Crop Insurance for Organic and Transitioning to Organic Producers
A Safety Net for Every Farm
Many organic farmers and transitioning to organic farmers manage risk through diverse production and stacked enterprises. In addition to the risk management strategies grown on the farm, crop insurance is a tool that supports organic curious, transitioning, and organic farmers as they manage risk in times of one extreme weather event after another.
How does Crop Insurance work?
Farmers can purchase insurance policies at a subsidized rate under the Federal Crop Insurance Program. In the event of below-average yields or revenue, depending on the policy purchased, the policy makes indemnity payments to farmers.
Crop insurance agents sell policies through private insurance companies. The USDA Risk Management Agency (RMA) subsidizes the insurance premiums and a portion of the companies’ administrative and operating expenses, and also shares underwriting gains and losses with the companies. This is a unique private-public partnership that is tax-payer funded, and on average, farmers are paying around 40% of their premiums.
Crop Insurance for Organic, Transitioning, and Organic Curious Producers
Different crop insurance options exist for different types of producers. For example, multi-peril, or “traditional” crop insurance might work well for some of the crops grown by row crop farmers, whereas specialty crop insurance might work better for a vegetable grower that specializes in a larger volume of a few main crops. Highly diversified producers might be better served through the Whole Farm Revenue Protection program, and forage producers might be best served through a Pasture, Rangeland, Forage insurance policy plan.
You should also know that sometimes, something you grow might not be well covered through existing crop insurance options, but this doesn’t mean you can’t insure it. There is a process to seek insurance for something not currently offered in your county, called a written agreement– more on that below.
Tools and Information for Accessing Crop Insurance Generally and Across Programs
Most of the information available to farmers about crop insurance options, deadlines, and details filters through a crop insurance agent, so it’s important to work with an agent who has previously served, or is interested in learning about the unique needs and challenges of organic and transitioning to organic producers. Some crop insurance agents specialize in organic farming. Since you’re not limited by location, choose an agent who understands your needs. Ask plenty of questions to gauge their experience with diverse farming operations.
- RMA Agent Locator can help you find a crop insurance agent near you.
- WFRP Agent Locator: Use this tool to find a crop insurance agent with experience working with Whole Farm Revenue Protection (more on that below).
- Contact your crop insurance agent for important dates for your crop. Be sure to submit your application by the Sales Closing Date and report your acreage by the Acreage Reporting Date. These dates vary by crop, state, and county. RMA’s Actuarial Information Browser provides applicable program dates by crop year.
Types of Crop Insurance Plans and Programs:
Multi-Peril Crop Insurance (MPCI)
The oldest and most common form of crop insurance, MPCI is available both as revenue protection (losses related to below-average revenue) and yield protection (losses related to below-average yields).
- Multi-peril crop insurance is for farmers and ranchers hoping to insure crops against natural perils.
- It works by allowing producers to insure a historical amount of documented crop production.
- The reliance on annual production history (APH) can be tricky for beginning, transitioning to organic, and organic producers because the APH starts over each time a farmer engages in a new practice.
- It’s also hard for organic producers to access the full benefits of a system based on APH because of their diverse crop rotations.
- Available for major commodities
- Protects against crop yield losses by insuring a percentage of historical crop production
Contract Price Option
- Allows the farmer to insure specific crops based on the contracted price rather than the organic premium price election set by RMA
- This works for both organic producers and transitional producers who have secured a higher price for crops through a contract
- Useful when the contract price is higher than the organic price election
- Useful when there is no organic price election for a specific crop
Other Options or Endorsements
- Depending on the type of policy, a producer can choose an additional option or endorsement, to strengthen coverage.
- Example: Malting Barley Endorsement (MBE)
- If barley for grain is included as a crop as part of a rotation, and the farmer has a contract for malting barley, it can be insured to the higher price listed in the contract.
Written Agreement
If coverage for a specific crop is not available in a given county, the farmer can work with their crop insurance agent to apply for a written agreement.
- This is a special request for a case-by-case agreement with RMA for coverage
- Farmers must supply information like:
- Planting and harvest dates
- 3 years of the producer’s production history of that crop or a similar crop
- Information about a county where this crop is covered
- Coverage begins at the later of two dates
- When RMA accepts the farmer’s application
- Crop planting date
Crop Insurance for Specialty Crop Producers
Specialty Crops Include: A full list of currently covered specialty crops
- This coverage is ideal for an individual crop (produced in quantity)
- Whole Farm Revenue Protection (for diversified operations)
- Written agreements (special request to cover a crop not otherwise covered in a state)
- Example of farmers utilizing this program.
Whole Farm Revenue Protection (WFRP)
WFRP was an idea hatched by the sustainable agriculture community as a way to provide crop insurance for diversified operations.
- This coverage plan is ideal for diversified operations
- For a farm with up to $17 million in insured revenue
- Covers multiple crops and livestock under one policy
- Available in all counties
- Insures based on the whole revenue of the operation rather than on yield history
- Includes re-plant coverage for annual crops (except Industrial Hemp or those covered by another policy)
- Offers a range of coverage levels from 50-85%
- WFRP Agent Locator: Use this tool to find a crop insurance agent who has experience working with WFRP.
