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Farm Programs Archive

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.

Financing Local Food: Recent Initiatives of the Farm Credit System

January 23, 2013

With the recent launch of the new USDA Farm Service Agency loan program for beginning-farmers, we thought it might be appropriate to address some of the many credit options that new and beginning farmers have these days. Bringing you the details on a new initiative by the Farm Credit System to service the needs of new and beginning farmers is Sara Albert. Sara Albert practiced corporate and franchise law in Dallas. She is currently pursuing an LL.M. degree in Agriculture and Food Law at the University of Arkansas in Fayetteville, with a particular emphasis on urban agriculture and food policy issues. 

The urban farmer – and others farming in less traditional, hyper-local ways – will now have greater access to a well-established credit resource for agriculture. Farm Credit System (“FCS”) has recently adopted an initiative to serve the emerging market segment represented by the local food farmer.

FCS is a privately owned, federally chartered network of bank cooperatives. Signed into legislation by Woodrow Wilson in 1916 as a “Government Sponsored Enterprise,” the statutory mandate of FCS was to serve all types of creditworthy agricultural operations and producers. FCS has provided reliable financing to the farm sector for generations and has been instrumental in its transformation to the industrialized model that dominates agriculture today. But new farming models are now a part of our urban, suburban and exurban landscapes. Consumer demand for farm-to-table locally grown food has prompted FCS to re-focus some of its resources to the businesses that are responding to this socio-cultural shift.

In April of this year, Farm Credit Administration (“FCA”), which makes the regulations that govern the network of FCS lending institutions,  directed member banks to develop marketing plans to “promote diversity and inclusion.” FCA’s diversity directive addresses the current reality that the small and/or urban agriculture businesses – whether producers, farm-related service providers, processors, or marketers – engaged in the local and regional food systems – are underserved by FCS. Food hubs, Community Supported Agriculture ventures, aggregators, hydroponics growers, hoop house farmers, aquaponics producers, retail agriculture (direct marketing), and vertical farmers are several of the business models in the local and regional system that need financial support from bankers who understand their business.

Through their young, beginning and small (YBS) farmer lending program already in place, FCS has a history of providing credit to new rural farmers. Through this new initiative, FCS promotes a clear objective to respond to the evolving demography of agricultural operators who are creditworthy and otherwise eligible for FCS funding. Not a lender of last resort, FCS perhaps recognizes an opportunity for growth of their own through development of this up-and-coming slice of the market.

As further guidance to FCS lenders, on October 11, 2012 the FCA Board approved Bookletter BL-066 entitled “Providing Credit to Farmers and Ranchers Operating in Local/Regional Food Systems.” A Bookletter is a document issued by an FCA official that communicates FCA’s legal interpretations and the Agency’s position on specific issues. BL-066 explains how FCS associations can serve the financing needs of local food farmers and certain farm-related businesses under their existing statutory and regulatory framework. Specifically, the Bookletter provides guidance to FCS banks on:

  • Determining eligibility and scope of financing for local food farmers;
  • Determining when a local food hub, aggregator, or support business qualifies for financing as a farm-related service business, processing or marketing operation, or similar entity
  • Applying standards of creditworthiness and underwriting to local food farmers;
  • The role of FCS banks in supporting FCS association lending;
  • Educational support for local food farmers; and
  • Developing a lender’s strategic business plan for emerging agriculture markets.

The beautiful Brooklyn Grange, an example of one of the many types of new but economically viable agricultural businesses that FCS is seeking to provide with credit.

Eligibility of the borrower is the threshold test for access to FCS credit. Even before the creditworthiness of the prospective farmer is analyzed, the borrower must demonstrate that he or she is a “bona fide farmer or rancher.” Earlier FCA Regulations defined a bona fide farmer or rancher as a “person owning agricultural land or engaged in the production of agricultural products…” The Bookletter points out that existing regulations do not specify where someone’s agriculture production must take place to qualify them as a bona fide farmer. “Therefore,” states BL-066, “if a person is engaged in producing an agricultural product for market in any location (rural, suburban or urban) that person most likely meets the definition of a bona fide farmer and would be eligible for FCS financing.”

Likeswise, creditworthy processing and marketing operations and other service businesses whose operations are directly related to the farmer’s agricultural production are eligible for FCS financing under this guidance. Businesses like contract slaughter facilities, beekeepers who provide bees for pollination of orchards, cold storage facilities, regional food hubs, mobile wine bottling units, and agricultural produce grading businesses can also apply for loans.

FCS’s diversity initiative opens up a world of possibility to those building businesses in our local and regional food systems. Targeting this market of creditworthy farmers is affirmation of the relevance of the rising local food sector. And it is a resounding nod to the demand for change in how and where we want our food produced and delivered.

— By Sara Albert, Esq.

 

Food Policy and Fat Tax

February 8, 2012

Via NPR, Massachusetts is the latest locality to consider a sugar tax in order to curb the high levels of consumption which are a leading cause of obesity. Once again, we have a local government taxing consumers to not eat or drink a product that is already artificially cheap because it has been subsidized into overproduction by the USDA.

