• Farm Bill,  Marketplace Equity

    Don’t Harm Crop Insurance, Improve It!

    This post originally appeared on the National Sustainable Agriculture Coalition (NSAC) blog.

    “Do no harm” to crop insurance has become a common refrain in Washington DC as we gear up for a new farm bill this year. NSAC agrees that a top priority should be to not harm crop insurance as the 2023 Farm Bill debate heats up. In fact, we aim to improve it. Barriers in program design and implementation leave small to mid-sized, beginning, specialty crop, and organic farmers without access to this pivotal safety net program, and Congress has the opportunity to address these shortfalls.

    Background

    A federally subsidized farm safety net is a necessary tool to help protect farmers from the many risks of farming. Yet NSAC members have long supported and worked with farmers for whom crop insurance is inaccessible. Limited resource, small, beginning, diverse, and organic farmers find themselves choosing between either purchasing crop insurance each year, if a relevant policy is even available and advertised to them, or adopting on-farm conservation practices and diversifying production and markets to mitigate risk and improve long-term resilience against disasters. Almost invariably, they choose the latter.

    If a farmer chooses to adopt conservation measures and diversification but then does not have enough remaining resources to be able to enroll in support of the farm safety net, it suggests that the program as it currently stands is not an effective tool that meets the needs of all farmers. No farmer should be forced to choose, and in fact, both strategies should be incentivized to help farmers manage risk.

    While more than 85 percent of planted acres for commodity crops (e.g., corn, soybeans, cotton, and wheat) are insured under the federal crop insurance program (FCIP), the chart below illustrates most farms are not served at all by the program. Most farms above 500 acres hold insurance policies, yet very few farms under 260 acres are enrolled in the FCIP relative to the total number of operations.

    All Farms and Farms Purchasing FCIP Policies, by Acres Operated

    federal crop insurance program participation by farmers

    The reason for this disparity in access is not because these farmers do not want a safety net to protect against the once-in-a-generation weather event or market pitfall that have become regular features of the farm economy. Rather, the FCIP was not designed to meet the needs of small, beginning, specialty crop, and organic farmers.

    Why Is Crop Insurance Not Working for Everyone?

    federal crop insurance 2023 farm bill

    First, because it is not accessible to farmers looking to diversify their income streams or differentiate themselves in the marketplace.

    The federal crop insurance program is a public-private partnership. Farmers purchase insurance policies from private sector insurers, known as Approved Insurance Providers (AIPs). USDA, specifically the Risk Management Agency (RMA), regulates the policies sold by AIPs, uses taxpayer dollars to subsidize farmer premiums (the cost of purchasing a policy), and subsidizes AIPs for the cost of selling and servicing crop insurance policies.

    Farmers may file a claim to receive an indemnity payment when they experience an insurable event, either a natural peril or revenue losses (depending on the type of insurance policy purchased: yield, revenue, or area-based policies, and more). Insurable commodities vary by location and depend on whether data exists to verify the projected value of a farmer’s product confidently and appropriately.

    This variability in whether a crop is insurable already places small, beginning, and specialty crop growers at a structural disadvantage. For example, a beginning farmer who wishes to grow strawberries in a Montana county where no other producer grows that crop will almost certainly not have the option to purchase an insurance policy that insures strawberries. If they desire the security of a safety net, the farmer will be incentivized to instead grow a commodity that is already widely grown in the county – such as wheat – which is unlikely to unlock market opportunity and allow the beginning farmer to differentiate themselves, but for which an insurance product is readily available.

    Second, because it promotes monoculture commodity production over specialty crops and on-farm conservation.

    Several rules and guidelines that determine how the FCIP is administered challenge the ability of nonconventional farmers to remain eligible for full crop insurance protections. For example, farmers must adhere to “Good Farming Practices” as defined by RMA to qualify for indemnity payments in the aftermath of an insurable event. RMA currently maintains that a practice which reduces yields may not be considered a Good Farming Practice. This is a serious deterrent against adoption of many conservation practices because temporary yield drags are common on farms transitioning to climate-friendly, regenerative, and organic systems before yields can stabilize and even rise.

    Additional guidance on when and how cover crops may be terminated creates a similar disincentive. What should be a farm-specific decision is applied to a broad region wherein conditions may vary wildly from farm to farm.

    Likewise, RMA determines regionally appropriate final planting dates, wherein acres planted on or before this date receive the full yield or revenue guarantee that a farmer selected when purchasing their insurance policy. Organic and conventional operations are currently held to the same final planting date, even though certified organic farmers sometimes plant crops such as corn later than their conventional counterparts to avoid cross-contamination with neighboring genetically engineered seed. The value of a yield or revenue guarantee is reduced each day for farmers who plant after the final planting date.

