Whole-Farm Revenue Protection is Here

Hey check out USDA’s Risk Management Agency (RMA) Whole Farm Revenue Protection (WFRP) crop insurance prograRMAm which is now available in all states in the lower 48 for the 2016 crop year. The policy allows producers to insure between 50 to 85 percent of their whole farm revenue and makes crop insurance more affordable for producers, including fruit and vegetable growers and organic farmers and ranchers. Appealing aspects of this program include the fact that it rewards on-farm diversity and this is important because you get what you pay for. This could finally bring crop insurance in line with stewardship goals.

WFRP coverage

We need to transition from a safety net approach that is not protecting the wealth of our soil. We are paying for it so let’s get it right. Subsidization of crop insurance by the government has increased participation rates greatly in recent years. According to a USDA report by O’Donoghue, in Illinois, coverage of corn and soybean acreages increased from about 20-30% coverage rates observed in the 1990s to 80% coverage rates by 2012. Participation rates in colder areas (IA,MN, ND), which were always higher, increased from about 50-60% coverage to over 90% coverage of corn and soybean during that period.

Modest crop insurance options have been in place since the 1930s to cover farmers’ losses from bad weather or pests. New crops and insurance products were added over the years but enrollment did not begin to grow until the Federal Crop Insurance Act of 1980 required crop insurance to be sold and serviced by the private sector and encouraged this through premium subsidies and government payment of insurance company delivery costs. This made crop insurance extremely lucrative for farmers and insurance providers alike. Revenue based policies grew in use as a result of the Federal Crop Insurance Reform Act of 1994, which reduced the level of protection provided by farm programs and added requirements to have crop insurance in order to be eligible for ad hoc disaster payments. Modifications made between 1996 and through the 2008 Farm Bill established Crop insurance as an attractive option for farmers and ranchers to manage risk and ensure an ample and stable U.S. food, fiber, feed and fuel supply under the management of USDA’s Risk Management Agency in a partnership with 15 private insurance companies. Beginning in 1996, this multi-billion dollar program asked taxpayers to pick up about 60 percent of farmers’ premiums and cover about 18 percent of insurance companies’ operating costs without requiring conservation compliance.

The program has been popular with high participation and coverage levels being skewed toward larger farms that are incentivized to maximize production. Recall, since the enactment of the 1985 Farm Bill, eligibility for most commodity, disaster, and conservation programs had been linked to compliance with the highly erodible land conservation and wetland conservation provisions. Critics have noted that 2012 payments which were some of the highest payments in history, were even more costly than the direct payments they replace. The $9 billion a year subsidy overcompensates farmers and insurers and has had negative consequences for the environment. The Agriculture Reform, Food and Jobs Act of 2012, began to address this with several key amendments related to crop insurance (Reducing insurance premium subsidies for farmers earning more than $750,000; requiring conservation compliance of participants, and paying organic farmers at organic rather than conventional prices in the event of disaster insurance payments). Additional changes made in the 2014 Farm Bill will hopefully set us on a path that will no longer subsidize ‘socialized losses and privatized gains’.

The WFRP is a new risk management option, available on a pilot basis in 2015, that might align crop insurance programs with conservation goals and help us recover from some missteps that proved to be disastrous for our soil and water resources. It might also help the little guys and gals get a piece of the subsidy pie. While fewer than 600 producers enrolled in the pilot year of the WFRP program, I am hoping that modest participation in the Midwest might grow from the 26 in Indiana, 14 in Illinois, six in Wisconsin, and the 2 participants enrolled in Iowa, Minnesota, and Missouri.

Whole farm revenue protection combined the popular Adjusted Gross Revenue (AGR) and Adjusted Gross Revenue Lite (AGRLite) programs to expand the range of coverage levels, coverage for replanting, provisions that increase coverage for expanding operations, offer a higher maximum amount of coverage and the inclusion of market readiness costs in the coverage. The policy requires growers to insure a variety of crops at once instead of one commodity at a time. This encourages rather than discourages crop diversity and helps support the production of a wider variety of foods on the landscape. Eligible farms can make up to $8.5 million in insured revenue, including farms with specialty or organic commodities (both crops and livestock (this has a $1 million cap)).

For more about this new program check out the RMA website (http://www.rma.usda.gov/policies/wfrp.html) and see NCAT’s “Primer on Whole-Farm Revenue Protection (WFRP) Crop Insurance: Updates for Producers in 2016” at https://attra.ncat.org/attra-pub/download.php?id=501.

 

http://www.usda.gov/wps/portal/usda/usdamediafb?contentid=2015/08/0239.xml&printable=true&contentidonly=true

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