Progress 09/01/14 to 08/31/19
Outputs
Target Audience:Organic farmers and ranchers, organic advocacy groups, organic certifying agencies, USDA agencies Changes/Problems:The original Principal Investigator left for medical reasons near the end of the first year of the project, and we also discovered flaws in our approach and methods. We had originally hoped to collect detailed financial information from enough farms to make a broad comparison of risk in organic and non-organic operations. But collecting this type of information from a sufficient number of farms proved unrealistic. Moreover, the question of whether organic farming is more risky than non-organic farming, while theoretically interesting, seemed to have limited practical relevance to the OREI program mission of "enhancing the ability of producers and processors who have already adopted organic standards to grow and market high quality organic agricultural products." Project team members felt that other kinds of research and education were more urgently needed. So we made a mid-course correction, re-focusing the project on what we believed to be the most important barriers and opportunities for access to high-quality crop insurance by organic farms. These areas of investigation included: (1) Attitudes about crop insurance and risk generally, on the part of organic growers; (2) Potential bottlenecks and barriers in the crop insurance delivery system, including the application process, incentive structure, and insurance agent's perspective; and (3) Various questions about how certified organic farms currently use crop insurance; and (4) A close study of Whole-Farm Revenue Protection, a new insurance product that is well-suited to the needs of organic growers. The project was originally planned to last four years and end in August 2018. We submitted a full explanation and budget change request to NIFA, requesting a one-year no-cost extension. In June 2018 NIFA approved a no-cost extension, and the project ended in August 2019. What opportunities for training and professional development has the project provided?A great deal of training and professional development took place throughout this project. We offered training during five annual face-to-face meetings of our Project Advisory Team--all of whom are in leadership positions with organic advocacy groups, certifying agencies, or grassroots member organizations. We provided training on good organic farming practices to around 200 crop insurance industry professionals, at an April 2017 National Crop Insurance Service (NCIS) crop insurance adjuster training.We also provided crop insurance training to NCAT's regional office directors and other staff members frequently throughout the project. How have the results been disseminated to communities of interest?Jeff Schahczenski and Eric Belasco each submitted articles to academic journals for publication. We created a new crop insurance page on the NCAT's ATTRA website, here: https://attra.ncat.org/crop-insurance/. We created a new ATTRA publications and three videos, and posted them all on this site. We made our 132-page report Is Organic Farming Risky? Improving Crop Insurance for Organic Farms available as a free pdf download from the ATTRA website, and distributed around 100 paper copies to key stakeholders, including all 10 regional offices of the USDA Risk Management Agency (RMA). Four members of our project team presented our findings and recommendations to the RMA at an April 2019 meeting in Kansas City, Missouri, organized by the National Sustainable Agriculture Coalition (NSAC). Project results were also disseminated via presentations, handouts, and booths at dozens of conferences around the country attended by growers, professional economists, agricultural educators, and RMA staff. What do you plan to do during the next reporting period to accomplish the goals?
Nothing Reported
Impacts
What was accomplished under these goals?
1. Determine the relative production risks of diversified commercial-scale organic farms. We studied crop insurance loss ratio data from the USDA Risk Management Agency (RMA), comparing organic and non-organic crops. A loss ratio is the mathematical result of dividing indemnities (pay-outs) by premiums (pay-ins). We studied risk indicators in a sample of 590 farms from the Farm Financial Management Database at the University of Minnesota, comparing organic and conventional farms. We also conducted a study of loss ratios for all Whole-Farm Revenue Protection (WFRP) policies sold from 2015-2018. Key findings: Insurance policies for most organic crops have had consistently higher loss ratios than policies for equivalent non-organic crops, creating a perception that organic farming is inherently more risky. There are several possible explanations for these differences, however. WFRP loss ratios are a more plausible indicator of revenue risk than average loss ratios across all crops and insurance policies. To date there has been no significant difference in WFRP loss ratios between organic and non-organic farms. Likewise, a study of hypothetical WFRP loss ratios for a random group of Midwestern farms showed no significant difference between the organic and non-organic farms. 2. Determine whether there is a lack of adequate federally subsidized crop insurance for diversified commercial-scale organic production that is critical to expanded organic markets. We studied crop insurance usage data and statistics, looking for coverage gaps and unmet needs. We conducted a national survey of attitudes towards crop insurance by farmers, receiving 1,042 completed surveys. We conducted a national survey of crop insurance agents, asking them about their experience working with organic producers and selling WFRP. We received 96 responses, and conducted follow-up interviews with nine respondents. Key findings: Many organic farmers report difficulty finding policies that meet their needs, insuring the full value of their crops, locating agents who understand organic farming, and filing successful claims. Low overall crop insurance participation rates among organic producers can largely be explained by the limited availability of coverage for horticultural crops--fruits, vegetables, and