    This structure to incentivize monoculture commodity production over specialty crops and diverse rotations is mirrored in eligibility considerations to receive agriculture loans as well as other public and commercial resources. The Whole-Farm Revenue Protection (WFRP) program is an exception to this paradigm and the dominant insurance model where the availability of policies is determined by crop and county. WFRP is the only insurance product designed to protect a farmer’s entire operation, not just one crop, and it is available nationwide. It also includes a built-in insurance premium discount for crop and enterprise diversification that considers the inherent risk reduction impacts of diversification. However, significant red tape has made it difficult for farmers to purchase WFRP. Recent changes announced by RMA are expected to improve farmers’ ability to access the product, and additional changes can and should be made.

    How Can Insurance Be Improved to Expand Access?

    There are many reasons why small, beginning, organic, diversified, and specialty crop farmers rarely purchase crop insurance. Historical barriers include limited policy availability, bureaucratic red tape (including burdensome paperwork), and insufficient outreach and education. While Congress and USDA in recent years have taken steps to address these challenges and expand insurance coverage for nonconventional producers, additional reforms are needed.

    NSAC’s 2023 Farm Bill Platform proposes recommendations that will be key to improving crop insurance access for small and diversified farmers. In summary, these needed reforms include:

    • Expanding insurance options and further streamlining the WFRP program;
    • Directing RMA to provide continued education to insurance agents about agronomic practices and coverage options for nonconventional producers;
    • Reforming barriers to conservation practice adoption perpetuated by insurance rules, including the RMA definition of Good Farming Practices and cover crop termination guidelines; and
    • Establishing a secure data service to collect, link, and analyze data on conservation practices so this information can be integrated into crop insurance actuarial tables, as proposed in the Agriculture Innovation Act of 2021.

    Remember: low enrollment in federal crop insurance policies among small and diversified farms does not reflect disinterest in participation. Overwhelmingly, these farmers desire a safety net to protect themselves from the worst impacts of unpredictable weather events and market variability, just as any other farmer does. It is the responsibility of Congress to ensure these historically underserved farmers can purchase an insurance policy as easily as their conventional counterparts.

  • Marketplace Equity

    Biden Expands Anti-Trust Protections in Agriculture, Part 2

    Last month, President Joe Biden signed an Executive Order (EO) on Promoting Competition in the American Economy. This EO is exciting in many ways, from the sheer scope of its ambition to its acknowledgment of some of the many ills that have plagued American farmers, from unfair contract farming to retaliation. More on that EO can be found here.

    One of the most exciting facets of the Order, however, only received a few sentences’ worth of attention.

    The Order charged the Secretary of Agriculture, in conjunction with the Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office, with submitting a report to the White House outlining the problems posed by patent-protected seeds.

    These seeds challenge regulators to protect them as intellectual property, while still ensuring fair competition in the agricultural industry. Patent-protected seeds cause tension between carrying out the Packers and Stockyards Act, which seeks to reduce monopolies and increase competition, and the Patent Act, which seeks to reward innovation by financially protecting intellectual property. 

    While instructing bureaucrats to submit a report may not sound like exciting government action, that the Biden administration has acknowledged patent-protected seeds as a potential detriment to competition is a sign of progress. 

    Anti-Trust and Seed Competition

    Competition in the seed industry is in real danger. Larger seed companies have been buying up smaller firms since the introduction of genetically engineered seeds, consolidating property rights in the seeds. Now, just four companies control 60% of global proprietary seed sales (see Howard’s seed chart here). 

    Consolidations in the seed industry mean higher prices and fewer choices for farmers. Farmers who use proprietary seeds also have to comply with restrictions on their use, including restrictions on seed saving. Decreased competition in the seed market also means less biodiversity in our soils and potentially, fewer tools as farmers look to adapt to an ever changing climate. 

    This industry consolidation is the kind of practice the U.S.’s antitrust laws are meant to prevent. Nevertheless, we also have robust intellectual property protections, under which these genetically engineered seeds are patented. These protections are rooted in protections going back to 1930, when the Plant Patent Act allowed the patenting of asexually reproduced plants (excluding tuber-propagated plants).

    The patenting of plants continued to expand over the next fifty years, when in 1980 the first utility patent– these are the quintessential patents, granted for new inventions– was granted for a genetically engineered bacterium. Patent protections continued to expand as GE crops were rapidly developed throughout the 90s. Patents prevent others from making, using, or selling a protected product for a set period of time. Patents thereby grant the owner a limited period of exclusivity– the enemy of competition.

