“What’s in a word? A rose by any other name would smell as sweet.”
–William Shakespeare, Romeo and Juliet
In a recent flurry of press releases and federal rulemaking, USDA’s Risk Management Agency (RMA) is possibly re-thinking to change its understanding of organic agriculture. Perhaps the most intriguing is the proposal by RMA to change its definition of organic agriculture. While one might think the definition of organic agriculture is common across all USDA agencies, it is not. The new proposed RMA definition is as follows:
“Organic farming practice. A system of plant production practices used on organic acreage to produce an organic crop this is approved by a certifying agent in accordance with 7CFR, part 205.”
What is interesting about this new definition and perhaps of most significance is that RMA now agrees at least in part that organic production is a system of production. However, the changed definition is still confusing since it also continues to see organic agriculture as a practice or set of practices.
The important point here is what a system of production actually means. A system of production is not merely a set of practices, but rather the dynamic interaction of those practices where the whole is much greater than the sum of its parts. RMA has not fully embraced the concept of a system of production in part because it seems to believe organic production is riskier than non-organic production, which our recent research calls into question as not likely.
Because RMA’s definition does not embrace a system of production, organic livestock production is excluded. This, too, may be short sighted since the re-integration of cropping with livestock production systems would likely lower revenue risk as well as address climate disruption.
This confusion around organic agriculture systems and crop insurance is partially understandable given the conflictive and confused history of how RMA established insurance for newly certified organic farmers and livestock producers.
Although not well known, the first organic crop insurance policies were written in 2002. A total of 110 policies covering 20 different organic crops were sold. However by 2004, fundamental changes were made by RMA such that organic crop insurance policies were limited to a small number of commodity crops, based indemnity (loss) payments on non-organic prices, added a 5% surcharge on the premium costs of all organic crops, generally established that the ten-year county average yields of most organic crops were 35% of non-organic yields, and finally that organic prices of crops were always about double those of non-organic crops. These policies led to a situation where many organic farmers paid more for crop insurance with less coverage than their non-organic peers.
It took until the passage of the 2014 Farm Bill to see significant reform with an elimination of the 5% premium surcharge and the creation of the Contract Price Addendum (CPA) whereby organic and transitioning organic farmers who had sales contracts could insure their crops at almost the full contracted price rather than the projected price established by RMA, which was wholly based on non-organic prices.
The passage of the 2014 Farm Bill also created the Whole-Farm Revenue Protection (WFRP) policy, which provides coverage based on the historic or expected economic capacity of the whole farm to generate revenue. Because organic farmers and livestock producers tend to generate higher levels of gross revenue and generally grow a higher diversity of often unique crop and livestock products otherwise uninsurable, WFRP offered a clear advantage to organic farmers.
However, use of WFRP has declined thanks to an over-complicated application, confusing policy requirements, and the lack of interest by many crop insurance agents and crop insurance companies to sell the product. This is unfortunate since it’s the only approach to crop insurance that incentivizes crop and livestock diversity, which according to USDA has great potential to address climate disruption. It is also the only crop insurance product that provides high-quality revenue-risk protection for almost any product and is available nationwide.
Additional recent changes by RMA beyond redefining organic agriculture include:
The ability of farmers to hay, graze, chop cover crops for silage, haylage, or baleage after having received a prevented planting insurance payment. The intent of this change is to encourage cover cropping which is a conservation practice used by almost all organic farmers. This change in policy occurred as a response to the pandemic disruptions and a desire by RMA to further promote cover cropping.
Added flexibility to the “1 and 4” rule as to when land can and cannot be eligible for prevented planting coverage. The “1 and 4” rule required that to be eligible for a prevented planting coverage, the specific insured land must have been planted, insured, and harvested in at least one of the four most recent years.
Allows only organic farmers who use WFRP to make adjustments for rapid gross revenue expansion in estimating the revenue guarantee for insurance coverage possibly leading to better over-all coverage.
Introduction of a “micro” option for users of WFRP, such that if applicants have less than a historic gross revenue of $100,000 (or $125,000 if a previous user of WFRP), onerous application and policy requirements that are part of a regular WFRP are waived. For instance, a regular WFRP requires the tracking of historical and current year expenses such that if one does not spend at least 70% of their historical expenses in the year of insurance, a penalty is assessed. This requirement is waived for the micro option.
Jeff Schahczenski is an agriculture and natural resource economist with the National Center for Appropriate Technology (NCAT) and co-author of Is Organic Farming Risky? Improving Crop Insurance for Organic Farms, available for free download at https://attra.ncat.org/product/is-organic-farming-risky/.
Resources:
For a look at related press releases: Conservation and Climate; Organic Expansion & WFRP and proposed rules and how to comment at: www.govinfo.gov/content/pkg/FR-2021-11-30/pdf/2021-25925.pdf.
Morris, M., Belasco, E., Schahczenski, J., 2019. Is Organic Farming Risky? Improving Crop Insurance for Organic Farms. National Center for Appropriate Technology, Butte, Montana.
See: USDA Action Plan for Climate Adaptation and Resilience 2021 at: www.sustainability.gov/pdfs/usda-2021-cap.pdf.