other specialty crops--which make up the great majority of production from organic farms. Policies for many of these crops are nonexistent or geographically limited. Insurance access is much better for farms growing field crops. Organic field crop growers are purchasing crop insurance at rates similar to their non-organic counterparts. All organic farms are at risk of having their crops underinsured or having their claims denied because their methods are not recognized as good farming practices. Reviews of WFRP by agents were mixed and somewhat negative, with agents noting the product's advantages but also the intense paperwork and other problems. Only a small percentage of the farms that have bought WFRP to date have been either certified organic or highly diversified, showing that WFRP is not yet meeting the needs of these farms very well. Nonetheless, WFRP offers the best hope for organic farms that are growing horticultural crops to gain better access to crop insurance. The major problems with WFRP can be solved. 3. Provide national policy recommendations that will lead to improving federally subsidized crop insurance and economic performance for diversified organic farms. We created a detailed 132-page national guidebook on crop insurance issues related to organic production, including the following 19 recommendations: Maintain and increase general education aimed at introducing basic concepts of crop insurance, along with new options for organic farms, to wide audiences. Launch new educational efforts targeted to specific commodities and markets, especially mid- to large-scale horticultural crop growers and others with low historic crop insurance participation rates. Continue to adjust single-crop policy rates so they better reflect the growing body of experience among organic farmers. Conduct further research on how adverse selection impacts the use of crop insurance by organic producers. Establish a policy to the effect that having a current valid organic certification and being in compliance with an approved Organic System Plan suffices as prima facie evidence that an organic grower is using good farming practices. Establish a policy that any practice approved through NRCS conservation programs meets the standard of a good farming practice. Improve access to single-crop revenue-based policies with organic price elections in more counties nationwide. Pilot a type of simple and inexpensive Catastrophic Risk Protection (CAT), possibly within WFRP, aimed at small and diversified fruit and vegetable growers. Eliminate the cap on contracted prices and allow the use of full, actual contracted prices in the Contract Price Addendum. Improve public availability of organic price data, particularly in field crops and livestock products. Provide more education and outreach to RMA employees, AIPs, insurance agents, and claim adjusters about organic certification and production systems. Eliminate the WFRP requirement to report operating expenses and indemnity penalties related to expenses. Reduce the burden of proof on growers when estimating insurable revenue and completing the WFRP Intended Farm Operations Report. Develop farmer-friendly tools to ease WFRP paperwork burdens. Provide more education and outreach to organic farmers about the WFRP alternative, particularly those in locations where no alternative single-crop revenue policies exist. Count indemnity payments as historic farm revenue for WFRP claims adjustment purposes. In determining a farm's historic average revenue for WFRP purposes, allow lower-than-average years to be replaced or adjusted. Raise or eliminate the 35% WFRP limit on expansion. Lock in expected price and yield upon acceptance of the WFRP Revised Farm Operations Report. 4. Undertake extensive educational outreach activities on the topic of organic crop insurance options for organic producers through presentations at workshops, webinars, and extension publications. We created a Crop Insurance page on the ATTRA website. Project team members disseminated findings and distributed publications and handouts at dozens of conferences and many smaller meetings. We also gave two webinars, submitted three journal articles for publication, and presented many of our recommendations to RMA at an April 2019 meeting in Kansas City, Missouri. Key findings: Grower education efforts should be targeted to farms with high need and low current participation rates. The organic farmers most interested in buying crop insurance tend to be large, grow field crops, grow a modest number of different crops, use just a few organic methods, sell wholesale, and are driven more by economic motives than by ecological ones. Unmet needs are greatest among medium- to large-scale horticultural crop farms. The need for education is lower among field crop farms and very small direct-marketing farms. Educating insurance industry professionals about organic farming should be a high priority. Most crop insurance agents are interested in working with organic farms but have a limited understanding of organic systems. Many want more training.
Publications
- Type:
Other
Status:
Published
Year Published:
2019
Citation:
Morris, Mike; Belasco, Eric; Schahczenski, Jeff. Is Organic Farming Risky? Improving Crop Insurance for Organic Farms. National Center for Appropriate Technology.
- Type:
Journal Articles
Status:
Under Review
Year Published:
2019
Citation:
Schahczenski, Jeff. Is Organic Farming Risky? The Mysterious Case of Loss Ratios. Submitted to Agricultural and Food Economics.
- Type:
Journal Articles
Status:
Under Review
Year Published:
2019
Citation:
Belasco, Eric. Is Organic Farming Risky? An Evaluation of Whole-Farm Revenue Protection in Organic and Conventional Production Systems." Submitted to Journal of Agricultural and Resource Economics.
- Type:
Journal Articles
Status:
Under Review
Year Published:
2019
Citation:
Belasco, Eric. An Examination into Organic Crop Insurance Selections and Stated Preferences.
- Type:
Other
Status:
Published
Year Published:
2019
Citation:
Schahczenski, Jeff, Noninsured Crop Disaster Assistance Program and Whole-Farm Revenue Protection: Understanding the Differences. National Center for Appropriate Technology, 2019. ATTRA publication IP589.
