Rethinking Crop Insurance
This year, farmers across the Midwest have seen tornadoes, torrential rain, and flooding that made planting difficult, if not impossible.
In Ohio, where 40 of 88 counties received disaster designation, many growers were unable to plant at all and those that did face increased disease, pest, and weed pressure and late harvests. Needless to say, the loss of marketable crops and reduced farm income has been devastating for many farmers.
In the past, as OEFFA staff talk with growers about crop insurance, the phrase “my diversification is my insurance” has been a frequent refrain. Yet, this spring has many farmers rethinking the decision not to use crop insurance. While organic, diversified, and sustainable farmers have had few options historically, Whole Farm Revenue Protection (WFRP) is a relatively new option available everywhere, for all types of growers.
Most federal crop insurance policies sold in the U.S. today are designed for farmers who grow a single crop, leaving diversified grain, livestock, and produce operations with few options to manage risks on their farms. However, WFRP is a crop-and-enterprise-neutral revenue insurance policy designed to protect revenue on a farmer’s whole farm, not just a single crop. The program, initially authorized in the 2014 Farm Bill, changed the game by providing insurance to growers of all types in any county, but the first few years of implementation revealed needed changes.
The 2018 Farm Bill authorized the U.S. Department of Agriculture Risk Management Agency (USDA RMA) to solicit feedback on what changes would be necessary to improve this new tool. Based on that feedback, including recommendations by the National Sustainable Agriculture Coalition (NSAC) (of which OEFFA is a member), the following positive changes will take effect for the 2020 crop insurance year:
- Disaster payments and other state and federal program payments (including Market Facilitation Program payments) will now be excluded from revenue-to-count and allowable revenue. This change will decrease the volatility of a farmer’s historic farm revenue and the resulting under-insuring and higher premium costs.
- The impact of disaster years on historic farm revenue will now be moderated through the following three-step process:
- The lowest of the average adjusted revenue years from the five-year average will be dropped.
- Years that are below 60 percent of average revenue will be replaced by a 60 percent revenue plug (60 percent of the producer’s simple average or indexed average for calculating approved revenue).
- A 90 percent cap on approved revenue will be instituted, meaning that the approved revenue for the current year will be at least 90 percent of the previous year.
- Previously, WFRP users did not have access to the disaster year “smoothing” provisions enjoyed by other revenue policyholders.
- Non-Insured Crop Disaster Assistance Payments (NAP) will now be treated like other non-RMA insurance payments. NAP payments will be included as revenue-to-count when it exceeds the WFRP deductible. Previously, farms could participate in both programs but could only receive payments from one.
- The livestock and nursery cap will be raised to $2 million, which is $0.5 million above the NSAC recommended amount and $1 million above the current cap. The cap applies to the amount insured, not to the producer’s total volume of production.
Additionally, hemp is now added as an insurable crop with the following restrictions:
- The hemp must be produced in compliance with a state, tribal, or federal applicable plan.
- The hemp must be grown under a marketing contract.
- No replant payments will be offered.
- “Hot” hemp (when THC concentrations spike above 0.3 percent due to crop stress or cross-pollination) will not be considered an insurable loss.
The 2018 Farm Bill also increases the period of time that beginning farmers have to use WFRP’s beginning farmer premium discount (ten percent) from five years to ten years. That change has already been implemented; effective immediately, beginning farmers with ten or fewer years in operation are now able to receive a ten percent discount on their annual WFRP insurance premiums.
NSAC continues to advocate for ongoing improvements to this important new tool for growers. If you have not used crop insurance before and are thinking about ways to protect your farm in the face of weather extremes, WFRP is worth considering. Contact OEFFA to learn more.