For too long, farmers and growers who produce crops other than the big-acreage ones like corn, soybeans and wheat have been under the impression that crop insurance is not available for them.

Under the new Farm Bill, that has changed. This summer, look for local or regional meetings throughout the Northeast to answer questions about the so-called “specialty” crops. The new Farm Bill makes a concerted effort to bring specialty crop producers, especially those with horticultural crops, under the farm income insurance umbrella.

“There has been a real change in emphasis,” Jayson K. Harper, professor of agricultural economics at Penn State University, said. “With the latest changes, they are trying to broaden policy offerings.”

This means that a producer who had coverage for field corn and soybeans can get coverage for the fall pumpkin crop or the sweet corn crop that provides added income.

Farm Bill in effect

With passage of the new Farm Bill in 2014, the USDA Risk Management Agency (RMA) began to implement the new crop insurance mandates. The 2015 crop year is the first year that some program expansions or changes have been offered, Joe Morrissey with the New York State Department of Agriculture and Markets, said. “Like all crop insurance coverage opportunities, they are related to sign-up deadlines by crop,” he said.

“There have been many new changes coming out of the 2014 Farm Bill as well as several improvements in recent years that have made crop insurance more flexible and provide additional coverage for your farm,” Harper said.

USDA’s RMA is the lead organization on crop insurance. Most of the insurance sales efforts will recommence in September when producers of fall crops will be in a buying mode. Sign-up for fruit producers is in November. Now is the time to ponder options.

One important, and earlier, deadline that farmers should be aware of is the deadline for conservation compliance certification. In order to be eligible for the premium subsidy on crop insurance policies in 2016, farmers must have filed form AD-1026 (Highly Erodible Land Conservation (HELC) and Wetland Conservation (WC) Certification) with FSA by June 1, 2015.

Various options available to specialty producers

There are different mechanisms that are available to specialty crop producers. It will take some pencil pushing with an individual operation’s acreage and historic production to see which is the most cost-effective.

The bottom line, however, is that specialty producers can get coverage.

The easiest mechanism for a farmer with field corn or soybeans is to add the specialty crop under a whole farm income protection plan. This way, a sweet corn producer can get coverage for that crop as part of the bigger corn-soybeans package.

The same strategy will work for an apple producer who gets insurance for the apple orchard and now can add revenue protection for the plums on that farm to the coverage.

In the past, strawberry growers might have felt as if they were left on the sidelines. Today, there is a whole fleet of specialty crops that can enjoy the benefit of crop insurance.

Morrissey said specialty crops, like carrots or spinach, for which there is no crop insurance, can be protected with NAP or the Non-insured Disaster Assistance Program, up to 65 percent of the crop’s yield and at 100 percent of the crop’s value. The program is administered by the USDA Farm Service Agency (FSA). You can find their contact information, state by state at: http://www.fsa.usda.gov.

Among the other crop insurance improvements to come out of the 2014 Farm Bill are improved protection for organic and contracted crops.

“Organic elections have been made available for more crops,” Harper said. Organic price coverage has been extended to eight more crops (oats, peppermint, apricots, apples, blueberries, almonds, pears and grapes for juice) for a total of 16 crops. The individual producer has the option of using organic or conventional prices. Organic prices for additional crops will be available for 2016.

For many crops, a contract price may be used if the crop is contracted by the acreage reporting deadline and the price is higher than the established price. The 5-percent premium surcharge for organic price options, which most organic producers felt was discriminatory, has been eliminated.

In addition, containerized and field-grown nursery plants can be covered under crop insurance. Although the annual deadline for signing up is May 1, coverage for existing policies automatically renews on June 1.

Table 1. Example of farmer paid premiums for yield protection and revenue protection coverage by unit structure (130 bu. APH yield, medium-risk county)

Farmers can choose to exclude disaster years from their production history if the county yield in that year was less than 50 percent of the county (or an adjacent county’s) 10-year average.

Enterprise units still a mystery

Although the enterprise unit concept has been around for several years, the idea remains a mystery to many farmers. When buying crop coverage, a producer can choose basic, optional or enterprise units. The choice of insurance unit will have an impact on the cost of insurance, the likelihood of collecting for losses, and how the operation must keep and report yield records.

A farmer receives one basic unit for the land owned and cash-rented within a county. There is another one basic unit for each landlord with whom a producer crop share rents. Each crop share landowner can also insure their own interest in the crop as a separate unit.

Here is where it gets a bit tricky. Each different crop also creates a separate unit, and tracts of land in different counties must be insured as separate units. Each crop/county can have a different type of policy and level of coverage, and could receive a loss payment separate from the other units. Separate production records must be kept for each basic unit.

