NSAC's Blog
Guest Blog: Insuring and Financing Healthy Farms
April 24, 2012
Editor’s Note: We want to thank Jeffrey O’Hara from NSAC member the Union of Concerned Scientists (UCS) for his contribution. Dr. O’Hara is an agricultural economist in the Food & Environment Program at UCS; his expertise includes local food systems and community development.
Farm policy has historically disregarded whether domestic crop production is aligned with dietary recommendations. Given that healthy foods are under consumed in the United States, there is an urgent need to change this policy.
The latest report from the Union of Concerned Scientists, Ensuring the Harvest, identifies policies to help farmers who are growing healthy food using sustainable practices. These policies include removing fruit and vegetable planting restrictions, making improvements to crop insurance policies, and supporting greater credit accessibility.
Implementing these recommendations will increase jobs and incomes in rural economies. Although the U.S. Department of Agriculture (USDA) has important programs that support farmers selling in local markets, the attention directed to developing a safety net for these farmers has been completely inadequate in Farm Bill deliberations to date.
USDA administers and subsidizes a crop insurance program because farmers are exposed to considerable risk from weather and market shocks. A catch-22 exists because the USDA only develops crop-specific policies for crops that are widely planted with extensive market data. As a consequence, the crop insurance program is oriented towards extensively subsidized commodity crops. Crop insurance is unavailable for many farmers growing an array of fruits, vegetables, other healthy crops, as well as raising livestock on the same farm.
The Ensuring the Harvest report describes how USDA can rectify this by offering whole farm revenue insurance on a national basis. A strength of whole farm revenue insurance is that it provides coverage for any type of crop or livestock. This provides incentives for farmers to grow healthy crops in regions without a crop-specific policy. Also, one comprehensive policy is cheaper for farmers to purchase (and taxpayers to subsidize) relative to multiple crop-specific policies when the premium reflects that farmers are already undertaking risk-mitigating practices. For example, growing multiple crops helps a farm self-insure against pest outbreaks or price declines that impact a single crop.
While USDA has developed pilot whole-farm-revenue insurance policies, farmers must incur high transaction costs to buy the policy, and it is only available in select regions. USDA should offer farmers a suite of options to value their crops to make the existing policy easier for farmers to purchase. In addition to submitting tax records, which is the current procedure, farmers should also be allowed to use contract prices and pricing indexes that USDA could develop with data from their existing market surveys. This would further make the standards for purchasing crop insurance more equitable among different types of farmers.
In order to implement whole farm revenue insurance in regions where data is sparse, USDA should develop insurance policies with administratively-determined premiums at the outset. USDA can use the resulting data they collect over time to subsequently calculate premiums more accurately.
Crop insurance will further help these farms obtain financing since its purchase also protects lenders. This is a priority because farmers on smaller farms undertaking less conventional farming practices already experience challenges with obtaining an operating loan relative to other farmers.
Some economic development organizations are becoming actively engaged in financing healthy food farms. However, USDA could do more to broker the flow of capital to these farms by educating and engaging lenders seeking such opportunities. In addition, systematic evaluations are needed of USDA farmer outreach programs and financing conditions for local food farmers.
We have been hearing over and over again that this Farm Bill should be renamed the “Jobs Bill.” The Local Farms, Food, and Jobs Act will implement the proposals contained in our report and offers the one of the best opportunities to support farmers growing healthy crops.
If you have not yet urged your representatives to support the Local Farms, Food, and Jobs Act, you can do so on the UCS Action Center today.
Categories: Farm Bill, Local & Regional Food Systems