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Progress 09/01/17 to 08/31/18
Outputs
Target Audience:Organic farmers and ranchers, organic advocacy groups, organic certifying agencies, USDA agencies Changes/Problems:A year ago we reported that we had corrected problems with our original methodology and our project had a clear path to completion. We are happy to report that we had no further problems during the period of this report (Year 4) and our team made steady progress towards achieving our objectives. In May 2018, NCAT requested a one-year no-cost extension, in order to carry out fully our third and fourth project objectives: completing educational activities and making national policy recommendations that will lead to improving federally subsidized crop insurance and economic performance for diversified organic farms. In June 2018 NIFA approved a no-cost extension, and the project will now end August 31, 2019. What opportunities for training and professional development has the project provided?Throughout the year, and especially during our January project team meeting in Washington, DC, we provided training to the members of our Project Advisory Team--all of whom are in leadership positions with organic advocacy groups, certifying agencies, or grassroots member organizations. Most Project Advisory Team members attended the meeting of the National Sustainable Agriculture Coalition that immediately followed our team meeting (January 21-4), where crop insurance was a major topic of discussion. Mike Morris also provided crop insurance training to NCAT's regional office directors and other staff members, in August 2018 in Butte, Montana. How have the results been disseminated to communities of interest?Initial dissemination of project findings took place through NCAT's ATTRA website and via talks and posters at three large conferences attended by growers, professional economists, agricultural educators, and RMA staff. We continued to provide basic information about crop insurance via presentations, handouts, and booths at dozens of conferences around the country attended by NCAT staff. As an indirect outcome of this OREI project, NCAT's California office was funded by the USDA Risk Management Agency to provide education about Whole-Farm Revenue Protection in California. Project partner Montana State University was also funded by the RMA Risk Management Education program to deliver risk management education throughout Montana. At the end of the reporting period, project team members had submitted at least five proposals to present our research findings at agricultural conferences during the winter and spring of 2018-19. What do you plan to do during the next reporting period to accomplish the goals?In the fall of 2018 we will focus on drafting our national guidebook on crop insurance issues that are related to organic production. We will also survey insurance industry professionals, to understand incentive structures for insurance agents and potential barriers to sales of crop insurance products to organic farmers and ranchers. We will hold one final meeting of our Project Advisory Team, in January in Washington, DC in January 2019. We will also continue educational efforts such as webinars, conference workshops, social media, train-the-trainer efforts, and adding content to the new crop insurance area on the ATTRA website. Eric Belasco will submit at least two articles for publication. In the spring and early summer we will write up our findings, including our recommendations for improving crop insurance options for organic producers. **********************************************************
Impacts
What was accomplished under these goals?
1. Determine the relative production risks of diversified commercial-scale organic farms. Our major accomplishment during this reporting period was completing a national survey of attitudes towards crop insurance by a wide range of organic and conventional farms. The survey included 46 multiple-choice questions and also offered many opportunities to provide written comments. We asked how often growers experienced various kinds of losses, their degree of diversification, and asked many questions about their attitudes towards buying crop insurance and their previous experiences with insurance agents and companies. Before it was released, the survey was extensively tested by growers and educators. As an incentive to complete such an in-depth survey, we offered an optional $20 honorarium. Applicants had the option of taking the entire survey anonymously, although those who requested the honorarium needed to provide a mailing address. We heavily promoted the survey, making a special effort to reach USDA-certified organic farms and ranches. We also targeted a wider group of operations that appear to be excellent candidates for the new insurance products, such as highly diversified farms, small farms, and farms growing specialty crops. We built a list of all registered USDA-certified organic farming operations with an e-mail address in the comprehensive USDA Organic Integrity Database, and invited each of them to take the survey. Each of NCAT's six regional offices (in Montana, California, Texas, New Hampshire, Mississippi, and Arkansas) promoted the survey within its region. We ran several stories and announcements about the survey in NCAT's Weekly Harvest newsletter, which reaches about 15,000 readers nationally. We also sent several direct e-mail blasts to all of these subscribers. Our Project Advisory Team also promoted the survey through their networks, which include large membership organizations such as Oregon Tilth, the Kansas Rural Center, the Midwest Organic & Sustainable Agriculture Education Service, and the New England Farmers Union. The survey ran for 16 weeks, from August 7 to November 26, 2017. Of the 1,577 people who started the survey, 1,042 met our eligibility requirements and completed the entire survey. Of these, 84% said they use organic methods on at least some acreage, and 31% reported having some USDA certified organic acreage. We got responses from all 50 states and Puerto Rico, with the highest numbers coming from Texas (104), California and Montana (80), Wisconsin (64), North Carolina (62), Kansas (54), Arkansas (50), Washington (48), and Michigan (45). The survey yielded significant insights into the needs of organic producers, exploring a wide range of possible factors that might make them more or less interested in buying crop insurance and critically examining common stereotypes and assumptions. The survey ended in late November 2017. During the winter months we analyzed the results, reached conclusions about attitudes towards crop insurance, and defined audiences for intensive and targeted educational efforts. Our other major accomplishment during the reporting period was drafting many sections of our forthcoming guidebook on crop insurance for organic producers. Working papers include the history of access to crop insurance by organic farms; relationships between organic farming, conservation programs, and credit access; usage of Whole Farm Revenue Protection (WFRP) by organic farms; and the relationship between WFRP loss ratios and the production and financial risks of organic farming. 2. Determine whether there is a lack of adequate federally subsidized crop insurance for diversified commercial-scale organic production that is critical to expanded organic markets. Our survey contained many questions about the adequacy of existing crop insurance products for organic farms. For example, we asked people who rarely or never buy crop insurance to explain why they have not bought it. We asked how often a lack of crop insurance has reduced access to loans or opportunities for growers to expand. We also had many conversations with USDA Risk Management Agency (RMA) staff, organic growers, and other groups (such as the National Sustainable Agriculture Coalition) that are actively involved in crop insurance reform efforts. And we made some progress in gaining access to crop insurance data maintained by the USDA Risk Management Agency that has not previously been available to the public. 3. Provide national policy recommendations that will lead to improving federally subsidized crop insurance and economic performance for diversified organic farms. We created a draft list of policy recommendations that grew, evolved, and was discussed by our project team throughout the year. At the end of the reporting period, we were considering 21 possible policy recommendations. These included increasing access to organic-specific policies in more counties nationwide; reassessing and adjusting organic crop T-yields; and providing more education about Whole-Farm Revenue Protection insurance to organic farmers, RMA employees, Approved Insurance Providers (AIPs), and insurance agents. 4. Undertake extensive educational outreach activities on the topic of organic crop insurance options for organic producers through presentations at workshops, webinars, and extension publications. We conducted numerous educational activities during the reporting period, and we have now met or exceeded many of this project's numerical educational targets. We created a new Crop Insurance page on the ATTRA website, and began adding content to this page. Project team members spoke about crop insurance and distributed publications and handouts at three conferences and various smaller meetings. Our survey results set the stage for additional outreach activities by defining high-priority audiences and revealing common misconceptions about crop insurance. The survey also found thresholds (size, age, experience, diversity, premium cost, etc.) where growers become more or less interested in crop insurance.
