Can Crop insurance Work to Lower Production and Price Risk of Diversified Farms?
Lessons Learned from the AGR-Lite Wizard ProjectJeff Schahczenski, Agricultural Economist
National Center for Appropriate Technology
THE NCAT MISSION
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protect natural resources.
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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
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
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
What is Insured Nationally- 2012Major Crop Rankings by Crop Liability
Total (Billions of dollars)
% 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%
Other 17.4 N/A 15%
Why Whole Farm Revenue InsuranceAdjusted 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
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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 2013Loss 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
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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
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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
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AGR-Lite Wizard
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• CD available for PC (no Mac version) - Sept. 15th for 2013
• www.agrlitewizard.com
Case 1- Small Organic Vegetable and Livestock Results
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AGR-Lite
Animals Intended Revenue Only
Bees / Hives Intended Revenue OnlyCrops Whole Farm Revenue 48-72%
- level of coverage elected
Losses Covered Production Loss Price Decline Quality Loss
Cost Premium $ 956
Losses Paid Minus Premium Net Payment
$ 1,928 $ 956 $ 972
Case 2- Organic Wholesale Results
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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 $ 212,470 Premium $ 7,590
Losses Paid Minus Premium Net Payment
$ 42,542$ 24,738 $ 17,804
$ 57,082 $ 7,590 $ 49,492
Case 3- Organic Grain Result
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Individual AGR-LiteOrganic 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
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
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