March 1, 2013
USDA’s Risk Management Agency this week announced the removal, starting in 2014, of the five percent premium surcharge assessed against all organic farmers seeking federal crop insurance. This penalty against organic farming has been an issue NSAC has campaigned against for nearly a decade and we are delighted to finally report significant progress.
The change came about in part as a response to a just-relased audit of organic crop insurance by USDA’s Office of Inspector General.
The audit found that transitional crop yields for the small but growing percentage of organic farmers in the crop insurance program generally exceeded actual production histories. Transitional yields, in this instance, does not refer to the yields during the transition to certified organic production. Rather, transitional yields are county average yields used in the federal crop insurance program when producers do not yet have a long-term production history with a particular crop, and also when a producer has a very bad year due to natural disasters.
Beginning with the 2014 insurance year, RMA will now use actual transitional yields for organic crops. While this is the appropriate policy, it remains highly problematic because the data being used is RMA’s own data and is based necessarily therefore on very thin evidence. Only a quarter of organic farmers are enrolled in federal crop insurance and many of them have enrolled relatively recently. Given the historic surcharge penalty, and given that most crop insurance policies still pay out at conventional rather than organic prices, it is likely that those enrolled, as a general rule, either had higher risks or were more risk averse. Hence, current transitional yield data may very well be skewed in a way that still disadvantages organic farmers. Until more organic farmers are enrolled and have accumulated actual production histories that are recorded with USDA, this will be a continuing problem. However, the removal of the five percent premium surcharge should help considerably in this respect.
No less important is establishing organic prices that RMA can use in establishing the correct insurance payout rates in cases when insurance payments are triggered due to natural disasters or other reasons. The current Administration made a major step forward in this regard in 2011, when organic prices started being used for corn, soybeans, cotton, and processing tomatoes. Since then, RMA has added organic price elections for avocados and certain stonefruit crops. According to this week’s bulletin, USDA is working toward having organic price selection available in the next two years for wheat, barley, and oats plus almonds, apples, pears, blueberries, table grapes, and certain stonefruits. NSAC supports a Senate-passed farm bill provision, championed by Senator Jeff Merkley (D-OR), that directs USDA to finish the organic price selection work for all insurable commodities within three years.
Not addressed by this week’s report and announcement is the broader issue of insuring individual crops versus insuring the revenue base of an entire farming operation. For highly diversified producers, whether grain, grain-livestock, or fruit and vegetable, insuring crop-by-crop may not be the best approach. For many years, RMA has made available, in certain states and in certain counties, Adjusted Gross Revenue Insurance (AGR) and a variation known as AGR-Lite. These may be better options, even today, for many organic growers than the crop-by-crop insurance. One way to see if it works for your farm is to use the AGR-Lite Wizard tool created by NSAC member group, the National Center for Appropriate Technology (NCAT).
Better still may be the proposed new Whole Farm Diversified Risk Management Insurance, a farm bill provision promoted by NSAC and included in both the Senate-passed and House Agriculture Committee-passed farm bills in 2012. It would be available on a nationwide basis and provide for a diversification bonus. For diversified operations, the Whole Farm product may prove to be a superior option once it becomes available.