Publications
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Progress 09/01/16 to 08/31/17
Outputs
Target Audience:Organic farmers and ranchers, organic advocacy groups, organic certifying agencies, USDA agencies Changes/Problems: In our project's first year, we demonstrated the possibility of a novel way of estimating and comparing loss ratios for organic and conventional farms, including farms that had not actually bought crop insurance. Nonetheless, during our project's second year we concluded that we could not complete the large-scale study of hypothetical loss ratios that was envisioned in our original proposal. By the fall of 2016 (early in Year Three) we had decided that the best way to achieve our original objectives would be to conduct a large national survey of attitudes towards crop insurance by organic and diversified producers, along with related studies of new crop insurance products and the crop insurance delivery system. We informed NIFA of these plans in January 2017, and the project steering committee endorsed this new direction at its annual meeting in Louisville Kentucky. While we had hoped to launch our survey in the spring, NIFA very understandably asked us to submit a budget reallocation request and budget justification. We submitted these in March, NIFA approved our request in June, and we immediately began preparations to launch our survey, which went "live" in early August 2017. The survey got off to a good start in August, along with a major outreach and promotion campaign. At the end of the reporting period (Year Three) two other important tasks--research into the insurance delivery system and creating a crop insurance area on the ATTRA website--were still in their early stages, partly because they depend so heavily on the outcomes of the survey. We appreciate NIFA's support and patience throughout these very significant changes in our project. Our project has finally corrected the problems with its initial methodology and now has a clear path to completion. While this took longer than we expected, we believe that the changes were necessary and will be worthwhile. We remain enthusiastic and convinced of the importance of this work. It is now highly likely that we will seek a no-cost extension, which would (if granted) add a fifth year to this project and allow us to fully realize its benefits: translating survey results into a targeted educational campaign and empirically-based policy recommendations. What opportunities for training and professional development has the project provided? Training on crop insurance options for organic farms was provided to the members of the advisory team before and during our January project team meeting in Louisville, Kentucky. The team also benefitted from many follow-up e-mail discussions and information-sharing after the meeting. Again this year, members of the Project Advisory Team provided training on crop insurance to their employees, members, and participants. Most members of the Project Advisory Team are in leadership positions with organic advocacy groups, certifying agencies, or grassroots member organizations. The Louisville meeting took place immediately preceding the annual meeting of the National Sustainable Agriculture Coalition. Crop insurance was a significant topic of discussion at the meeting, and many Project Advisory Team members stayed on for the NSAC meeting at their own expense. Mike Morris and an organic inspector (Evelyn Rosas) offered a half-day training on good organic farming practices for crop insurance adjusters, at the National Crop Insurance Service (NCIS) crop insurance adjuster training in Bastrop, Texas (April 27, 2017). Mike Morris also provided crop insurance training to NCAT regional office directors, in August 2017 in Butte, Montana. How have the results been disseminated to communities of interest? Dissemination of project findings will primarily take place in Year 4, after our survey and related studies are complete. Dissemination of basic information about crop insurance has been happening throughout our project, and took place again during the reporting period through presentations and booths at conferences, such as the Montana Organic Association, Texas Organic Farmers & Gardeners Association, Midwest Organic & Sustainable Education Service, Kansas Rural Center, and many smaller conferences. What do you plan to do during the next reporting period to accomplish the goals? In the fall of 2017 we will complete our survey. In the winter months we will analyze the results, reaching conclusions about attitudes towards crop insurance and defining audiences and messages for intensive and targeted educational efforts. These will include webinars, conference workshops, social media, train-the-trainer efforts, and the creation of a new crop insurance area on the ATTRA website. We will also undertake a survey of insurance industry professionals, seeking to understand the crop insurance delivery system, including incentive structures for insurance agents and potential barriers to sales of crop insurance products to organic farmers and ranchers. Eric Belasco will complete his related studies of risk indicators in organic and conventional production systems, including loss ratios, revenue variability, yield and price variability, and willingness to purchase crop insurance. He will compare performance of Whole-Farm Revenue Protection insurance (WFRP) with Noninsured Crop Disaster Assistance Program (NAP) of the USDA Farm Service Agency, as well as the advisability of combining WFRP with standard single-crop insurance policies and other questions of practical importance to growers who are considering buying crop insurance. And Eric will also complete his study of adverse selection by organic growers in a study of ARMS data (Agricultural Resource Management Survey).
