Diversified crop growers have a new and improved risk management tool under their belt with USDA’s Whole-Farm Revenue Protection (WFRP), a federal insurance policy that covers all of an operation’s crops and livestock under one plan.
As part of the 2014 Farm Bill, USDA’s Risk Management Agency (RMA) created the new crop-neutral insurance product, which was made available to growers for the 2015 insurance year.
Unlike other insurance policies that are either crop or yield based, WFRP covers all crops and livestock on an operation under a single policy. The plan is offered nationwide and provides insurance coverage for up to $8.5 million in insured revenue for diversified operations (operations that grow a wide range of commodities to show reduced risk), and for those marketing to local, regional, farm-identity preserved, specialty, or direct markets.
As outlined in the plan’s policy, WFRP protects your farm against the loss of revenue from commodities produced during the insurance period whether they are sold or not; commodities bought for resale during the insurance period; and all commodities on the farm except timber, forest, and forest products, animals for sport, show, or pets.
For growers who lose their crop early in the season and need payment quickly, WFRP also provides replant coverage for annual crops, which is equal to the cost of replanting up to a maximum of 20% of the expected revenue.To help outline the details of WFRP, RMA associate administrator Tim Gannon helps answer a few of the policy’s most frequently asked questions.
What are the primary prerequisites to qualify for the insurance?
According to Gannon, the two most important things growers will need to qualify for WFRP are production history and five years of historic tax records for most producers.
“Growers will need to show they have farm tax records and production history records from 2010 through 2014 in order to buy a policy,” he explains.
“There are a few exceptions for beginning farmers — they can qualify if they have three years of tax records from 2012-2014 — or if you’re missing a year of tax history because of illness, or deployment you may still qualify for WFRP. Along with the required years of income tax records, producers will need to provide their farm plan for the insured year.”
What are the options for beginning farmers?
Speaking on crop insurance at large, Gannon says that if growers qualify as a new or beginning farmer they’re able to receive an extra 10% support on their premiums.
“For example, if they were to receive 65% coverage from the government they’ll pick up an extra 10%, so they only pay 25% of that premium. We also waive administration fees if you’re buying what is called a ‘CAT policy’ which covers catastrophic events,” he says.
However, regarding WFRP, a new or beginning farmer can qualify for insurance if they’ve had a minimum of three historic years instead of the normally required five, as long as they also farmed the year before the insured year.
According to WRFP’s policy page the five year average revenue is then constructed using the three years of history, the lag year, and the lowest revenue amount from those four years as the fifth year of history. The WFRP policy does not offer CAT-level coverage, but new or beginning farmers would be eligible for the extra 10% of premium subsidy on the coverage levels offered.
“In the time that we’ve had the new and beginning farmer provisions, for the roughly 2.5% of our producers that qualify, they’ve saved more than $12 million in premium subsidies,” Gannon says.
What are the coverage levels of the insurance?
Coverage levels for WRFP range from 50% to 85% coverage, according to Gannon, stopping at 75% for farms with commodities that meet the revenue diversification requirements for one or two commodities. However, growers can get to the 80% to 85% coverage range if they meet the diversification requirements for three or more commodities.
“That can be tomatoes, lettuce, and cucumbers, or those three things plus eight more, but once you meet that diversification requirement you can be covered in the 80% to 85% range. The WFRP policy has a coverage limit of $8.5 million, so at the 85% coverage level a farm with $10 million in approved revenue may qualify for WFRP,” he explains.
Furthermore, producers who generate up to $1 million in a greenhouse or nursery are eligible for insurance under WFRP. The greenhouse/nursery limit is applicable when plants are being grown for sale. If vegetables or fruit are being sold from the greenhouse, then those crops are listed separately and do not apply to that limit.
What are the primary advantages of using WFRP versus other insurance options?
If you’ve looked at crop insurance and didn’t find a workable solution in the past, WFRP may be a good solution for your operation, according to Gannon.
“Also, many specialty crop producers who have not had crop insurance options, have had a difficult experience accessing credit,” he explains.
“Going to that lender and being able to say, ‘I bought a crop insurance policy that will cover me in case of disaster, etc.’ is a lot more attractive. This product helps level the playing field for those looking for credit to get started, get a seasonal operating loan, or an expansion loan.”
Why should small to mid-sized growers sign up for this insurance?
As with most policies there’s no one-size-fits-all glove, and each operation is going to have its own decisions to make regarding the affordability of the product and producers needs and expectations.
“We think that this product fills in a gap for many of the small to mid-sized growers that may not have had insurance before,” Gannon says.
“If you’re a really large operation, there are a lot of non-insurance ways to manage your risks, for example having production at multiple locations so that weather may not impact you. But for a small to mid-sized grower, that’s probably not an option,” he says. “Crop insurance might become a more important aspect to overall risk management.”
Before making any final decisions, Gannon advises growers to have a discussion with a local crop insurance agent who can better explain the intricacies of the policy and provide an idea of what the costs might be.