New Issues with Crop Insurance for Diversified, Sustainable and Organic Farmers

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1 New Issues with Crop Insurance for Diversified, Sustainable and Organic Farmers Jeff Schahczenski, Agricultural Economist National Center for Appropriate Technology Farming as if People Matter Farm & Food Conference, November 2013

2 THE NCAT MISSION Helping People by championing small-scale, local, and sustainable solutions to reduce poverty, promote healthy communities, and protect natural resources.

3 ATTRA-The National Sustainable Agriculture Information Service Need some help with any sustainable Ag issue? Simply call our English-language ATTRA tollfree hotline at or the Spanishlanguage ATTRA hotline at for expert advice....or use the Ask An Ag Expert tool to send us a note.

4 Sustainability-Resilient Diversity In every deliberation, we must consider the impact on the seventh generation... even if it requires having skin as thick as the bark of a pine. Great Law of the Iroquois Resiliency Diversity Adaptable Interdependence

5 Is Good Crop Insurance for Diverse Farms Possible? Good - meaning reasonably priced and with effective coverage Good - meaning as good as current commodity or specific crop-based policies

6 Can Crop Insurance Promote Resilient Sustainable Diversity? Current Crop Insurance products for the most part do not promote diversity Proposed crop insurance related policies in new Farm Bill may actually exacerbate the problem

7 Why Resiliency? 2011 Disaster-October

8 Why Resiliency? 2012 Disaster- October

9 Why Resiliency?

10 Why Resiliency?

11 Why Resiliency- Harvey County, Kansas Subsidized Crop Insurance is an issue Soil Matters

12 Why Insure Crops and Livestock Multiple Perils, unavoidable natural occurrences Including : adverse weather fire Insects disease Wildlife earthquakes, volcanic eruption 12

13 Why Insure Crops- Price Volitility 13

14 Kansas Crop Insurance Types Source: RMA website Summary of Business: 14

15 In How Many Counties in Kansas can you buy Crop Insurance for Field Corn? 15

16 In How Many Counties in Kansas can you buy Crop Insurance for Organic Sweet Corn? 16

17 Yes- Whole Farm Revenue Insurance

18 AGR-Lite Wizard CD available for PC (no Mac version) - Sept. 15th for

19 Why Whole Farm Revenue Insurance Adjusted Gross Revenue Lite Crops with no Multi-Peril (Yield) or Revenue Insurance Commodities with premium prices Organic and specialty crops Varietal differences in yield and price Provides for quality losses Livestock

20 Case 1- Kansas Organic Veggie Farm 2 acres organic sweet corn: 1300 $7.20/doz = $18,720 1 acre green beans: 3900 $2.00/lbs.= $7,800 1 acre carrots : 19,500 $1.54/lbs= 30,330 1 acre squash: 14,800 $1.75/lbs.= $25,900 Total Gross Income: $82,450 20

21 Case 2- Kansas Diverse Commodity Farm 100 acres of wheat, 41 $8.78 /BU= $35, acres of soybeans, /Bu= $27, acres of corn, 78 $5.65/Bu= $22,035 Total Gross Income: $85,060 21

22 230 acres of wheat Case 3- Kansas Wheat Farm 41 $8.78/BU= $82,

23 Kansas Organic Veggie Farm Loss Scenario 23

24 Kansas Wheat Revenue Insurance Loss Calculation APH-BU/Acre Coverage Level Yield Guarantee BU/Acre Projected Price/Acre Revenue Guarantee/Acr e Revenue Calculation $8.78 $ Harvest Price $ $ Indemnity Calculation Final Indemnity $ 7.22 $ $ = $ Wheat Revenue Insurance-Harvey County, Kansas- Based on 50% loss 1. County Average Yield-T-yield 2. Projected Harvest Price Current Estimate not final 24

25 Cost of Insurance Comparison 25

26 Needed Critical Improvements for AGR-lite Coverage too low- or deductable to high Premium costs do not decline adequately with diversity Application process and information intensity needs to be lowered---agr-lite Wizard helps Whole farm revenue should be available nationwide 26

27 2013 Senate and House Farm Bill 27

28 New for Organic % surcharge for premiums on organic crops is history. Separate price elections for cotton, corn, soybeans, processing tomatoes, avocadoes, and stone-fruit crops (peaches, nectarines, plums in California). Separate price elections coming for apricots, apples, blueberries, oats mint, and millet. Contract price option- use of contracted prices as price election for crops T-yields for organic crops lowered as much as 35 percent of non-organic yields. 28

29 New National Policy for 2014 Cover Crop Termination in Kansas

30 Cover Crop Termination Policy See FAQ from RMA Join us for National Webinar on January 23 for national webinar led by national leaders from NRCS and RMA 30

31 More Subsidy for Commodities to Come? Supplemental Coverage Option- this proposed new Farm Bill program would provide shallow loss coverage by paying for a portion of the current deductable in revenue policies essentially protecting 90% of historic yield or revenue. See: Pumped Up: How Supplemental Insurance Could Bulk up Farm subsidies This report estimates that if this proposed program was in operation in 2012 that it would have added an additional $6.77 Billion in Crop insurance subsidies to the already $17 Billion that were paid out. 31

32 Budget Battles, Climate Change, and Backlash Based on USDA data, if the current version of the farm bill were extended ten years into the future, even without expansions under debate, crop insurance would cost $8.41 billion per year, or $84.1 billion total, according to Jim Langley of the Congressional Budget Office. With the expansions the projected costs rise to about $99 billion. Source: op-insurance-west-texas-gmo 32

33 Summary Whole farm revenue can work well for some diverse farms as is. With improvements it could be used more extensively and be a less crop biased and economical approach to insurance. Indeed it could be the basis for all crop insurance. Commodity crop based revenue insurance is highly subsidized and promotes specialization rather than diversity, which could undermine resilient sustainability Farm Bill proposals could make crop specialization even worse. Farming is risky, but riskless farming could be very expensive for taxpayers and create a taxpayer backlash. 33

34 Questions? Warning! Always check with your insurance agent when changing farming practices, policies or if you think you have experienced an insurable loss ATTRA Hotline: English or in Spanish