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Is Organic Farming Risky? Improving Crop Insurance for Organic Farms

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Is Organic Farming Risky? Improving Crop Insurance for Organic Farms Is Organic Farming Risky? Improving Crop Insurance for Organic Farms NATIONAL CENTER FOR APPROPRIATE TECHNOLOGY Authors Mike Morris, Ph.D., Principal Investigator ([email protected]) Eric Belasco Ph.D. ([email protected]) Jef Schahczenski, M.S., M.A. ([email protected]) Researchers Project Advisory Team Den Paul Cortez Harriet Behar Margaret Krome John Mesko Kristal Jones Doug Crabtree Russ Lehman Roger Noonan Scott Marlow Michael Diaz Carl Little Dale Nordquist Marty Mesh Mary Fund Molly Lutton Leonard Polzin Xanna Prentice Viola Glen Scott Marlow Joan Quinn John Wallace Ellen Gray Marty Mesh Chris Schreiner Layout & Cover Design: Amy Smith Editing: Tracy Mumma Printing: Debbie Rask Copyright © 2019 National Center for Appropriate Technology 3040 Continental Drive; P.O. Box 3838; Butte, MT 59702-3838 1-800-ASK-NCAT • www.ncat.org All rights reserved. No part of this publication may be copied or reproduced in any form, by means graphic, electronic, mechanical, or otherwise, without written permission of the National Center for Appropriate Technology. This work was supported by the National Institute of Food and Agriculture, U.S. Department of Agriculture, under award number 2014-51300-22224. The contents are solely the responsibility of the authors and do not necessarily represent the ofcial views of the USDA or NIFA. While every precaution has been taken in the preparation of this document, neither NCAT, nor the authors, nor the funders assume any liability for any loss or damage caused or alleged to be caused, directly or indirectly, to any person or entity by the information or instructions contained in this book. Reference to any specifc commercial product, process, company, individual, or service does not imply endorsement, recommendation, or favoring. Acknowledgments Tis report presents fndings from the 2014-2019 project Is Organic Farming Risky? We’re grateful to the Organic Agriculture Research and Education Initiative (OREI) of USDA’s National Institute of Food and Agriculture (NIFA) for funding this project and, more generally, appreciating the importance of social science research to the future of organic agriculture. We’d especially like to thank Dr. Mathieu Ngouajio, our NIFA program ofcer, for his steady support and encouragement during a long project that included a major mid-course change of direction. We owe special thanks to our advisory committee, which included experts on organic farming and crop insurance from around the country. Tey are named individually on the title page and represented the following organizations: Center for Farm Financial Management, Montana State University, Florida Organic Growers, National Center for Appropriate Technology, Food Action, New England Farmers Union, Kansas Rural Center, Oregon Tilth, Michael Fields Agricultural Institute, New Mexico Department of Agriculture, Midwest Organic & Sustainable Education Service, Rural Advancement Foundation International, Montana Organic Association, and Washington Sustainable Food and Farming Network. While they did not serve on our advisory committee, we also frequently consulted with Ferd Hoefner, Paul Wolfe, and the other experts on crop insurance at the National Sustainable Agriculture Coalition. Staf members at the USDA Risk Management Agency (RMA) were generous with their time and expertise, made data available to our project that had never previously been released to the public, listened to our suggestions with an open mind, and helped us understand both nuances of crop insurance and the challenges of administering a complex and controversial federal program. Scott Marlow of RAFI-USA did much of the research on how organic farms use crop insurance reported in Chapter 2. Kristal Jones of JG Research & Evaluation conducted the survey of crop insurance agents described in Chapter 4 and analyzed the results. We thank them both. Finally, we’d like to thank the 1,042 farmers who took our grower survey, the 96 crop insurance agents who took our agent survey, and the hundreds of farmers, organic advocates, adjusters, and other insurance industry professionals who participated in our educational workshops or agreed to be interviewed. All of these people contributed to the ideas in this report and saved us from many errors. But we, the authors, are solely responsible for the contents of this report and for any errors that remain. — Table of Contents — Executive Summary .....................................................................................................................i List of recommendations ...........................................................................................ii Introduction ..............................................................................................................................1 Why crop insurance matters to organic farms ............................................................1 Goal and objectives ...................................................................................................1 Research methods .....................................................................................................2 Scope and limits of this report ...................................................................................2 Previous research .......................................................................................................5 About the recommendations .....................................................................................5 Chapter 1. How organic farms gained access to crop insurance ..................................................7 How it all got started ................................................................................................7 Organic crop insurance expands ..............................................................................10 Chapter 2. How do organic farms use crop insurance?..............................................................15 Crop insurance 101 .................................................................................................15 Some gross (and misleading) comparisons ...............................................................16 Participation by commodity ....................................................................................16 Geographic diferences ............................................................................................19 Limited availability of single-crop policies ...............................................................20 Growth in participation by organic farms ................................................................21 Discussion ...............................................................................................................22 Chapter 3. A survey of grower attitudes about crop insurance ..................................................25 Survey design and execution ....................................................................................25 Survey fndings ........................................................................................................30 Discussion ...............................................................................................................41 Representative comments ........................................................................................43 Complete list of grower survey questions and summary results ................................46 Chapter 4. A survey of crop insurance agents ...........................................................................59 Te crop insurance agent's role ................................................................................59 Survey design and execution ....................................................................................60 Who took the survey? .............................................................................................61 Survey fndings ........................................................................................................62 Discussion ...............................................................................................................67 Complete list of agent comments ............................................................................68 Complete list of agent survey questions and summary results ..................................76 Chapter 5. Why are organic loss ratios so high? ........................................................................79 Background .............................................................................................................79 More recent data on loss ratios ................................................................................81 Possible explanations for high organic loss ratios .....................................................82 Discussion ...............................................................................................................86 Chapter 6. A study of Whole-Farm Revenue Protection loss ratios ...........................................89 Why revenue risk matters ........................................................................................89 Are organic crop yields more variable? .....................................................................90 Are organic prices more variable? .............................................................................91 Comparing loss ratios between users of Whole-Farm Revenue Protection ...............92 Product diversifcation and whole-farm revenue risk................................................94
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