Organic Broadcaster

USDA offers bold, new crop insurance where none has gone before

By Harriet Behar, MOSES

Crop insurance is an important tool to help farmers and ranchers manage economic and production-based risks. It provides a safety net that offers stability and protects the long-term investment they have in their farm’s infrastructure
and land.

For many, crop insurance may be a requirement to obtain farm operating loans. At times, the lender may require that they are either informed of an insurance payout, or be listed as a beneficiary in the crop insurance contract to cover the loan they provided to the farmer.

With scientists telling us to expect more extreme weather events, such as droughts or repeated heavy rains different from our historical averages, as well as increasing threats from aggressive non-native insects, weeds and diseases, crop insurance can offer some support and stability in an uncertain world.

For many years, organic and diversified farmers have suffered from the lack of a practical safety net to protect them from weather or market-based occurrences that negatively affect their farm income. Many farmers who grow high-value unusual crops such as medicinal herbs or vegetable seeds may not have found an insurance product to protect their work and investment.

In response to this need, the USDA has created a new crop insurance product entitled Whole Farm Revenue Protection (WFRP). Now in its second year, this crop insurance provides coverage to farms in every county in the nation based on revenue, not yields or specific commodity crops. It’s not designed for farmers who grow mostly one crop each year. Rather, this new insurance is designed for farmers with two or more enterprises (crops or livestock).

WFRP has been set up to be easy to understand, navigate and choose the level of coverage that works best for each farmer.

What’s Covered
WFRP is a multi-peril insurance, covering losses from insects, weather or other “natural” events that occur in some or all of a farm’s fields. In addition, market forces, such as less income due to lower priced imported crops is also covered under this policy. Unfortunately, losses due to pesticide drift are not covered under this insurance.

Diversification is encouraged, since there is an understanding that if you don’t “put all your eggs into one basket,” you have less risk than if you did not pay attention to that wise saying. Just as its name suggests, it covers the whole farm’s revenue, including income from livestock products.

Beginning farmers and ranchers can qualify for WFRP insurance if they have three years of prior farm tax returns, as long as they also farmed the “lag year” before the insured year. And, they may also qualify for an additional 10 percent subsidy. For all other farmers, it is an absolute requirement that there are five years of farm revenue documentation to obtain this insurance.

Since this is a fairly new crop insurance offering, not a lot of crop insurance agents offered it in 2015—but that is changing. You should be able to find an agent who has been trained to work with you to provide information and a policy for this insurance here in the Upper Midwest.

As with all crop insurance, there is documentation required on your part, and some time needed to navigate the various rules. However, doing this preparation and obtaining this crop insurance could be a good choice to protect your farm income from unexpected economic losses.

Why It’s Needed
For years, crop insurance has not been attractive to organic farmers because:

1. The higher organic price was not covered under the crop insurance policy—organic farmers could only get the conventional price.
2. Diversified operations were penalized by having to setup numerous policies to cover each crop, or follow burdensome reporting requirements, such as tracking planting and harvest of many succession crops planted over the course of the year.
3. Organic farming practices were viewed as not being able to produce the same yields due to pressure from weeds or insects since they did not use the same “crop protection” tools as non-organic farmers.
4. Organic farmers paid the same or higher premiums as non-organic farmers, and would receive a lower payment for losses based on lower assumed yields as compared to the county average for that crop, if there was a county yield average. If there was no county yield average for that crop, getting coverage was even more difficult.
5. Farmers with numerous crops and a varied crop rotation found it difficult to get coverage since crops would vary from year to year, even though income would be steady.
6. Organic farmers producing unusual crops or livestock, such as medicinal herbs or ostriches, would have a hard time finding an agent willing to figure out how to insure their production.

None of these barriers to obtaining crop insurance is a problem with WFRP.

