RAFI’s Work in Whole-Farm Revenue Protection

RAFI has long worked on crop insurance. We do this work not only because crop insurance can help farmers survive severe weather and manage risk but because it can also pave the way to other risk management tools, most notably agricultural credit. Historically crop insurance has best served commodity growers in the Midwest, but we work to ensure that it serves a diverse set of farmers including commodity growers but also specialty, organic, direct market, and diversified farmers. In short, we aren’t advocating for crop insurance, we’re advocating for farmers.

Crop insurance tailored specifically for these types of growers (formerly Adjusted Gross Revenue [AGR] and AGR-Lite) already exists but has not been widely adopted due to significant barriers. RAFI has spent the last year talking to farmers and crop insurance agents about how to make it better meet the needs of underserved producers. We’ve used all of those conversations to craft a set of recommendations that we have shared and advocated for within USDA’s Risk Management Agency (RMA, the agency responsible for administering federal crop insurance).

RAFI’s recommendations, along with a lot of work from our partners at National Sustainable Agriculture Coalition and RMA, led to the introduction of a new and improved policy to replace AGR and AGR-Lite: Whole-Farm Revenue Protection (WFRP). (For more on the basics of the program visit our WFRP site.) With the closing date for the first year of available coverage only weeks behind us, we’ve collected preliminary data to see how the crop insurance landscape has changed with the introduction of this new policy.

What Makes WFRP Different?

WFRP covers revenue for your entire operation based on your Schedule-F tax records. This means that if you have good records, you can insure all of your crops at your actual market prices, whether you sell at an organic price, in direct markets, or to wholesalers, retailers, or other markets. The policy can cover all farm commodities (including specialty crops and livestock), can be combined with other policies (except policies at the CAT level), and is available at coverage levels up to 85%. Never before has coverage at this level been available for such a wide array of crops.

The policy also offers premium discounts for diversification.

If you have two or more significant crops on your farm, you’re eligible for an 80% premium subsidy at coverage levels of up to 75% — equivalent to the subsidy paid under corn and soy federal crop insurance products.
Increasing premium discounts for each additional significant crop up to 7 crops.
Why “significant?” Each crop must account for a significant amount of your total revenue to be counted. Check with your agent for more details.

Although WFRP takes major steps in making crop insurance better serve specialty, organic, direct market, and diversified farmers, it isn’t the perfect fit for everyone. Russ Vollmer of Vollmer Farm in Bunn, North Carolina has told us that WFRP still doesn’t serve his farm. Vollmer’s diverse farm offers everything from farmer’s market produce to school tours and movies on the barn. However, much of the farm’s revenue is directly and indirectly tied to their pick-your-own strawberry operation. Not only are strawberries a very high value crop for North Carolina farmers but they also draw significant business to agritourism sites like Vollmer Farm. Because WFRP’s goal is to incentivize farms that spread revenue across many crops, it leaves farms like this vulnerable.

“I had a look at [WFRP] this year, but I’m just not convinced yet. If we have a loss in the strawberries, we feel it all over. It’s not as easy as making it up elsewhere on the farm. We need protection for the strawberries specifically.” –Russ Vollmer, Vollmer Farms

While North Carolina doesn’t currently have a strawberry crop insurance policy (RAFI is working on it!), policies are available for apples, blueberries, cabbage, canola, grapes, peaches, peanuts, potatoes, processing beans, and tobacco. You can visit your regional RMA office’s website to get a listing of what’s already available in your state. If there isn’t a policy for your crop you can also consider the Farm Service Agency’s (FSA) Noninsured Crop Disaster Assistance Program (NAP). NAP offers coverage of all crops that do not have crop specific policies in a given county.

Year One in Review

Policies Sold

Last year, 838 AGR and AGR-Lite policies were sold in the US. Thus far 1,120 WFRP policies have been sold in 2015 – an increase of 282 policies, or 34%, over AGR and AGR-Lite combined. The majority (241) of the increase in policies came from counties and states that previously had access to AGR or AGR-Lite. Only 41 were sold in the 9 states in the Midwest that newly gained access to WFRP in 2015.We see the increase in interest from states that already had access to AGR and AGR-Lite as evidence that WFRP is beginning to address some of the barriers farmers experienced in past years.

The geographic distribution of policies did not change significantly. Fruit and nut tree growers in the Pacific Northwest still make up the majority of WFRP policies, though now coverage has spread throughout the Midwest as well. Click on the map for an enlarged image.

