.

Drought Hits Organic Farmers Hardest: Gaps in the Crop Insurance Program

August 28, 2012

Though temperatures may be cooling, a lack of rain has allowed the nation’s worst drought in decades to worsen this week. The U.S. Drought Monitor showed that as of Tuesday, just over two-thirds of Iowa, the nation’s biggest corn producer, was in extreme or exceptional drought — the Monitor’s worst two classifications. News agencies report that nearly all of Nebraska, Kansas, Missouri and Illinois are in the same categories.

Plains farmers have begun harvesting scant amounts of surviving corn, though some growers cut their fields weeks ago in acknowledgement of their losses. Many ranchers were forced to sell livestock after having no grass for grazing or money to buy feed, the cost of which has also soared due to the drought.

Initially forecasting the nation’s biggest harvest since 1937 in the spring, the USDA now estimates the summer will bring the lowest corn and soybean production levels since 2006.
Throughout this drought, however, organic farmers struggle the worst in the face of unfair insurance policies and disaster-relief programs.

Because the USDA perceives less chemically-dependent organic farming as a higher risk method than conventional farming, organic farmers are charged higher insurance premiums (about 5%) than conventional farmers. Theoretically, this premium is offset by the higher profit margins an organic farmer should receive compared to his conventional counterpart; currently, a bushel of organic corn goes for $15.89, while conventional corn goes for about $8.50.

However, in the face of a drought or other natural disasters, crop-insurance policies for organic crops do not compensate organic farmers at the same rate as “conventional” farmers. Scott Marlow, Director of the Farm Sustainability Program for Rural Advancement Foundation International – USA illustrates this disparate treatment:

“For an organic farmer who receives a price for organic product that is double the conventional price, 75% crop insurance coverage based on the conventional price actually covers 37% of the farmer’s income. Organic farmers in essence pay more for less coverage.”

In 1995, the Crop Loss Disaster Assistance Program (CLDAP) established separate payment rate and yields for different “end uses” of the same crop, with rates meant to reflect differences in price that the produce would have commanded on the open market had there been no disaster. However, a series of legal battles have since confirmed that there is no duty on the Secretary of the USDA to establish distinct rates for organic crops.

Organic producers should have access to insurance programs that meet their needs without putting them at a competitive disadvantage to conventional producers. It is time we either abolish the 5% insurance premium or begin to provide organic farmers with disaster assistance that will accurately reflect organic market prices.

— By Gabriella Agostinelli