All farmers deserve access to a farm safety net that protects against the inherent risks of farming. However, the vast majority of federal crop insurance policies sold in the U.S. today are designed for farmers who grow a single crop – leaving diversified grain, livestock, and produce operations with few options to manage risks on their farms. One of these options, which is growing in popularity, is Whole Farm Revenue Protection (WFRP) – a crop-and-enterprise-neutral revenue insurance policy designed to protect revenue on a farmer’s whole farm – not just a single crop.  WFRP is also currently the only policy offered in every county and state in the country.

In June 2019, the Federal Crop Insurance Corporation (FCIC) Board of Directors approved several important revisions to the WFRP policy, many of which were proposed by the National Sustainable Agriculture Coalition (NSAC) following a farmer stakeholder meeting in Kansas City organized by the Coalition in partnership with the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA). Coalition members participating in this meeting and our continued advocacy efforts include: the Center for Rural Affairs, National Center for Appropriate Technology, New England Farmers Union, Rural Advancement Foundation International, and World Farmers.

The recommendations recently approved by the FCIC will go into effect for the 2020 crop insurance year, which begins in August 2019. In this post, NSAC summarizes the pending changes to WFRP, as well as future improvements to the program that we hope will be made in future years.

Background

WFRP was first authorized in the 2014 Farm Bill and became commercially available for the first time in 2015. NSAC played an instrumental role in the establishment of the program, and continues to engage with Congress and RMA by amplifying farmer concerns and comments, and offer recommendations on ways to expand and improve the program.

The 2018 Farm Bill recently signed into law directs RMA to meet with and solicit feedback from WFRP stakeholders in order to identify needed improvements to the program. The bill also directs RMA to review and consider modifications to program procedures and requirements, including:

• Removing livestock and nursery production coverage caps
• Allowing waivers for operations to expand past the current limit
• Reducing application paperwork and simplifying record keeping
• Developing simpler alternative recordkeeping techniques for documenting planting and production history
• Finding better options for moderating the impact of disaster years on coverage levels
• Improving insurance agent training to better reach the small farm sector and underserved regions

The 2018 Farm Bill also increases the period of time that beginning farmers have to use WFRP’s beginning farmer premium discount (ten percent) from five years to ten years. That change has already been implemented; effective immediately, beginning farmers with ten or fewer years in operation are now able to receive a ten percent discount on their annual WFRP insurance premiums.

Summary of WFRP Changes

FCIC’s Board of Directors recently approved changes to WFRP for the 2020 crop insurance year and subsequent years, including several recommended by NSAC, including:

• Disaster payments and other state and federal program payments (including Market Facilitation Program payments) will now be excluded from revenue-to-count and allowable revenue. Previously, they were not excluded from allowable revenue. This change will decrease the volatility of a farmer’s historic farm revenue and the resulting underinsuring and higher premium costs.

• The impact of disaster years on historic farm revenue will now be moderated through the following three-step process:
  • Lowest of the average adjusted revenue years from the five-year average will be dropped.
  • Years that are below 60 percent of average revenue will be replaced by a 60 percent revenue plug (60 percent of the producer’s simple average or indexed average for calculating approved revenue).
  • A 90 percent cap on approved revenue will be instituted, meaning that the approved revenue for the current year will be at least 90 percent of the previous year.
  • Previously, WFRP users did not have access to the disaster year “smoothing” provisions enjoyed by other revenue policyholders.

• Non-insured Crop Disaster Assistance Payments (NAP) will now be treated like other non-RMA insurance payments. NAP payments will be included as revenue-to-count when it exceeds the WFRP deductible. Previously, farms could participate in both programs but could only receive payments from one.

• The livestock and nursery cap will be raised to $2 million, which is $0.5 million above the NSAC recommended amount and $1 million above the current cap. The cap is a soft cap, i.e., it applies to the amount insured, not to the producer’s total volume of production.

In addition to these NSAC-promoted changes, the FCIC Board also approved adding hemp as an eligible crop under WFRP, as mandated by Congress’ recent disaster legislation. The addition of hemp to WFRP comes with several restrictions:

• The hemp must be produced in compliance with a State, Tribal or Federal applicable plan.
• The hemp and CBD flower must be grown under a marketing contract.
• No replant payments will be offered.
• “Hot” hemp (when THC concentrations spike above 0.3 percent due to crop stress or cross-pollination) will not be considered an insurable loss at this time.