The good news, Harper pointed out, is that insuring all acres as basic units entitles producers to a discount on their premiums.

Basic units may be divided into optional units when a crop is being grown under distinctly different production practices. For example, a grower with both irrigated and nonirrigated acres of the same crop may qualify for optional units. Other special farming types or practices may also qualify acres to be insured as separate units.

Optional units may also be established by FSA farm serial number or on a section equivalent basis for annual crops. Optional units based on section equivalents must be requested through a crop insurance agent, contain a block of land at least one square mile, and be clearly indicated on a map using identifiable boundaries. Separate APH records must also be kept and reported for each optional unit. Farmers selecting optional units do not receive the premium discount allowed for basic units.

An enterprise unit combines all of the acres of a single crop within a county in which a particular farmer has a financial interest into a single unit, regardless of whether they are owned or rented, or how many landlords are involved (separate enterprise units may be available for irrigates and nonirrigated acreage of a crop).

Because enterprise units are usually larger than basic units or optional units, this would make it less likely that the overall yield in a given year would be low enough to trigger a loss payment. This is especially true for farmers who have a very large acreage of the insured crop that is widely dispersed. However, this isn’t the case for most New England and mid-Atlantic farmers.

“In many of these situations there is no real difference between choosing basic and enterprise units,” Harper said.

This is important because enterprise units are eligible for additional premium discounts over basic units.

Harper offered examples of the cost of both yield protection and revenue protection coverage for a farmer with a 130 bushel APH yield in a medium risk county in Table 1.

Using basic units rather than option units generally results in a cost savings of $2 to $4 per acre. Switching from optional units to enterprise units would result in substantial savings, in some cases up to $15 per acre.

Carefully consider the difference between using basic and enterprise units for your farm; you could reduce your premiums and keep the same level of overall protection. The cost savings from using enterprise units could also be used to purchase higher levels of coverage for your farm than under either basic or optional units without increasing your farm’s crop insurance costs. For example, if you insured at the 75 percent level before using either optional or basic units, you could now insure at the 80 percent level with enterprise units and also save a couple dollars per acre.

Know your risk management

Morrison lists several changes for organic crop insurance coverage for the 2015 crop year. They are the addition of several crops for price elections (but none impacting New York, specifically); the contract price addendum (which allows organic producers who have a contract price to use the contract price to value crop insurance protection – available only for crops for which there is already a crop insurance policy); the removal of the organic crop price surcharge (making organic crop insurance cheaper); and, organic T-yields, which are average prices issued for producers who wish to insure before they have five years of their own production records (conventional T-yields were used before 2015).

All this might point to some changes you should consider for your risk management plan including: enterprise units, trend adjusted yields, the supplemental coverage option, and whole-farm revenue insurance.

Photo by ValentynVolkov & Li Jingwang/istock 

“There have also been improvements made for organic producers, new benefits for beginning farmers, and a provision that allows farmers to exclude extremely low yields due to bad weather from calculation of their actual production history (APH),” Harper said.

With the improved NAP (from FSA) with buy-up protection giving 65 percent coverage level at 100 percent of established prices, producers can purchase meaningful protection for each crop that they grow.

Fresh choices for new farmers

Younger producers get some fresh options, too. New and beginning farmers get an 80 percent yield plug for replacing low APH yields; the current 60 percent yield plug is retained for everyone else.

A new farmer is defined by RMA as one who is in the first five years of producing an insurable crop. Those producers are eligible for an additional 10 percent premium subsidy for buy-up coverage.

They also are exempted from paying the administrative fee for catastrophic (CAT) and buy-up policies.

Young farmers who have gone out on their own after being active managers in another farm operations (say their parents’ family farm) can use the production history of an existing farming operation. The key point is that the young farmer has to have been previously involved in the decision making or physical activities of the farm. That should be an easy hurdle for most young farmers.

Young farmers also are eligible for an increase to 80 percent of the applicable county transitional yield (T-yield) in the substituted yield adjustment, which allows a replacement for a low yield due to an insured cause of loss.

For producers young and old, the sign-up deadlines are the same. Many state universities or ag departments offer a list of crop insurance agents who sell crop insurance. One for Pennsylvania can be found at: http://extension.psu.edu/business/crop-insurance. New Yorkers can find information at: http://www.agriculture.ny.gov/AP/CropInsurance.html. And anyone in any state can dig into RMA’s site at: http://www3.rma.usda.gov/apps/agents/ for agency names.

Specific information on actual policies sold and the number of acres insured is not yet available, Morrissey said. This is because, although sign-up was in March, the acreage reporting deadline is July.