By Harriet Behar
In response to the USDA’s Office of Inspector General (OIG) audit of organic crop insurance, the Risk Management Agency (RMA) announced changes in early March to the 2014 federal crop insurance program for organic farmers.
The most positive change was the removal of the 5% surcharge added to crop insurance premiums, which has penalized farmers who use organic practices. This surcharge is still in effect for 2013, but will go away in 2014. Although organic farming has been recognized as a “good farming practice” since 2000, it has taken until now for RMA to fully acknowledge this fact in the crop insurance program by equalizing premium rates.
Another welcome change is that organic farmers may now choose to pay a higher insurance premium to cover the higher price organic crops receive in the marketplace. This option will be available for corn, soybeans, cotton, processing tomatoes, avocadoes and some stonefruits. RMA plans to add additional “organic price selections” for wheat, barley, oats, almonds, apples, pears, blueberries, table grapes, and certain stonefruits in the next two years. Unfortunately, organic forages and pasture–important as livestock feed and in crop rotations–will not be recognized.
Along with these positives are some negatives that will continue to challenge organic farmers and those transitioning to organic when they seek crop insurance.
Origin of Crop Insurance
Crop insurance was put in place in the 1930s to aid farmers during the devastating effects of both the extended droughts of the Dust Bowl and extremely low prices caused by the Depression. In its best application crop insurance protects producers from weather- and market-related losses. Expected crop yields that define the payments for crop insurance are determined two different ways: either the farmer has a minimum of four years of crop yield history for that type of crop, or county averages for the crop are used.
Organic Crop Insurance Payments Determined “Excessive”
In the OIG audit, it was determined that crop insurance payments to organic farmers using county conventional yield averages have been “excessive.” This determination was based on a sample of 76 crop insurance policies nationwide, held by 33 producers in six states. As a result, in the future, farmers who do not have their own organic cropping history may see crop yield projections for basing insurance payments reduced to as much as 35% below county averages. Given the strong yields we see on most organic farms, I believe that this 35% less yield on organic versus conventional land seems “excessive.”
It is obvious to those involved with organic production that the sample size in making this determination was too small, and the data somewhat skewed. Because of historical penalties (such as the surcharge, and not receiving payments in line with the organic price) many organic farmers have not purchased crop insurance. The yield data in the OIG report may have included a higher percentage of farmers new to organic, who would not have the benefit of a long-term organic rotation to bring yields closer to the conventional county average. The organic industry does not have the same data collection support as non-organic has. As a result, there is no public data that reports actual regional organic yield averages.
Chilling Effect on Those Considering Organic Production
This lower crop yield figure sends a negative message to those looking to transition to organic production. Many times, it is these producers who seek crop insurance to lessen the anxiety of trying a new type of production. The USDA message that, on average, organic produces 35% less yield than conventional production could have a negative influence on the decision to transition to organic. Since these farmers would not have a four-year history of growing a specific organic crop, they would rely on organic crop yield data in their region. Without that data their organic crop could only be insured on a yield that is 35% less than conventional counterparts. There is a sliver of silver lining, though, in that the insurance premium paid by the producer would also be less.
Hopefully, with the 2014 changes removing the 5% surcharge and providing for more crops covered with an organic price, more of our long-term organic producers will find crop insurance worthwhile. In the future, their crop yield data will be available to help RMA modify this negative view of organic crop yields. Unfortunately, this change will take quite a few years. With long and diverse crop rotations practiced by many organic farmers, it could take 15 years or more to provide four years of a specific crop’s history.
Good Practices Based on Organic Inspection Report
Another problem in the changes is the requirement of the Office of Inspector General for insurance providers to review a farm’s organic inspection report in order to verify that good organic farming practices were in use. This il
strates a serious lack of understanding of the organic certification process. The valid organic certificate, not the organic inspection report, is the verification that the farmer is in compliance with the USDA organic regulations. The certification agency is the body that annually determines whether or not the farm receives organic certification, not the inspector.
This requirement is problematic for a variety of reasons. We should not put the power to deny crop insurance in the hands of someone who does not understand the organic certification process, and who could easily misinterpret the inspector’s observations or comments. The inspection report will be an incomplete look at what the farmer’s overall plans are for utilizing good farming practices and achieving optimum yields. The organic inspection report is a “snapshot” of what was seen on a specific day and time. Organic certification is not based on what is seen on one day, but on the overall system that is in place on the farm. The information provided by the inspector to the certification agency, along with the completed Organic System Plan, allows the Certification Agency to make the decision to approve organic certification.
The organic farmer retains field activity records that verify they are doing tillage, planting, cultivation, pest control and harvest activities that would result in a good crop yield. If the inspector arrives in the spring, the crop production records discussed in the report may be for the previous year, and not for the current crop year covered by the crop insurance. The organic farmer can choose to share his or her records with the insurance provider, just as a conventional crop producer shares his herbicide application records.
As a final point, organic inspectors and certification agencies have specific disclaimers on the inspection report stating it is not to be used for any other purpose than for the organic certification agency to determine compliance to the organic regulation.
In order to maintain fairness, the crop insurance program needs to recognize that an organic field can be wiped out by a hail storm, just like a conventional field, no matter how good the farmer’s organic practices are. Insurance agents should not be given the power to deny or lessen crop insurance payments based on a misinformed interpretation of an organic inspection report. Organic farmers should have access to crop insurance protection based on truly realistic crop yields, and monetary losses based on historical prices or contracts, just like any other farmer. We must support, and not penalize, farmers who choose to be organic.
RMA has released a three-page fact sheet titled “Organic Farming Practices” providing details on crop insurance for organic producers.
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