Can Crop insurance Work to Lower Production and Price
Risk of Diversified Farms?
Lessons Learned from the AGR-Lite Wizard Project
Jeff Schahczenski, Agricultural Economist
National Center for Appropriate Technology
THE NCAT MISSION
Helping People by championing small-scale, local, and sustainable
solutions to reduce poverty, promote healthy communities, and
protect natural resources.
www.ncat.org
ATTRA National Sustainable Agriculture
Information System
Need help with flame weeding?
Are you ready to start selling
your produce at the farmers
market? Need some help with
any sustainable-Ag issue?
Simply call our English-language
ATTRA toll-free hotline at
800-346-9140 or the Spanishlanguage ATTRA hotline at
800-411-3222 for expert advice.
...or use the Ask An Ag Expert
tool to send us a note.
Why Insure Crops and Livestock?
October 2011
September 2012
January 2013
This Crop Year Already
Important National Benefit for Agriculture
• In 2010 it was predicted that the
federal subsidization of crop
Insurance premiums could be
close to $9 billion dollars per year
through 2022.
• Average premium benefit is about
62% of the cost.
• In 2012 premium subsidy was
almost $7 billion dollars- Payouts
highest ever over $16 billion
dollars and counting
9
Is Whole Farm Revenue Insurance an answer?
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
Commercial Farms
Farm Profitability
Is Good Crop Insurance for Diverse Farms
Possible?
• “Good”- meaning
reasonably priced and
with effective coverage
• “Good”- meaning as
good as current
commodity or specialty
crop-based policies
Why Insure Crops- Price Volitility
15
What is Insured Nationally- 2012
Major Crop Rankings by Crop Liability
Total
% Revenue
% of Total
51.6
83%
45%
Soybeans
25.8
85%
23%
Wheat
10.3
85%
9%
Cotton
6.8
72%
6%
Nursery (FG&C)
2.3
N/A
2%
17.4
N/A
15%
(Billions of dollars)
Other
Field Corn Crop Insurance
Fresh Market Tomatoes Crop Insurance
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
Three Cases from Maryland
• AGR-lite for small diverse organic vegetable and
livestock farm
• AGR-lite for wholesale larger organic vegetable farm
compared to individual policies
• AGR-lite for organic grain farm vs. individual policies
20
Case 1- Maryland Diverse Organic Farm
• 72- 6’ x 350’ beds ~ 3.6 acres
• Basil, Kale, Beets, Potatoes,
Winter Squash, Onions, Carrots,
Tomatoes
• 15 Bee hives
• 60 Laying hens (eggs)
• $62,400 in projected gross
revenue for 2013
Loss Scenario:
50% loss of honey yield, 50% loss
due to egg price drop, 80% loss
onion yield, 50% loss in tomato
yield and 50% loss carrot price
and yield
21
Case 2- Maryland Wholesale Organic Farm
• 130 acres organic
processing sweet corn
• 30 acres organic fresh
market tomatoes
• 60 acres organic green peas
• 8 acres of organic apples
Loss Scenario:
50% yield or price loss
on all crops
22
Case 3- Maryland Organic Grain Farm
• 85 acres of organic wheat
• 110 acres of organic
field corn
• 60 acres of organic
soybeans
Loss Scenario:
50% loss yield or price
on all crops
23
AGR-Lite Wizard
• CD available for PC (no Mac version) - Sept. 15th for 2013
• www.agrlitewizard.com
24
Case 1- Small Organic Vegetable
and Livestock Results
25
Case 1- Small Organic Vegetable
and Livestock Results
AGR-Lite
Animals
Intended Revenue Only
Bees / Hives
Crops
Intended Revenue Only
Whole Farm Revenue 48-72%
- level of coverage elected
Losses Covered
Production Loss
Price Decline
Quality Loss
Cost
Premium
Losses Paid
Minus Premium
Net Payment
$ 1,928
$ 956
$ 972
$ 956
26
Case 2- Organic Wholesale Results
27
Case 2- Organic Wholesale Results
Individual
AGR-Lite
Organic Processing Sweet Corn
50% Yield Loss
50% Revenue Loss
Organic Fresh Market Tomatoes
50% Yield Loss
50% Revenue Loss
Organic Green Peas
50% Yield Loss
50% Revenue Loss
Organic Apples
50% Yield Loss
50% Revenue Loss
Criteria
100% price election and 70% of
approved APH Yield
90% coverage x 80% payment
rate = 72% of approved AGR
Cost
Total premium for all APH
policies $ 24,738
Trigger
Premium
Losses Paid
Minus Premium
Net Payment
$ 42,542
$ 24,738
$ 17,804
$ 57,082
$ 7,590
$ 49,492
$ 212,470
$ 7,590
28
Case 3- Organic Grain Result
29
Case 3- Organic Grain Result
Individual
AGR-Lite
Organic Field Corn
50% Revenue Loss
50% Revenue Loss
Organic Wheat
50% Revenue Loss
50% Revenue Loss
Organic Soybeans
50% Revenue Loss
50% Revenue Loss
Criteria
100% price election and 70%
of approved APH Yield projected
and havrvest price
90% coverage x 80% payment
rate = 72% of approved AGR
Cost
Total premium for all APH policies
$ 8,890
Premium $ 5,543
Losses Paid
Minus Premium
Net Payment
$ 30,304
$ 8,890
$ 21,414
$ 40,698
$ 5,543
$ 35,055
30
Critical Improvements
• Coverage too low- or deductable to high
• Premium costs do not decline with diversity
• Application process and information intensity needs
to be lowered---AGR-lite Wizard helps
• Whole farm revenue should be available nationwide
31
2012 Senate Farm Bill
32
Summary
• Whole farm revenue can
work well for some diverse
farms as is. With
improvements it would be
used more extensively
• Crop based insurance pick’s
winner’s and promotes
specialization rather than
diversity
33