Impacts
What was accomplished under these goals?
1. Determine the relative production risks of diversified commercial-scale organic farms. Our major accomplishment during this reporting period was creating and launching a national survey intended to to create a nuanced picture of production risks on a wide range of organic and conventional farms. For example, the survey asks how often organic and conventional producers experience various kinds of losses, their degree of diversification, and how often their gross income falls below average. We think this survey will yield significant insights into the needs of organic producers, critically examining many stereotypes and assumptions. The survey development process took several months and included extensive testing by growers, the members of the project advisory committee, and other stakeholders. The final survey included 46 multiple-choice questions and many opportunities to provide written comments. To encourage large numbers of growers to take such an in-depth survey, we decided to offer a $20 honorarium. Although any commercial farmer or rancher in the United States is eligible to take the survey, we targeted our promotion efforts strongly towards organic farmers, including a direct mailing to all organic farming and ranching operations listed in USDA's Organic Integrity Database. The survey was launched August 8, with extensive publicity efforts by NCAT and Project Advisory Team members, in order to reach the largest and most diverse possible audience.Our steering committee played a strong role in publicity, reaching diverse growers in all parts of the country. NCAT's six regional offices (in Montana, California, New Hampshire, Texas, Arkansas, and Mississippi) also all promoted the survey heavily in their respective regions. During this reporting period, Eric Belasco also continued his study of risk indicators in a sample of 590 farms from the Farm Financial Management Database at the University of Minnesota, and began writing a publication comparing organic and conventional farms in their usage of crop insurance and related indicators of riskiness. Eric also collected a sample of farms from the USDA Agricultural Resource Management Survey for a study of the usefulness of crop insurance for organic farms. The study will compare organic and conventional farms with regard to crop insurance usage, financial indicators, and other variables. 2. Determine whether there is a lack of adequate federally subsidized crop insurance for diversified commercial-scale organic production that is critical to expanded organic markets. Our survey contains many questions that will shed light on this topic. For example, we asked people who rarely or never buy crop insurance to explain why they have not bought it. And we asked how often a lack of crop insurance has reduced access to loans or opportunities for growers to expand. We also had many conversations with USDA Risk Management Agency (RMA) staff, organic growers, and other groups (such as the National Sustainable Agriculture Coalition) that are actively involved in crop insurance reform efforts. We invited RMA staff to attend a number of our events, and asked for their input on our survey. We made some progress in gaining access to crop insurance data maintained by the USDA Risk Management Agency. For example, the Oklahoma City RMA office provided a summary (by county and crop) of insurance policies sold to certified organic farms in this region (OK, TX, NM) for the 2016 crop year. 3. Provide national policy recommendations that will lead to improving federally subsidized crop insurance and economic performance for diversified organic farms. Our policy recommendations will depend heavily on the results of our survey. However, we did make progress in defining some of these recommendations. In October 2016, Mike Morris and Eric Belasco met with key stakeholders and agency representatives in Washington, DC. These included Sharon Hestvik, National Organic Coordinator of the USDA Risk Management Agency, Betsy Rakola, Organic Advisor to the USDA Agricultural Marketing Service, and Paul Wolfe, Policy Specialist with the National Sustainable Agriculture Coalition. Throughout the reporting period, Project Advisory Team members had ongoing discussions about recommendations that our project might make, and the broad outlines of some of these recommendations began to take shape. 4. Undertake extensive educational outreach activities on the topic of organic crop insurance options for organic producers through presentations at workshops, webinars, and extension publications. We conducted numerous educational activities during the reporting period. For example, project team members spoke about crop insurance and distributed publications and handouts at about a dozen conferences and meetings. Our survey will set the stage for additional outreach activities by defining high-priority audiences and topics for targeted educational efforts. These may be based on geography, production system, need, size, level of diversification, experience, income, awareness, interest level, ethnicity, gender, peer pressure, farming philosophy, or many other factors. The survey looks for common misconceptions about crop insurance as well as correlations between dozens of possible factors and people's interest in buying crop insurance. It also looks for thresholds (size, age, experience, diversity, premium cost, etc.) where growers become more or less interested. We began a strong national outreach and promotional effort in August 2017, to encourage participation in the survey. This effort will have significant educational benefits in itself--calling attention to the new crop insurance options and creating curiosity and interest in them.