NSAC is pleased that WFRP will continue to insure all types of crops, though we are also concerned that there is not adequate production, planting costs, and pricing data to extend the coverage for hemp. Moreover, USDA has not yet issued regulations on how to implement hemp directives in the 2018 Farm Bill. Adding it as an insured crop under WFRP, therefore, is putting the cart before the horse. USDA has exercised some caution in limiting hemp’s inclusion in WFRP to marketing contracts with an assured price, which will help fill the gap in the lack of pricing and yield data. Over time, as more information is available and data collected, other options may become available.

While the FCIC Board has approved all of these changes outlined above in concept, RMA must still work out the fine details prior to the start of the next crop insurance year for these changes to be fully implemented. We expect more details from RMA sometime later this summer and will keep readers appraised once they are released.

NSAC’s Continuing Advocacy on WFRP

NSAC has supported and monitored the Whole Farm Revenue Protection (WFRP) policy since its inception in the 2014 Farm Bill. We supported the introduction of whole farm crop insurance as a part of the Local Food, Farms, and Jobs Act prior to the 2014 Farm Bill and then advocated for its inclusion in that farm bill.

Even before the 2014 bill became law, NSAC organized a meeting in Kansas City attended by RMA staff, interested farmers, and NSAC member organizations to provide feedback and share recommendations for standing up the new policy and getting the word out to farmers.

Last year, NSAC supported the Whole Farm Revenue Protection Improvement Act of 2018 introduced by Representative Sean Patrick Maloney (D-NY). The bill included provisions to streamline the policy, ensure crop insurance agents were adequately compensated for the increased time commitment of writing a Whole-Farm policy, and allow revenue substitution in calculating projected or historic revenue to prevent underinsurance. The 2018 Farm Bill incorporated a mandate to streamline the policy and included the revenue substitution proposal as a required consideration.

In addition to the recently approved changes, NSAC is also asking RMA to consider:

• Increasing the current 35 percent cap on year-to-year growth expansion, especially important for beginning farmers in their start-up and maturing years
• Including indemnity payments as revenue-to-count and allowable revenue
• Preventing the unfair, backward adjustment of price and revenue expectations at the time of claim adjustment
• Eliminating burdensome production expenses paperwork requirements
• Hosting a webinar series to improve understanding of the program among crop insurance agents
• Including cultural crops specific to immigrant and indigenous farmers within the commodity codes

Looking Ahead to Expanded WFRP Participation

The number of WFRP policy holders is still fairly small but is far higher than participation in the two predecessor programs, Adjusted Gross Revenue (AGR) and AGR-Lite. In 2015, there were 1,122 WFRP policies that earned premiums, followed by 2,204 in 2016 and 2,732 in 2017. Even with a slight decrease in 2018 to 2,496 policies, WFRP still outperformed its predecessors, which never sold more than 1,100 policies combined. Moreover, the 2017 crop insurance year saw the best loss ratio for WFRP at 1.07, barely above the ideal ratio of 1.0, which is a significant achievement for a still fairly new product. The loss ratio appears to be falling over time as experience with the program increases, with preliminary numbers for 2018 well below 1.0.

The new changes for the 2020 crop insurance year should help make the policy more attractive to farmers, especially in these times of more extreme weather and more regular disaster years. However, until crop insurance agents actively promote the policy and become more familiar with it, its growth will remain limited. Agent training remains paramount, as does finding ways to further simplify the recordkeeping and paperwork requirements.

One further directive from the 2018 Farm Bill could also help grow the program in both the medium and long term. RMA and the Farm Service Agency (FSA) are now required to collect and share data so that RMA can develop new or improved policies for current users of FSA’s NAP program. The new farm bill also requires a coordination effort between the two agencies to provide better coverage options for beginning farmers. FSA and RMA are directed to work together to help the transition of crops and counties from NAP to crop insurance, including assisting beginning farmers to use NAP as an on-ramp to federal crop insurance. Over time, these farm bill directives could also help grow the program as a viable option for those transitioning from NAP to federal crop insurance.