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Organic 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.

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

Chemical Drift and the Law of Trespass

August 1, 2011

From Minnesota comes an interesting case for organic farmers who grow their crops adjacent to non-organic farms. Johnson v. Paynesville Farmers Union Coop. Oil Co.,(2011 Minn. App. LEXIS 92), concerns the ruinous effects pesticide drift may have for neighboring organic producers.

The plaintiff in this case,Oluf Johnson, made the switch to organic production back in the 90’s. Despite ringing his organic fields in buffer strips, he had repeated problems with pesticide drift from over-spraying of pesticides on an adjacent farm. The drift periodically destroyed his organic certification for the land affected by the drift.

After several unsuccessful attempts to remedy the issue with the sprayer, Oluf initiated this action. His first case was dismissed in part on procedural grounds (statute of limitations). More importantly, the trial court did not agree with the theory of his case. Oluf grounded his complaint in the law of trespass, an unlawful interference with one’s possessory rights which creates economic damage. The trial court did not believe the damage was significant enough to rise to the level of a trespass.

This appeal is the first case in Minnesota’s jurisprudence that determined pesticide drift to be a trespass, not a nuisance. The legal distinction made by the court in this case is an important one. A nuisance is an interference with one’s enjoyment and use of property. Trespass is an interference with possession to land.

In other words, if some offensive vapors from an adjacent hog farm spoil my backyard barbecue, it is a nuisance. I enjoy my barbecue much less, but the party still goes on. If the manure lagoon bursts on the adjacent hog farm and then flows into mine, it is a trespass. The negligence of my neighbor has deprived me of more than my barbecue because I can no longer use my backyard for anything. In a nuisance case, I enjoy my land less. In trespass, I enjoy it not at all. The damages for trespass action are equal to the total loss of my right to profit from my land.

On this appeal, Oluf successfully argued that his neighbor’s interference with his organic farm was legally equivalent to an eviction from his own land.

Though the financial rewards are there, the economic burden of switching to organic production are well documented. In Minnesota at least, negligent destruction of a farmer’s organic certification is tantamount to dispossession. This decision acknowledges the special investment organic producers make in their land when they make the switch to organic production. As organic farming proliferates, I expect this line of reasoning to prevail in more and more states.

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.

Labels That Make a Difference

July 1, 2011

Consumers have faith in the organic labeling standards.

My take is that the more complex the production requirements, the more consumers seem to identify with the label. The rules for organic certification were literally created by act of Congress (7 U.S.C.S. 6501).  The USDA put out an entire handbook to assist growers to comply with all the organic rules. New York State Department of Agriculture and Markets provides grants to help defray the cost of obtaining organic certification. All of this time, effort and expense actually translates into consumer confidence in the process. It is a process they are increasingly willing to pay for.

What does “natural” mean in comparison? Iridium is natural.

By the way, if the idea of labels and certification appeals to you as a grower, you can always make up a perfectly credible one of your own. Several industries are already using contract law, trademark law and trademark licensing agreements to establish their own alternative quality or premium brand criteria. Kona Coffee, Idaho Potatoes, Florida Citrus have established collective brands for products originating within a designated region. Certified Angus Beef has created a premium brand within a entire breed of cattle using selection criteria for genetic and quality characteristics. California’s olive oil industry is steadily establishing its own standards for production and labeling. No need to wait around for another act of Congress.