By: Anna Johnson
For many years, farmers across the country have purchased crop insurance policies as a way to manage the risk of a yield or income loss, and have done so for many years. However, crop insurance has stepped into the spotlight as the highest costing federal farm program, at about $8 billion a year.
Despite the size of the program, crop insurance has not been available for many types of crops. In 2015 and 2016, 90 percent of crop insurance premiums covered only 10 crops, forcing commodity farmers who wished to experiment or diversify to do so without insurance. Other producers, such as farmers who grow vegetables or certain small grains, cannot buy insurance.
Often, coverage is available for a crop only on a regional basis. For example, in 2017, a policy was available for apples in 10 counties in Missouri and two counties in Minnesota, but nowhere in Iowa, Kansas, or Nebraska – even though each of those states reported apple production in the previous Census of Agriculture. Organic crop insurance is also limited, and many farmers have only been able to insure their higher-priced, organic commodities at the lower value of their conventional counterparts. This lack of availability often has to do with how crop insurance policies are calculated. As with other insurance, a crop is protected based on its value.
Unlike home or car insurance, where insurance is purchased on property that an individual already owns, a farmer purchases insurance on a crop before it is grown and harvested. Therefore, previous yield history is used to calculate the predicted value of a crop. For example, in a county where corn production is historically 150 bushels per acre, a farmer is more likely to buy insurance on an expected crop of 150 bushels per acre rather than on an expected crop of 200 bushels per acre.
However, basing policies on yield history means less common crops are often uninsured. For example, in 2012, there were 22 Nebraska farms that raised safflower in nine of Nebraska’s 93 counties. Insurance agents and companies cannot make a reasonable prediction on an expected safflower yield in a county with only one farmer who plants safflower. Farmers and ranchers who wish to diversify their production and rely on crop insurance as a risk management tool are less likely to raise and market uncommon crops.
A new crop insurance product designed to address these concerns and expand coverage for farmers and ranchers is Whole Farm Revenue Protection (WFRP). WFRP was created by the Agricultural Act of 2014, also commonly known as the 2014 farm bill. Up to $8.5 million of an operation’s revenue can be covered through WFRP, providing farmers and ranchers with the option to insure more crops and livestock, ranging from corn and soybeans, to pumpkins and berries.
Another feature of WFRP is that it rewards diversification. WFRP, like all crop insurance, is subsidized by the government, and farmers can qualify for a higher subsidy level if they produce more than one commodity on their farm. A farmer raising corn, soybeans, and cattle could qualify for the same higher subsidy level as a farmer raising goats, vegetables, and tree fruit.
This report is written by Anna Johnson, policy associate, and Glen Ready, policy assistant, with support from Cora Fox, policy associate.
Background on Risk Management Insurance For Beekeepers
The Risk Management Agency’s (RMA) Apiculture Pilot Insurance Program (API) provides a safety net for beekeepers’ primary income sources – honey, pollen collection, wax, and breeding stock. Apiculture systems consist of different types of plants or crops and often contain mixtures of different species, each with different growth habits and seasons, precipitation requirements, and other climate conditions necessary to maintain plant growth over extended periods of time. API was designed to provide maximum flexibility to cover these diverse situations.
The Rainfall Index uses National Oceanic and Atmospheric Administration Climate Prediction Center (NOAA CPC) data, which utilizes a grid system. Each grid is 0.25 degrees in latitude by 0.25 degrees in longitude, which translates to approximately 17 by 17 miles at the equator. Colonies will be assigned to one or more grids based on the location to be insured.
API is available in the 48 contiguous states with the exception of grids that cross international borders.
Coverage and Claims
Coverage is based on your selection of coverage level, index intervals, and productivity factor. The index interval represents a two-month period, and the period you select should be the one when precipitation is most important to your operation.
You may select a coverage level from 70 to 90 percent.
You select a productivity factor to match the amount of protection to the value of the production that best represents your operation and the productive capacity of your colonies. You do not have to insure all your colonies. However, you cannot insure more than the total number of colonies you own.
By selecting a productivity factor, you can establish a value between 60 and 150 percent of the county base value, which is based on honey production and uses a five-year rolling average of USDA National Agricultural Statistics Service (NASS) data. The yield data are based on the NASS state average, and the price is the national average honey price for a given year.
Your insurance payments are determined by using NOAA CPC data for the grid(s) and index interval(s) you have chosen to insure. When the final grid index falls below your “trigger grid index”, you may receive an indemnity. This insurance coverage is for a single peril, lack of precipitation. Coverage is based on the experience of the entire grid; it is not based on an individual farm or ranch or specific weather stations in the general area. You can find more detailed information on the NOAA website at www.cpc.ncep.noaa.gov/products/ monitoring_and_data/.
You will be asked to make several choices when insuring production from your colonies, including coverage level, index intervals, productivity factor, and number of colonies. You should work with your crop insurance agent to view the Grid ID Locator map and index grids for your area. RMA also encourages you to use the Grid ID Locator, historical indices tool, and decision support tools available on RMA’s website to help you decide whether API is the right insurance coverage for your operation. The Rainfall Index does not measure your direct production or loss. Please r eview histor ical indices for your ar ea to make sure that this product will be helpful to you.
Buying an API Policy
You can buy an API policy from a crop insurance agent by the sales closing date shown for each county in the actuarial documents at webapp.rma.usda.gov/ apps/actuarialinformationbrowser/. A list of crop insurance agents is available at all USDA service centers and on the RMA website at http:// www.rma.usda.gov/tools/agent.html.
This fact sheet gives only a general overview of the crop insurance program and is not a complete policy. For further information and an evaluation of your risk management needs, contact a crop insurance agent.
United States Department of Agriculture
A Risk Management Agency Fact Sheet
Apiculture Pilot Insurance Program
Honey, Pollen Collection, Beeswax, Breeding Stock