Big Risks for Uninsured Farmers
By Dylan Walsh
The farm bill, that cyclical flashpoint, is up for reauthorization in Congress this year, and reforms are needed to help small and organic farms obtain crop insurance, the Union of Concerned Scientists argues in a new report.
Crop insurance policies, which are regulated and subsidized by the Department of Agriculture, provide coverage almost exclusively on a per-crop basis, which suits industrial farms growing single crops on vast acreage. But for farmers who grow a diverse array of crops, as many small and organic farms do, enrollment can be an onerous and complicated task requiring them to apply for a dozen or more separate policies.
“The insurance burden that’s put on these types of farmers is completely out of balance,” said Jeffrey O’Hara, an agricultural economist for the scientists’ group and the report’s author. As a result, few small farms take out insurance plans, leaving them vulnerable to risks like extreme weather and hard-pressed to secure credit and loans.
Such administrative burdens are in tension with grass-roots and federal policy initiatives designed to support small-farm economies, the report notes. Environmental groups are also putting more of an emphasis on buying local, both for the sake of freshness and to reduce the fossil fuel emissions associated with transporting food from faraway places. “This needs to be a priority if we want to expand the local foods farm system,” Dr. O’Hara said. While insurance policies and payouts for global commodities like corn and soybeans rely on market price indexes and decades of historical yield data, the report says, insurance for noncommodity fruits and vegetables – or “specialty crops,” in legal terms – requires farmers to define reimbursement thresholds with historical revenue records for each crop.
“Insurance is just not scaled for the little people,” said Robert Maddox, who operates Sun One Organic Farm in Bethlehem, Conn.
Organic farms, considered too unorthodox and risky for crop insurance until passage of the Agricultural Risk Protection Act in 2000, face additional disadvantages, the report says.
Organic insurance plans almost universally impose a 5 percent surcharge to account for greater losses, but there is no evidence that organic crops necessarily pose a higher actuarial risk, Dr. O’Hara said. Risks can vary widely by geography and even compare favorably with those of nonorganic methods, he said.
Compensation for losses is also based on conventional rather than organic wholesale or market prices, with the recent exception of organic cotton, corn, soybeans and processing tomatoes.
“The price points offered simply don’t reward the grower,” said Patrick Horan, a manager at Waldingfield Farm in Washington, Conn. who sells produce at the Wooster Square Farmers’ Market in New Haven.
Waldingfield, one of the largest organic tomato producers in Connecticut, can sell wholesale tomatoes for more than $1.50 a pound, but insurance remuneration based on conventional prices would be much less than $1 a pound, he said.
“I’d be surprised if anyone here had insurance,” Mr. Horan said of the other farmers at the market.
Without insurance, small farms depend on community-supported agriculture groups, or C.S.A.’s, in which local consumers buy percentage shares of the seasonal harvest, however bountiful. This essentially spreads the risks of farming across a group of investors.
But because C.S.A. revenue is not readily divisible by crop, this practice discourages participating farms from taking out real insurance policies, which require the reporting of the revenue from each crop.
The United States Department of Agriculture is not idle on these concerns and has taken steps like removing the organic surcharge for particular crops and regions – citrus in Florida, for example.
It has also sought to increase enrollment in a 13-year-old program known as adjusted gross revenue, which is designed to insure entire farms rather than individual crops. But Dr. O’Hara said that the limited geographic availability of A.G.R. remains problematic.
The 2007 U.S.D.A. census counted 2.2 million small farms, but fewer than 1,000 A.G.R. policies were purchased last year. Almost 80 percent of those policies were taken out in three states: Washington, Oregon and California.
An independent study of A.G.R. commissioned by the U.S.D.A. and mentioned in the agency’s most recent Specialty Crop Report to Congress described participation as “complex and paperwork-intensive.”
Growing recognition of these issues led the House Committee on Agriculture to list crop insurance as one of its top three priorities for this year’s farm bill. In both the House and the Senate, efforts are under way to make improvements to whole-farm insurance through the Local Food, Farms and Jobs Act.
At a congressional hearing on Wednesday, Keith Collins, a former chief economist on risk management for the U.S.D.A., said that despite the challenges facing specialty crop insurance, the process was working. “But it’s a slow process,” he said.
Another hearing on the subject was held on Thursday. Economists, agricultural groups and insurance representatives aired their concerns at the two sessions, but no organic nor small farms were represented.