USDA makes changes to crop insurance

By Harriet Behar, MOSES

soybean rowsCrop insurance often can be the determining factor between success or crisis on a farm. It is the main source of disaster assistance, and in these times of climatic extremes, is a tool many farmers consider important to their long-term viability.

The past year has been a busy one for the USDA Risk Management Agency (RMA). The RMA introduced new procedures and new government subsidized insurance options for all crop and livestock farmers, including organic. Many new items are based on 2014 farm bill provisions.

Continuing the mandate from the previous farm bill, the RMA has developed more “organic price selections” to enable organic farmers to purchase crop insurance based on organic prices rather than non-organic prices. Right now there are only a few organic price selections, with no coverage currently for organic forages or pasture. On the positive side, the 5% surcharge for organic producers on crop insurance policies is gone. If you are a long-time organic farmer, you can insure your crop based on your historical yields. However, if you are a new to organic, you will only be able to insure your organic crop at 65% of the average non-organic yield in your county, due to the lack of good data on organic crop yields. The organic community hopes to work with RMA to change this unfair organic yield baseline.

The crop insurer’s reliance on the organic inspec- tion report to verify good management practices has been removed. This means that an organic producer can’t be denied an insurance payment based on an organic inspector’s field observations. As we know, the organic inspector’s visit is once per year, and what is observed one day could change the next. The RMA received pressure from organic farmer organizations to remove this.

Diversified and specialty crop growers may finally have an insurance option that can cover their multiple crops. This new product will replace the problematic options of AGR and AGR-Lite and will cover not just the growing of the crop, but also the cost of all activities to bring it to market, such as washing and packaging. The new policy, expected to be available by 2015, should improve risk management options for the long under-served fresh fruit and vegetable producer.

For dairy farmers, the Milk Income Loss Contract (MILC) payment program is gone. An insurance- based program, the Dairy Program Margin Protection Program (DPMPP), replaces it. Farm- ers pay $100 to be in the program plus a premium to cover the margin of difference between the price of milk and the price of feed (both conventional). When the margin is small (and the producer is losing money), they receive insurance payments. Prices are based on the national average price of conventional milk, corn, alfalfa and the Chicago Board of Trade price of soybean meal. Farmers can insure only part of their milk production and select insurance premiums based on the margin or gap between milk and feed prices they wish to cover.

The rules state that any producer may apply to the DPMPP using their production history of hundred- weights of milk as basis, not the price they received for the milk. Since organic milk and feed prices follow similar highs and lows to non-organic milk and feed, this may be something that organic dairy farmers would consider. However, the complexity of the program and cost may be a strong deterrent.

A big change to crop insurance is the requirement that ties government-sponsored premium subsidies to conservation compliance practices for highly erodible land and wetlands. Producers who are not in compliance now have time to develop and implement an approved conservation plan. This protects our environment by discouraging farmers from producing crops on marginal land.

The farm bill also reduces crop insurance ben- efits for farmers in Iowa, Minnesota, Montana, Nebraska, North Dakota and South Dakota who plow native sod by reducing the dollars they can receive and the amount of insurable yields. Unfor- tunately, Dust Bowl states are not protected from loss of grasslands.

Farmers who sign up for Price Loss Coverage (a program tied to commodity crop “reference” or target prices) can buy Supplemental Coverage Option (SCO) insurance to cover the gap between a price drop and when crop insurance would kick in based on reduced yields. The Agricultural Risk Coverage program can be purchased by farmers who are not in SCO. This is a revenue-based program tied to county yields and trigger prices, similar to the old ACRE program. Both of these FSA-run insurance-based programs are complex and will involve quite a bit of paperwork to access their protections. The farm bill included funding for trainings so farmers can understand how to participate in these programs.

Beginning farmers and ranchers in operation less than five years can insure their crop to a higher yield rate than current farmers on the same land. Beginning farmers also may be eligible to receive a 10% higher premium subsidy.

Learn more here.

March | April 2014

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