Publications
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Progress 09/01/15 to 08/31/16
Outputs
Target Audience:Organic farmers and ranchers, organic advocacy groups, organic certifying agencies, USDA agencies Changes/Problems: After the original Principal Investigator left for medical reasons in August 2015, it took many months to fully understand and correct methodological flaws in the project and complete a mid-course correction. As originally conceived, the research focused heavily on comparing hypothetical loss ratios between similarly-diversified organic and conventional farms. (In other words, the idea was to calculate premiums that farms would have paid and indemnity payments that they would have received if they had bought WFRP in previous years.) Despite various doubts and concerns about this approach, in the early spring of 2016 we still held out hope that some type of comparative study of loss ratios could be completed. But by May 2016 it had become clear that we had no realistic way of collecting the necessary financial information from a sufficient number of organic and conventional growers. The project team also increasingly felt that a study of loss ratios, while interesting, would have limited practical importance. There were other topics where we felt that research and education were more urgently needed. So in the late spring we decided to re-focus the project on what we believe are the most important barriers and opportunities affecting access to high-quality crop insurance by organic farms. These areas of investigation will include: (1) Attitudes about crop insurance and risk more generally, on the part of organic growers; (2) The crop insurance delivery system, including the application process, incentive structure, and insurance agent's perspective; and (3) How the new insurance products work and are best used by organic growers. Our timeline will change substantially, but there is enough time to carry out the surveys we now envision, since they do not depend (as the original timeline did) on collecting sensitive financial information or "real-time" results from multiple growing seasons. Our budget is in excellent shape although a reallocation of funds among categories will be needed. A full explanation and budget change request will be submitted to NIFA. Correcting the flaws in our research design took longer than we would have liked, although we learned a great deal through this process and now feel confident that the project is on the right path. Our project objectives have not changed and our topic is of the utmost importance to the growth of organic farming in the United States. Our team remains enthusiastic about carrying this project through to completion. Two other smaller challenges should be noted. First, crop insurance markets, sales patterns, and even the rules governing the new crop insurance products are rapidly evolving. (RMA has shown an impressive willingness to adjust and improve WFRP rules in response to comments from users.) Second, a number of related research and educational efforts by other organizations have begun. While we welcome and appreciate these efforts, they will create a need for coordination to avoid duplicated effort. What opportunities for training and professional development has the project provided? Everyone working on this project continued to gain expertise and sophistication on crop insurance during the second year of the project. Training on crop insurance options for organic farms was provided to the members of the advisory team before and during our January meeting in Davis, California. The team also benefitted from many follow-up e-mail discussions and information-sharing after the meeting. Members of the Project Advisory Team provided training on crop insurance to their employees, members, and participants. Most members of the Project Advisory Team are in leadership positions with organic advocacy groups, certifying agencies, or grassroots member organizations. The Davis meeting took place immediately preceding the annual meeting of the National Sustainable Agriculture Coalition. Crop insurance was a significant topic of discussion at the meeting, and many Project Advisory Team members stayed on for the NSAC meeting at their own expense. Principal Investigator Mike Morris spent three days in one-on-one meetings with RMA staff at the New Mexico Organic Farming Conference, including national team leader for Whole-Farm Revenue Protection insurance, Lane Webb (from RMA's Kansas City office) and national organic specialist Sharon Hestvik (from RMA's Washington, DC office). How have the results been disseminated to communities of interest? Some information dissemination took place through presentations and booths at conferences, such as the New Mexico Organic Farming Conference and annual conferences of MOSES (Midwest Organic & Sustainable Education Service) and the Kansas Rural Center. What do you plan to do during the next reporting period to accomplish the goals? We will survey organic and conventional growers around the country, seeking to understand their attitudes towards crop insurance and risk more generally. We will survey insurance industry professionals, seeking to understand the crop insurance delivery system, including incentive structures for insurance agents and potential barriers to sales of crop insurance products to organic farmers and ranchers. Eric Belasco will continue to study risk indicators in organic and conventional production systems, including loss ratios, revenue variability, yield and price variability, and willingness to purchase crop insurance. He will compare performance of WFRP with Noninsured Crop Disaster Assistance Program (NAP) of the USDA Farm Service Agency, as well as the advisability of combining WFRP with standard single-crop insurance policies and other questions of practical importance to growers who are considering buying crop insurance. And he will look for evidence of adverse selection by organic growers in a study of ARMS data (Agricultural Resource Management Survey). Major educational efforts will commence, including webinars, conference workshops, social media, train-the-trainer efforts, and the creation of a new crop insurance area on the ATTRA website.
Impacts
What was accomplished under these goals?
