2014 Farm Bill Analysis: Crop Insurance

Specialty crops like strawberries could get better insurance in new farm bill.
Specialty crops like organic strawberries could get better insurance in new farm bill.

This is the first in a blog series where RAFI staff will examine how the 2014 Farm Bill impacts key structural issues related to sustainability in agriculture. Click here to read the entire series.

2014 Farm Bill: Crop Insurance

By James Robinson
RAFI Research and Policy Associate

After two years of delay, the 2014 Farm Bill is now law. Also known as the Agricultural Act of 2014, the law is wide-ranging. This post aims to cover how the bill impacts crop insurance access for producers utilizing sustainable practices.

While there was some bad mixed with the good, the 2014 Farm Bill took positive steps toward expanding coverage for farmers utilizing sustainable practices. RAFI applauds these efforts and looks forward to working with producers and the USDA to further ensure a fair risk management system for sustainable agriculture.

Why Crop Insurance Matters

Crop insurance is a major determinant in how farms fail and how farms succeed. It is the main source of disaster assistance in times of trouble, yet it also determines a farmer’s access to credit long before a disaster happens.

Like all insurance, crop insurance is driven by available loss data. For commodity farmers, this data is widely available, thus allowing large-scale producers of corn and soy to benefit from effective crop insurance policies. But such is not the case for fruits and vegetables grown on a much smaller scale, or products grown for specialty markets like organic, where data isn’t largely available. At RAFI, we have seen this crop insurance gap limit the growth of local and sustainably produced food, leaving sustainable farmers to face foreclosure in times of disaster.

To alleviate this gap, innovative farmers and researchers have, over the years, proven the benefits of diversification, integrated production, soil conservation, and a host of sustainable practices. Yet our risk management infrastructure on the policy level has not kept up with the innovation of farmers, presenting a significant conundrum: Not only do diversified and specialty crop farms have a harder time securing their income, but they have a harder time obtaining agricultural credit.

Whole-Farm Revenue Crop Insurance

After many years of hard work and patience, we can claim a victory for diversified farms in the 2014 Farm Bill. The bill directs the USDA to develop and implement a new whole-farm crop insurance policy. Because the policy will cover multiple crops at once, it will serve diversified farms and actually include incentives for diversification. This simple fact has huge implications for beginning farmer entry and the ability of sustainable food production to grow beyond current limitations.

This new product is meant to replace AGR and AGR-Lite, the currently available whole-farm revenue insurance products, which have long been underperforming. For instance, producers with AGR-Lite policies had to subtract the cost of washing lettuce or putting cabbage into a box even though both were necessary for bringing the product to market. This both reduced their level of coverage and increased the complexity of applying for coverage or filing a claim. This is one of many problematic stipulations in the current policy that leave diversified farms largely uninsured. For example, in 2012, only 3 AGR-Lite policies were sold in North Carolina. The 2014 Farm Bill authorizes USDA’s Risk Management Agency to cover the cost of these post-production expenses.

The new policy, expected to be available by the 2015 crop insurance year, should improve risk management options for diversified farms. Crop insurance will be closer to covering the actual cost involved in bringing a crop to market.

Organic Price Election for Crop Insurance

The 2014 Farm Bill continues moving in the right direction by requiring USDA to finalize organic price elections by 2015. Farmers will be able to insure their organic crops at the organic price, actually protecting the full value of their crop. Organic price elections were available for some crops, but now the bill requires the organic price election series to be completed by 2015.

What Happens Now?

While these reforms are positive steps, the work to improve risk management for sustainable agriculture is far from over. The many problems with AGR and AGR-lite are unlikely to be completely solved in one try. Additional longitudinal data on organic and specialty crop production will be needed before some fixes can be made.

In addition, specialty crops are still underserved by crop insurance. In North Carolina, $747 million in specialty crop farm receipts were uninsured in 2012 by a single-crop policy. Reforming whole-farm revenue insurance is part of solving this problem, but single-crop policies remain important for growers who could benefit from mixing single-crop policies with whole-farm policies. For more details about our crop insurance work in North Carolina, read our report, Managing Specialty Crop Risk in North Carolina, released in 2013.

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