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Organic crops 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