Limited crop insurance options have historically put organic farms at a market disadvantage: reducing their ability to access loans and survive disasters and discouraging many conventional growers who would otherwise like to transition to organic production. The overall goal of our project is to improve access to high-quality crop insurance by organic farmers and ranchers. We are researching the usefulness of insurance products currently available to organic producers and increasing awareness of these products--especially Whole-Farm Revenue Protection (WFRP). We are also critically examining stereotypes about the risks of organic farming, seeking a more nuanced understanding of how organic farmers look at risk as well as the actual production and price risks that these growers face. This work will most immediately help organic farmers by giving them better access to risk management tools. Better access to crop insurance will also help all diversified farms, whether or not they are certified organic. 1. Determine the relative production risks of diversified commercial-scale organic farms. Co-Principal Investigator Dr. Eric Belasco largely completed his study of risk indicators in a sample of 590 farms (51 organic and 539 conventional) from the Farm Financial Management Database (known as FINBIN) housed at the University of Minnesota. The conventional farms in this sample bought more crop insurance, had higher crop sales per acre, and were more likely to have off-farm income. But years of farming experience and debt utilization (debt-to-asset ratio) were similar between the organic and conventional farms. 2. Determine whether there is a lack of adequate federally subsidized crop insurance for diversified commercial-scale organic production that is critical to expanded organic markets. In Year Two we had extensive conversations with USDA Risk Management Agency (RMA) staff, organic growers, and other groups (such as the National Sustainable Agriculture Coalition) actively involved in crop insurance reform efforts. We gained a deeper appreciation for the limitations and shortcomings of existing crop insurance options for organic farms. To its credit, RMA has continued to make improvements to WFRP, reducing some of the problems we noted in our first annual project report. For example: RMA made it easier for growers with less than five years of experience to participate in WFRP, although many beginning farmers are still not be eligible. As of January 2016, WFRP became available in every county and state in the country. RMA allowed higher coverage levels under WFRP for growers who have rapidly expanded their operations or contracted to sell products at unusually high prices. 3. Provide national policy recommendations that will lead to improving federally subsidized crop insurance and economic performance for diversified organic farms. These recommendations are not expected to take place until the third year of the project. 4. Undertake extensive educational outreach activities on the topic of organic crop insurance options for organic producers through presentations at workshops, webinars, and extension publications. Some educational activities took place during our second year. For example, in February Mike Morris offered a booth on WFRP and other insurance options for organic growers at the New Mexico Organic Farming Conference in Albuquerque. Two project advisory team members from Wisconsin received separate funding from RMA to conduct a webinar and educational activities at the annual MOSES conference (Midwest Organic & Sustainable Education Service). And a number of other project advisory team members also applied for and received Risk Management Education grants to carry out educational activities.
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Progress 09/01/14 to 08/31/15
Outputs
Target Audience:Organic farmers and ranchers, organic advocacy groups, organic certifying agencies, USDA agencies Changes/Problems:Since our proposal was written, AGR and AGR-Lite insurance were discontinued by RMA--a change that was unforeseen when we wrote our proposal. We had proposed to use the AGR-Lite Wizard as our data collection tool, but this tool would now need modifications or replacement to carry out the study we had intended. In June Project Director Jeff Schahczenski became ill, took a medical leave of absence and was forced to stop working on the project. In July Co-PI Mike Morris agreed to step in as Project Director, and the advisory team was informed of this change in August. Morris is an experienced project manager who has been involved in this project from the earliest stages. He is enthusiastic about leading the project forward. As noted above, some committee members noted the challenge of getting enough farmers to provide sensitive business information and expressed doubts that they could meet the ambitious recruitment target of 10 organic and 10 conventional growers per state, as indicated in our proposal. The team advised delaying farmer recruitment phase until the second year, after the historical (FINBIN) study is completed. Partly because of this delay, the team also recommended that we consider a no-cost extension, allowing us to collect data from the 2018 crop-growing season. Finally, team members strongly advised that the project should not be too fixated on quantifying the risks in organic farming (which may be extremely difficult or impossible), or making simplistic comparisons between organic and conventional farming, but should stay true to its practical mission: researching the full range of insurance-related challenges and barriers faced by organic and diversified farms, educating these producers about their options, and making a broad range of recommendations that will be helpful to them. Despite some challenges, the project made good progress in its first year, was well within its budget, and our work was on track. The project team remained enthusiastic about the importance and timeliness of this project and is eager to carry the project through to completion. What opportunities for training and professional development has the project provided?The Project Advisory Team has grown considerably in its expertise and sophistication on the topic of crop insurance during the first year of the project. Training on crop insurance options for organic farms was provided to the members of the advisory team before and during our January meeting in Jekyll Island, Georgia. The team also benefitted from many follow-up e-mail discussions and information-sharing after the meeting. The Jekyll Island meeting took place immediately preceding the annual meeting of the National Sustainable Agriculture Coalition, and in the same hotel. Crop insurance was a significant topic of discussion at the meeting, and many Project Advisory Team members stayed on for the NSAC meeting at their own expense. How have the results been disseminated to communities of interest?Only limited information dissemination took place to communities of interest during our first year. What do you plan to do during the next reporting period to accomplish the goals?We built into our timeline an option to adjust our research approach, pending the outcome of the FINBIN study. Although the FINBIN study was not completed by the end of the reporting period (August 31), it had already become clear that at least a modest mid-course correction was going to be necessary. While supportive of the main objectives and work plan in our proposal, some members expressed doubts that they could recruit the number of growers (10 organic and 10 conventional) that we envisioned for our study of premium costs and loss ratios. Others said that, while this study was probably feasible, it should not be allowed to take up an inordinate amount of project resources and should be balanced with a strong education and outreach effort. Finally, there were questions about whether focusing our research on WFRP loss ratios was the best way to dispel misconceptions and negative stereotypes about organic farming. A decision on adjustments to our research approach will be the first order of business in the early months of our second year. We will launch the main research phase of the project shortly after our second annual project January meeting, in Davis in January 2016. The basic approach and purpose of this research have not changed: We will recruit and survey farmers from around the country and include a study of WFRP premium costs and barriers to participation. We will also launch an educational and outreach campaign aimed at organic and diversified farms around the country.