Taking a closer look at county level changes, the figure below highlights the largest changes which occurred in western states. Washington, Oregon, Idaho, Montana, Wyoming, Colorado, and Arizona added many policies while California had fewer policies sold. Policies purchased in the South also generally increased with most new policy purchases occurring close to home in North Carolina. Many of the 41 policies sold in counties newly eligible for whole farm insurance came from Midwestern states: Indiana, Ohio, and Michigan. Generally, moderate declines were evident across northeastern states and in Florida.

Coverage Level

WFRP expanded the coverage levels available to farmers: from 65-80% under AGR and AGR-Lite to 50-85% under WFRP. It’s difficult to compare coverage levels between the two policies because AGR included a payment rate which was not carried over into WFRP. We can, however, compare WFRP coverage rates to crop insurance generally.

The percentage of farmers electing the higher coverage levels (80% and 85%) is similar between WFRP and all other policies– about 23%. We see a stark difference in the lower coverage levels, with WFRP farmers overwhelmingly preferring the 75% coverage level and rarely purchasing lower coverage levels. This is in contrast to all other policies, which were more likely to be purchased at the 65% and 70% levels. The difference is more surprising when you take into consideration that the premium subsidy for WFRP and other common crop insurance policies are the same, telling us that the financial incentives should be similar. A possible explanation for this is that diversified farmers decide to diversify because they prefer a more intensive risk management approach. The same farmers would also be more willing to pay for higher insurance coverage.

Where Do We Go From Here?

Based on increased enrollment, the first year of WFRP seems to have been a successful one. Initial, anecdotal feedback from credit providers has also been positive. Dean Benson put it this way,

We feel [WFRP] is a very important risk management tool and have tried to get the word out to as many producers within our marketing territory as possible and will continue to do so for 2016. – Dean Benson, Senior VP of Insurance Services at Northwest Credit Services

But there is still work to be done. While WFRP offers an affordable crop insurance option for specialty, organic, direct market, and diverse farmers it remains far from perfect. Most notably, barriers still exist for beginning farmers and farmers incorporating larger amounts of livestock into a diversified operation. WFRP requires that a farmer has 5 consecutive years of Schedule F tax forms, a hefty price of admission that disqualifies beginning farmers. Clif Parker, an agent working with Agribusiness Alliance CIR Group, Inc., encountered this many times in the past year, as well as several other cases where established farmers missed a year of records due to reasons outside of their control,

Our guy got sick, had cancer in the middle of the period and it ruled him out. That doesn’t seem right, and it doesn’t seem fair. – Clif Parker, Crop Insurance Agent

As ever, RAFI is most interested in getting feedback from farmers. We are currently asking that farmers complete a 10 minute survey to help better inform how RAFI and our partners, advocate for changes that improve WFRP next year and beyond. We’re interested in hearing from farmers who are using WFRP and those who are not. You can take the survey (100 responses so far and counting!) here: https://www.surveymonkey.com/s/rafiwfrpsurvey and we encourage you to share the link with fellow farmers.

About the Authors

Viola Glenn leads our crop insurance policy research. Prior to joining RAFI, she spent nearly a decade as a natural resource and agricultural economist with a background in research, survey design and implementation, outreach and communication, and rural development. She has held research positions at North Carolina State University, various US and international consulting firms and nonprofits, and worked for NC Cooperative Extension. It was her interest in each of these topics and her dedication to practical applied research and the South that led to an interest in sustainable agriculture and her work at RAFI. Viola holds a BA in Economics from Stetson University and an MS in Natural Resources with a concentration in Economics from NCSU.

Annie Segal is RAFI’s research assistant VISTA. She will be researching farming practices and developing systems to catalog existing research and track the impacts of programs at RAFI. She previously worked as a teaching assistant in France and has also worked with non-profits and volunteered with farms and community gardens. Annie attended UNC-Chapel Hill and graduated in 2013 with a BA in French and a Sustainability minor.

RAFI-USA challenges the root causes of unjust food systems, supporting and advocating for economically, racially, and ecologically just farm communities.

We envision a thriving, sustainable, and equitable food system: where farmers and farmworkers have dignity and agency; where they are supported by just agricultural policies; where corporations and institutions are accountable to their community.

We believe that our work is inherently interconnected, and when we work together our cooperation makes us stronger and more effective.