- How it works:
- Gather the following information:
- 5 years of Schedule F Tax Records
- Farm Plan for the year, including what will be produced and anticipated yields (your Organic System Plan)
- Organic certificate for organic items
- Sales records, including direct market sales records
- Summaries of coverage for any other insurance policies
- Inventory information for commodities
- Accounts receivable and payable
- Find an agent. Use the WFRP Agent Locator
- Purchase the policy
- Submit a notice of loss: If the revenue for the policy year is below the insured revenue, farmers must submit a notice of loss within 72 hours
- Make a claim: Farmers must file a claim within 60 days after submitting farm tax forms to the IRS
- For more information, consult the WFRP Handbook for the policy year in question.
- Gather the following information:
Micro Farm Program
Micro Farm is a sub-program of Whole Farm Revenue Protection oriented towards farms with up to $350,000 in insured revenue. It works pretty similarly.
- This subprogram of WFRP is designed for diversified operations.
- MicroFarm minimizes underwriting and recordkeeping requirements, and producers do not have to report expenses on individual commodities.
- The farm cannot have more than 50% of total revenue from commodities purchased for resale.
- Producers can include post-production activities as revenue, such as washing and packaging commodities or value-added products.
- Example:
- Jill and her family run a small CSA. In addition to the CSA, they raise pastured poultry and make jam out of a ¼ acre raspberry patch. MicroFarm would enable Jill to insure the revenue from all of these enterprises in one policy.
Crop Insurance Options for Transitioning to Organic Producers
Transitioning to organic can be a particularly risky time for producers. Currently, different producers use different strategies when transitioning. Some farmers transition ground in hay or forage and utilize Pasture, Rangeland, Forage insurance. Others crop the land, and utilize enterprise units to insure transitional ground separately from other crops. Still, others insure transitional ground as part of a Whole Farm Revenue Protection plan. We look forward to the development of additional risk management tools designed specifically for transitional producers.
Crop Insurance Options for Transitional Producers
Producers who have crop insurance coverage on crops in transition to organic are eligible for premium assistance from USDA. To receive crop insurance at organic rates as a transitional grower:
- You need a Transitional Production Plan (listed below).
- A certification entity must review your OSP or TPP and approve your operation as transitional.
- Transitional Production Plan for Crops
- Transitional Production Plan for Livestock
- Find a certification agency to review the TPP through the USDA Transition to Organic Partnership Program
- Contract Price Options for Organic and Transitioning to Organic are available by the RMA.
Pasture, Rangeland, Forage (PRF) Insurance
Producers who choose to transition their land to organic production in the form of pasture, rangeland, or forage, could use PRF insurance during transition. It can also be used to insure pasture, rangeland and forage for both non-organic and organic producers. This program works a little differently, and is based on a rainfall index.
- This program is based on a rainfall index, rather than actual losses, since moisture will be a predictor of yield.
- The National Oceanic and Atmospheric Administration Climate Prediction Center (NOAA CPC) has a grid system which the Rainfall Index uses to determine precipitation amounts within an area.
- Insured acres are assigned to one or more grid areas based on location
- Producers do not need to file a claim or submit documentation for a loss.
- Payments are made after rainfall data is collected and shared with RMA for each 2-month index interval.
Enterprise Units by Practice Type
A recent improvement to crop insurance for organic producers is the extension of enterprise units by practice type to organic and transitional production types. Enterprise Units by practice type are a unit structure that allows farmers to separate insured crops into different “buckets” of insurance. “Buckets” can be differentiated by irrigation practice, cropping practice, and now, organic or transitional status, and coverage can be purchased accordingly.
Organic Price Elections
Cover an individual organic crop with an organic price election — “organic premium price elections,” set by RMA, account for organic values and can be applied to the following two types of coverage.
- Eligibility is based on location and crop
- Organic premium price elections available by commodity
- Yield Protection: covers the operation in case of low yields due to weather, pests, disease issues
- Revenue Protection: covers the operation when low yields or market changes result in revenue below the expected amount
Non-Insured Crop Disaster Assistance Program (NAP)
NAP is not insurance. It is disaster assistance. Still, it can be part of a farmer’s risk management calculation.
- NAP provides financial assistance to producers of non-insurable crops when low yields, inventory loss, or prevented planting occurs due to natural disasters.
- Farmers can participate in WFRP and Micro Farm, and still participate in the NAP program.
- If the NAP payment exceeds the WFRP or Micro Farm deductible, the amount over the deductible will be considered revenue-to-count for WFRP or Micro Farm indemnity determinations.
- Beginning, limited resource, socially disadvantaged, and qualifying veteran farmers are eligible for a waiver of the service fee and a 50% NAP premium reduction.
- Examples:
- Sal’s strawberry field is damaged by a severe drought. NAP will cover the loss of income to Sal due to the drought, but it won’t cover the damage to the plants themselves. Re-planting cost will be Sal’s cost to bear.
- Rhea experienced a loss to her honeybee colony due to a hurricane. NAP covers the loss of income to Rhea, but does not cover the loss of the bees.