    Biden’s Executive Order has charged the Secretary of Agriculture with a difficult task: assessing how to ensure compliance with our robust patent laws, while also breaking up the consolidation of the seed industry and increasing competition. Notably, there is no deadline in the Order for when this report must be submitted, nor any measures of success. However, the Biden administration has acknowledged seed competition as a concern, and the report will be a tentative first step toward what needs to be a vigorous solution.

    This blog is the second in a series of two guest posts by OEFFA policy intern, Eliza VanNess.

  • Marketplace Equity

    Biden Expands Anti-Trust Protections in Agriculture, Part 1

    On July 9th, President Biden signed an Executive Order (EO) on Promoting Competition in the American Economy, which covers a variety of industries including the agricultural sector.

    The Order identifies consolidation as a threat to the survival of small family farms and proposes a number of antitrust measures to bolster support for these farmers. 

    This EO is the latest in a long tradition of antitrust regulations spurred on by the agricultural industry.

    The most sweeping regulation was the Packers and Stockyards Act (PSA), enacted in 1921. At the time, the industry was controlled by only five large meatpacking companies, who together were engaging in anti-competitive practices such as restricting the flow of food and controlling prices to manipulate the market. The PSA was passed to clamp down on these activities, to ensure fair business practices and competitive markets. The PSA, enforced by the U.S. Department of Agriculture (USDA), still provides these protections today,

    While the Packers and Stockyards Act was an important measure in providing antitrust protections in agriculture, it proved insufficient in addressing such a broad problem. Biden’s July EO seeks to beef up the PSA, to protect small farmers trying to compete with ever-growing agribusinesses. 

    The July EO seeks to address the following crucial issues: 

    1. Reducing the burden on litigants suing under the Packers and Stockyards Act

    In order to sue under the Packers and Stockyards Act, courts in the past have required that litigants prove not just that a practice has harmed them personally, but that the practice has resulted in industry-wide harm. This is a difficult standard to prove, and the requirement has made it difficult for individual farmers to take advantage of the Act’s antitrust power. The new EO clarifies that proving industry-wide harm is not necessary to establish a violation of the Act, increasing the usefulness of the law to farmers. 

    2. Bolstering antitrust protections for poultry farmers

    Chicken farmers are often subject to the costs of contract farming, in which contractors or dealers have inordinate control over the factors that determine how much the farmers are paid, while leaving the farmers to assume the risks of factors over which they have little control and require the highest cost investments. The EO seeks to clamp down on this system, “prohibiting unfair business practices related to grower ranking systems.”

     3. Providing anti-retaliation protections 

    Farmers who’ve spoken up about exploitation at the hands of their contractors have too often experienced retaliation, placing farmers in the unfortunate position of choosing to stay silent about unfair business practices and facing potentially ruinous financial punishment. The EO instructs the Secretary of Agriculture to adopt anti-retaliation protections “so that farmers may assert their rights without fear of retribution.”

    4. Clarifying food labels and ensuring access to markets

    The EO bolsters food labeling, mandating labels that allow consumers to choose products made in the U.S. The Order instructs agencies to consider implementing a “Product of USA” voluntary label for meat products. The Order also instructs the Secretary of Agriculture to submit a plan to the White House Competition Council, outlining measures to promote competition in agriculture, as well as to support value-added agriculture and alternative food distribution systems. The Order suggests increasing price transparency in agriculture markets, increasing transparency to allow consumers to choose products that support fair treatment of farmers, and creating model contracts to help farmers negotiate fairer deals as measures the Secretary can include in the plan.

    5. Protecting competition in seed markets

    Finally, the EO identifies patent-protected seeds as a potential danger for competition in agriculture. These seeds cause tension between the Packers and Stockyards Act, aimed at increasing competition in agriculture, and the Patent Act, aimed at protecting intellectual property. Patent-protected seeds challenge regulators to protect them as intellectual property, while still ensuring fair competition in the agricultural industry.

    To figure out how to rise to this challenge, the Order instructs agencies to submit a report to the White House Competition Council, laying out the potential problems. Biden’s Executive Order is sweeping in scope, aimed at addressing a host of long-standing problems in the agricultural industry. However, the Order only provides instructions for agencies, who are ultimately charged with implementing the policies and rule makings proposed by the administration. Only time will tell how well these agencies implement the ambitious policies outlined in the Order.

    This blog is the first in a series of two guest posts by OEFFA policy intern, Eliza VanNess, a second year law student at the Ohio State University.