September 2, 2016

Proven Safety Net for Growers —Success in Crop Insurance

Growers located in the western United States have some of the most diverse agricultural products and operations. The crop insurance program managed by the USDA Risk Management Agency (RMA) and administered by private crop insurance agents has provided a reliable farm safety net as growers face severe drought, freeze, insect, disease and negative market conditions. Improved options that have expanded over the past years have protected diverse farming operations such as organic producers and beginning farmers and ranchers.

“For years, RMA has painstakingly worked to ensure that crop insurance worked for all farmers growing in all regions,” said RMA Administrator Brandon Willis in a press release recently distributed by the USDA. “We are seeing those efforts pay dividends with a very diverse crop insurance program that is meeting the needs of farmers nationwide. Crop insurance will continue to provide the nation’s producers the assurance they need to keep agriculture strong, and our rural communities working, even in difficult times.”

In 2016, the federal crop insurance program includes more than 118,000 coverage options for 543 varieties of crops—nearly doubling from the roughly 64,000 different coverage options that were available in 2009. The total crop insurance liability rose from $79.5 billion to $102.4 billion over the same period.

In 2015 alone, the program was able to help 13,719 beginning farmers and ranchers working more than 3.5 million acres get their operations off the ground and save more than $14 million through reduced premiums and waived fees.

As coverage expanded and new tools provided better protection and increased flexibility, the federal program also has taken steps to strengthen program integrity. RMA reduced its improper payment rate by more than half, from 5.6 percent in 2014 to 2.2 percent in 2015—well below the government-wide improper payment average of 4.39 percent.

“We have redoubled our efforts to ensure that the crop insurance program is free of abuse,” Willis said. “Cutting our improper payment rate in half demonstrates our commitment to operating a well-run program that protects both taxpayers and farmers.”

RMA estimates that 85 percent of planted acreage for major crops is now covered by crop insurance, while 73 percent of planted acreage for eligible specialty crops is covered. The number of acres covered by crop insurance increased from 264.7 million for 2009 to 297 million for 2015. Coverage for fruit, vegetables, and other specialty crops alone has grown from 7.7 million acres in 2009 to nearly 8.3 million acres in 2015.

With many farm operations facing years of drought, new tools mandated by the 2014 Farm Bill—like the APH Yield Exclusion—have been developed to help farmers determine the level of protection needed for their operations. The program was implemented and expanded quickly to include many more crops than expected, including fruit, vegetables, and other specialty crops. Preliminary estimates suggest nearly 1,000 fruit, vegetable, and other specialty crop policyholders are taking advantage of APH Yield Exclusion for 2016 that allows producers to have better insurance coverage.

Crop insurance has been expanded providing options for organic producers through new and innovative programs, including the Whole-Farm Revenue Protection policy and coverage options that allow organic farmers to protect their products at the market value. In fact, the number of crops eligible for organic premium pricing went from four in 2011 to 57 for the 2016 crop year. The number of acres insured by organic producers nearly doubled from 576,700 in 2009 to more than one million in 2015.

When crop prices are low, access to credit is critical for farmers to manage risk. Producers who purchase federal crop insurance have better access to credit and are often able to receive lower loan interest rates. This allows growers to recover and remain farming after a difficult year.

An efficient delivery of the program helps reduce taxpayer costs for selling and servicing policies. RMA manages and regulates the activities of the 17 private crop insurance companies and private agents who work with the farmers and ranchers to secure coverage, assess losses and file claims.

As crop insurance products have expanded to include more commodities and more flexibility for today’s farmers, the public-private model has worked well to meet the obligations of the government to provide an effective farm safety net. Because the private sector is able to adjust more quickly than the federal government to urgent needs and adapt more quickly to change, this relationship provides accountability and efficiency for the crop insurance program.

The public-private relationship provides reliability for farmers and taxpayers alike, as the federal government stands behind the insurance products it offers and reinsures the companies that provide claim payments quickly. Crop insurance agents in the field bring a practical approach to the consultative process. In the event of a claim situation crop adjusters are able to respond immediately as they are domiciled in the growing regions. This partnership has proven to work well between all parties and the positive results are in the growing statistics of the program.

The expanded risk management tools with products like Whole Farm Revenue Protection, APH Yield Exclusion and organic pricing have helped farm businesses sustain and grow. This supports a strong next generation of farmers and ranchers and aids in the succession of the operation.

To learn more about crop insurance and its special offerings tailored to your operation, please contact me at (530) 305-7800 or [email protected].


(Editor’s Note:  The data was pulled from the “USDA Builds on Record of Crop Insurance Success for America’s Farmers and Ranchers” press release distributed by the USDA on July 7, 2016.)