Impacts
What was accomplished under these goals?
Historically a low percentage of U.S. organic farms have used federally subsidized crop insurance. This puts them at a financial disadvantage in comparison to farms that have crop insurance and appears to be a major barrier to the expansion of organic production. Crop insurance enables farms to survive losses and is essential for access to many types of farm credit, often tipping the balance towards farm profitability. So a self-perpetuating cycle is created where more organic farms fail and lenders become more wary about extending credit to organic farms. Meanwhile conventional farming builds an impressive track record of success and looks safer, easier, and more profitable. The prospect of losing access to credit and losing the crop insurance safety net discourages conventional farms from converting to organic production. Many explanations have been offered for the low participation by organic farmers in insurance programs. Historically these programs have valued organic crops at conventional crop prices, despite generally higher prices for organic products in the marketplace. Many organic farms are diversified, putting them (like all diversified farms) in the difficult position of buying separate insurance policies for each crop or animal that they produce. Some attempts have been made to address these problems, most notably through the introduction of organic price elections by the USDA Risk Management Agency (RMA) as well as a new kind of crop insurance (whole-farm revenue insurance) intended to serve the needs of diversified and organic farms. On the other hand, stereotypes persist that organic farmers either do not really want subsidized crop insurance or that organic farming is inherently risky in some way that makes it exceptionally difficult, expensive, or in some other way unfeasible to insure. The overall goal of our project is to improve access to high-quality crop insurance by organic farmers and ranchers. We are researching and improving the usefulness and availability of insurance products currently available to organic producers, increasing awareness of these products, and critically examining stereotypes about the risks of organic farming, seeking to create a more nuanced understanding of the real production and price risks. This work will most immediately help organic farmers by creating a more level playing field and giving them better access to risk management tools. Moreover, improved access and awareness to whole-farm insurance will help all diversified farms, whether or not they are certified organic. In the first year of this four-year project, we assembled our project team, made decisions about methodology, and performed an initial review of data from 590 organic and conventional farms. 1. Determine the relative production risks of diversified commercial-scale organic farms In the spring of 2015 Jeff Schahczenski (Project Director) and Eric Belasco (co-PI) traveled to Minnesota, where Dale Nordquist showed them the Farm Financial Management Database program and database (known as FINBIN) at the University of Minnesota. The Project Advisory Team devoted considerable effort to identifying ways to measure the production and price risks of organic production. At the January 24 Project Advisory Team meeting, Belasco, Nordquist, and Schahczenski presented their initial research strategies. Committee members asked many questions of clarification and discussed methodological issues. In July, the usable observations from FINBIN (financial and production information on 51 organic farms and 539 conventional ones over the past five years) were transferred into the research team's file folder and Belasco did a preliminary analysis comparing conventional and organic producers. The organic farms tended to be smaller, had lower costs and lower profitability, and were far less likely to purchase crop insurance. Although we had information about only 51 organic farms, having records from 500 conventional farms increases the possibilities for comparing similar organic and conventional operations. 2. Determine whether there is a lack of adequate federally subsidized crop insurance for diversified commercial-scale organic production that is critical to expanded organic markets. The Project Advisory Team expressed enthusiasm about Whole Farm Revenue Protection (WFRP), but also noted various concerns: Since it requires a multi-year track record of gross revenue, WFRP is not available to many beginning farmers. As of January 2015, WFRP was not yet available in all states. In many cases WFRP works best when combined with traditional yield-based insurance products. So organic farmers can't simply switch to WFRP, and are still saddled to some extent with the problems and limitations of standard single-crop insurance. WFRP does not work very well for certain farmers who rapidly expand their operations, because in effect it caps the maximum increase in coverage from one year to the next. It remains to be seen if WFRP will be prone to abuse, somehow exploited to reward poor agricultural practices instead of good ones. The Project Advisory Team also voiced some concerns with traditional (single-crop) insurance for organic farms: Insurance for many "specialty crops" is geographically limited, often to an extreme degree. The petitioning process to add crops to the list is complicated and time-consuming. "Organic price elections" are only available for a small percentage of crops, and only in certain states and counties. So in effect, single-crop insurance is often based on conventional crop prices and does not reflect the full value of organic crops. In various situations, RMA bases yield estimates on county-average "transitional yields" (T-yields), and in 2014 began lowering these by 35% for organic producers: a reduction that many members of our team felt was excessive and makes it impossible for some high-yielding organic farms to purchase adequate insurance. RMA has recently agreed to accept contract prices, but caps the maximum allowable price level. Some team members felt that these caps are indefensible since these prices are not hypothetical but written into actual contracts. 3. Provide national policy recommendations that will lead to improving federally subsidized crop insurance and economic performance for diversified organic farms. These recommendations are not expected to take place until the third year of the project. 4. Undertake extensive educational outreach activities on the topic of organic crop insurance options for organic producers through presentations at workshops, webinars, and extension publications. Only limited educational activities took place during our first year. In March Schahczenski gave a presentation on WFRP at the Organic Agriculture Research Symposium held in conjunction with the Midwest Organic and Sustainable Education Service (MOSES) conference.
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