There is a common theme which undergirds these fat and sugar taxes, the Happy Meal bans, and salt limits. I am beginning to view them all as local repudiation of the excesses caused by the federal cheap food policy. Commodity crops are the raw ingredients for the feed that grows the salty chicken nuggets, the fatty-fatty beef in the fast food burger, and the HFCS that goes into everything else. These are precisely the products targeted by state and local regulators because their consumption has been so often linked to obesity.

Local governments like New York San Francisco and Massachusetts have absolutely no control over the production spigot. The only thing they can do is swallow a spider to catch the fly, as the rhyme goes. Regulating local consumption within their jurisdiction is their only recourse against the torrent of cheap calories produced by federal subsidies.

This leaves public health advocates with the difficult task of convincing people not to eat the food we already paid farmers to overproduce. “Taxes!” is a facile argument and it is a far too local and ad hoc method of correcting a serious flaw in the food system. They should aim higher.

The Flexibility of Farm Programs

July 21, 2011

You do not need to grow soybeans on a titanic scale in order to receive financial assistance from the USDA. Small-scale farmers are also eligible for significant assistance if they are engaged in the right kind of agricultural activity.

The Hickories is a small, highly-diversified farm in the midst of suburban Ridgefield, Connecticut. The farm’s owner sells by direct-market through a CSA and a roadside farm stand. The land is productive enough to support 225 CSA contracts weekly, which is impressive for its size. Everything grown on the farm is certified organic.

Organic certification qualified the farm to receive significant financial assistance from the USDA. The farm is the beneficiary of funding through the Environmental Quality Incentive Program. Program recipients get financial assistance to help plan and implement conservation practices that address natural resource concerns and for opportunities to improve soil, water, plant, animal, air and related resources on agricultural land. The Organic Initiative Program, which falls under the EQIP umbrella, provides assistance of up to $20,000 annually (with an $80,000 max program payout) for farmers to implement conservation practices related to organic production.

In FY 2010, the EQIP program handed out over $838,000,000 to conserve agricultural resources on 13 million acres of land. Some of this money went to small-scale farms like The Hickories. Funding is definitely out there for you if you go after it aggressively enough. Just because you are small does not mean you are beneath the radar of the USDA. There are an infinite number of ways these programs can be used to make a real difference on your farm. You just need the right guidance.

Farm The Program

July 20, 2011

Governor Peter Shumlin of Vermont has proposed some changes to the Schools/Child Nutrition Commodity Programs which may benefit his state’s farmers.

The Commodity Program feeds school children using surplus commodities. It support American agricultural producers by providing cash reimbursements to growers for meals served in schools. Food purchased by the USDA in this way also goes to programs like the National School Lunch Program, the Child and Adult Care Food Program, and the Summer Food Service Program. In 2010, the program spent $844 million to purchase food and stabilize commodity prices in the United States.

It is important to note that this is a price control program, not a feed-the-children program. Feeding needy children is a laudable secondary benefit of the program. The intended beneficiaries are mainly the states producing the products on this list, a table of foods available for the coming 2012 school year. That may or may not be Vermont. Most of the federal program dollars probably flow south and west, where the agriculture is larger in scale and commodity-based. Vermont may grow some of the crops used in the program, but I suspect that the state’s farmers receive a smaller percentage of its dollars than most others.

Shumlin’s idea suggests a pretty clever reallocation of funds that would be an absolute boon to Vermont’s farmers. Shumlin wants to take Vermont’s allocation and use it to purchase agricultural goods made in Vermont. It would take federal program dollars and pour them back into his own state rather than a commodity producing state.

It seems like a great plan, but it rather frustrates the purpose of a commodity surplus program. Instead of using federal dollars to stabilize prices by relieving market excess, the dollars will instead be diverted to stimulate more local production. That would be great for Vermont farmers, and better for the kiddies, but would leave surpluses untouched. It’s a great idea nonetheless.

Same Old Farm, Several New Streams of Revenue

June 20, 2011

Late last week, the USDA released a report on five case studies performed on small farms under the “Farm of the Future” program. The individual case studies make for some fascinating reading.

Each piece of land in the study used government conservation programs, private funding, agricultural extension services, and enhanced land management techniques to improve soil, air, and water quality. Each farm remained profitable during the study.

My favorite is the Mudford Farm study because its geography reminds me so much of most of the East End. I like the synergy created when traditional commodity crop production, federal wetland restoration funds, and hunting revenue all come together on a littoral piece of farmland. Mudford is a model that can be easily replicated out here.

Profitability does not necessarily require a bigger yield. In exchange for ceding some marginally productive land, the Mudford farm then turned one government program into two streams of dependable revenue. The farm receives income under the Conservation Reserve Enhancement Program to restore some wetlands, then collects fees from hunters who bag the game which inhabit them. Brilliant.