The USDA Risk Management Agency subsidizes WFRP. This subsidy rewards diversification by lowering a policy’s premium as the number of covered enterprises (crops and livestock) increases. While there’s no limit on the number of enterprises a policy can cover, the subsidy is capped at seven commodities/enterprises.

A policy can cover a maximum of 85 percent of the farm’s revenue with up to $1 million of that revenue coming from livestock production.

Basic Requirements
You will need to provide five years of your IRS tax records with your Schedule F or complete a Schedule F based on written historical records for those five years. (Again, beginning farmers need only three years and must have farmed the lag year.)

You must describe the commodities you plan to produce for the year you plan to insure and your projected income, based on the historical record of sales you have had for that commodity. If you have inventories from a previous crop year, you will need to provide this information to the crop insurance agent. There is an initial form you complete, a mid-summer revised farm operation report if there were changes to your plan, and a final one at the end of the crop year. You must complete the final Farm Operation Report if you need to make a claim. Even if you aren’t making a claim, complete this final report or your coverage in the following year will be limited to 65 percent.

You will also need to describe your usual expenses, such as seed, fertility inputs, and pest management inputs. If your expenses in your insured year are under 70 percent of what was approved for your policy, your actual expenses will be used to adjust your insured revenue downwards. Examples of allowed expenses to be charged against your revenue include the cost of animals or other commodities you purchased for resale, car and truck expenses, conservation expenses, hiring someone else to do custom farm work, depreciation from IRS Section 179, feed purchased, fertility inputs, freight, fuel, farm insurance, labor hired, seeds and plants, storage costs, and more.

There is an allowance for an increase of up to 35 percent above your five-year farm revenue average if you add land, switch to a higher value crop (such as going from transition to organic to organic production), or change the acreage of a high value crop, which would increase the revenue of your farm for the crop insurance year. Your insurance agent can talk you through this important allowance if you need it.

WFRP does not protect revenue received from value-added products, farm work you did as a custom hired activity, renting out your farm equipment, contracting as a livestock producer, wages or tips, or government programs. This insurance covers revenue received only from the growing and sale of raw agricultural commodities.

There are a variety of other restrictions relating to other insurance you may have and your allowed revenue and expenses, which can be reviewed during your meeting with the crop insurance agent, or in the WFRP handbook. Find the handbook. The handbook also contains template forms to help you track and calculate approved revenue and expenses.

The payment you receive from this insurance will be paid after you file your farm taxes for the insured crop year. Your taxes will be used to verify that the amount of revenue loss and the expenses you had meet the program’s criteria. For example, if the insurance coverage you choose is for $10,000 (at 75 percent of your total revenue), and your revenue was only $6,000 due to flooding, you are entitled to a $4,000 payment if all of the other factors, such as expenses, are acceptable.

Estimating Cost, Benefit
You can work directly with a crop insurance agent or you can use the “cost estimator” on the Risk Management Agency’s website. You will need to disable your browser’s pop-up blocker or add the page to your list of safe sites to use the estimator.

Using the estimator:

Fill in each field, leaving MPCI liability at 0 for now. Select “Add Multiple Commodities” to get the list of commodities you can insure. Note that there is a category for other vegetables or other livestock. You can only choose this option once—it is considered one commodity. The premium you pay will drop as you insure more crops; each crop must be at least 17 percent of your total revenue. Click “Get Estimate” and view the individual coverage you can get based on the revenue you projected.


You can see how much coverage you get based on the percentage of revenue you wish to insure. Select the “Producer Premium Amount” button to see your share of the premium. This example shows that insuring the farm’s $24,000 income from the five commodities listed at the 75 percent level costs $216.


See how the premium changes if only three commodities are insured at the same farm revenue amount—it goes up from $216 to $292 for the same 75 percent coverage, illustrating how WFRP benefits diverse operations.


Harriet Behar, MOSES Senior Organic Specialist and member of the National Organic Standards Board, answers farmers’ questions about certification and organic practices.

From the January | February 2016 Issue

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