Organic farmers and some specialty growers don’t often know they advantages when it comes to multi-peril crop insurance. Depending on the crop, farmers can submit their crop contracts in order to use their contracted price in place of the established crop insurance price if it’s higher. The rules vary between different crops but oftentimes farmers can increase their price guarantee up to 150% more than the crop insurance price. I believe this is the biggest benefit to these farmers as they can truly personalize their crop insurance policy to what they need for their operation. Producers need to have a special option on their policy by sales closing to accomplish this but don’t have to submit the contracts to their agent until acreage reporting deadline, which is most often July 15th. For example, in 2022 the certified organic soybean crop insurance price was set at $27.41. Some producers were able to secure contracts around $40 per bushel. If a farmer had a guaranteed yield of 52 bushels per acre, his revenue guarantee would be $1,425 ($27.41 x 52 bushels) without a contract. However, with a contract of $40 per bushel, his new guaranteed revenue is $2,080 ($40 x 52 bushels). This is a great way to secure more crop insurance guarantee without having to increase your coverage level.
At Northbourne Organic Crop Insurance, we specialize in making sure each farmer is aware of the crop insurance options available to them. We set ourselves apart by digging in the weeds of the complicated products looking to create an avenue for organic and specialty farmers to gain guaranteed revenue.
Pasture, Rangeland, and Forage
Ever wonder if you can have insurance on your perennial haying or grazing acres? Pasture, rangeland and forage (PRF) insurance has been around for a while, but surprisingly hasn’t gained traction nationwide. This policy is unlike any other where it covers you solely for a lack of rainfall in the area where your fields are. They compare the average rainfall all the way back to 1948 to what the current rainfall is for the time periods you select and if it falls below your guaranteed moisture level, you will collect an indemnity. I personally have wondered why more people don’t use this policy as it’s the most stress-free insurance option available. Acres are signed up in the fall and then moisture is tracked the whole following year. Farmers do not need to report any rainfall or yield information; a claim is automatically opened if the two-month interval that the farmer selected is short on moisture. Need another reason to look into the product further? This policy is unlike your traditional crop insurance policy because it allows you to pick and choose which fields to insure. Under a corn contract, any acre planted to corn in the county automatically must be insured. For PRF, you can just insure one field if you’d like. This insurance is still considered a pilot program so there may be changes in the future on it but as of now, it’s a great affordable option for farmers to make sure they’re protected against a shortage of hay or pastures due to lack of moisture.
Whole Farm Revenue Protection
Whole Farm Revenue Protection (WFRP) is a great option for the specialty or diverse farmer who may not have many crop insurance options available to them. This policy encompasses the entire operation, rather than having an individual guarantee per crop. Since WFRP is protecting the farmer strictly against a loss in revenue, five years of Schedule F history is needed to sign up the for the policy. They compare the average allowable revenue from those tax forms with the expected revenue for the upcoming crop year. The lower of those two numbers is multiplied by your selected coverage level to establish your guaranteed revenue. Since this policy is all revenue based instead of yield, claims cannot be finalized until after taxes have been filed for that crop year which is quite a bit more delayed than the traditional crop insurance program. However, this policy can cover almost all crops and livestock where revenue protection can’t so if you’re not afraid of some extra paperwork, this could be a beneficial option to look into! The policy is continuously developing as it’s still considered a pilot program with enhancements and corrections always taking place. Recently, they announced a new Micro Farm portion of WFRP which caters to farmers with lower revenue allowing them to not have to provide as much paperwork. This fits well for the farmer who has a small orchard or grows produce that they sell at a local farmers market. Even though this policy was designed for the specialty farmer, it can be utilized to protect the overall revenue of your operation similar to an umbrella policy. Whole Farm Revenue Protection truly caters to all farmers which makes it unique compared to the other policy options available.
Livestock Risk Protection
Livestock risk protection (LRP) has gained a lot of popularity over the last few years. The policy has been around for quite some time, but they revamped the program in 2021 increasing the subsidy levels which in turn made it more attractive for farmers. LRP covers you solely on a decline in market price for livestock, mainly cattle and swine. Farmers can select from a variety of insurance periods and coverage levels. From there, they can see the expected ending value (predictions for the market price at the end of the time period) and decide if they think that price point is worth insuring at. The prices change daily following the market so there isn’t one major deadline throughout the year, making this a unique product. Another major benefit to this product is you can virtually insure up to 100% of the value which is typically unheard of in crop insurance. LRP also does not require any major record keeping. Everything is tracked using area pricing so if the price falls below the expected ending value, an indemnity will be paid out. Since this product is subsidized, farmers are starting to turn to insurance to protect themselves on livestock rather than going through a broker. The example below shows a farmer who wants to insure 100 head of feeder cattle at 800 pounds each. The expected ending value for this timeframe is $180 per cwt.
Coverage – 200 head x 8 cwt x $180 = $288,000 of insurance coverage
Actual Value – 200 head x 8 cwt x $173 = $276,800
Indemnity = $11,200