Protect Your Profits with the Right Organic Crop Insurance Plan

By Eric Sorensen, FBN Crop Insurance and Bryce Irlbeck, AgriSecure

One of the biggest concerns’ farmers have about transitioning into organic is that they’ll lose their crop insurance.

But that’s a myth — there is government-subsidized crop insurance for both organic and transition acres, and the program is better today than it’s ever been.

However, guarantees, coverage details, building your APH, and risk considerations are significantly different compared to conventional crop insurance.  For example, insurance guarantees will be based upon T-yields, which are typically conservative, until you have an opportunity to build your APH.  Additionally, some organic crops may not be insured in your area today.

Because of these differences, you need to understand the growing season risks of each crop and evaluate the options available for managing your risks by working with a partner, such as AgriSecure, and an agent who can advise you on the best plan for your operation.

Work With a Knowledgeable Agent

Due to the complexity of insurance for organic and transition acres, the No.1 step you can take in setting yourself up for success is to find an agent who specializes in crop insurance, especially one that has experience insuring organic crops.

This is crucial because no two situations in organic are alike and there are several nuances that will make a significant impact in structuring your policy correctly. By working with an inexperienced agent, it is unlikely they will fully understand the rules and nuances with organic crop insurance, which could result in significant penalties or reductions in your coverage.

Unfortunately, there’s currently no professional designation for crop insurance agents, which makes it challenging to determine how knowledgeable your agent is. But there are a few things you can look for and ask to be sure that your agent can properly serve you.

First, look for an agency that has a website with a page dedicated to crop insurance. Even more preferable is to look for an agency that has at least one person dedicated primarily or solely to crop insurance. This not only ensures they’re knowledgeable, but also will have the bandwidth to take you through the process of a claim during rough times, as seen in many parts of the country this year. If an agency has someone dedicated to more than just crop insurance, such as health and property-casualty, that’s a surefire sign they don’t specialize in crop insurance.

Once you find someone who specializes in crop insurance, you’ll want to find out if they’ve ever insured an organic farm. If they haven’t, it doesn’t mean they can’t learn it, but in having a conversation with them you’ll be able to quickly determine whether they can understand it.

Start the Process Early

Once you find an agent, you’ll want to get the conversation started with them as soon as possible.

At the very minimum, you need a month before the sales deadline, which is March 15 for most areas of the Midwest. However, given the amount of work involved — making sure your organic certification plan matches up to the right entity, that your FSA paperwork is in line, the final sale of the grain matches up with the policy name — a month isn’t optimal.

Ideally, you should start the process a year in advance. This is because, much like a tax accountant who can advise you on what to do based on the current tax laws, your agent can give you recommendations on what would be best for your risk management. If this causes you to change your plans, a year would give you enough time to make them. It also gives your agent time to get more familiar with organic crop insurance, if they aren’t already.

5 Factors in Creating the Right Insurance Plan

There are several options and factors that go into creating the best crop insurance plan. Here are four things you should consider or discuss with your agent:

1. Crop Insurance Unit Structure

Crop insurance is broken into crop insurance units, which means that all of the acres within that unit are standalone. It matters what unit structure you have in your operation, whether it’s basic, optional or enterprise, and you need to consider the impact your organic acres will have on your unit structure, as well as your overall risk profile.

2. Create Separate Entities

Because crop insurance units often lump conventional and organic acres under the same policy, we frequently recommend splitting your operation into separate entities, so organic acres are in one entity and conventional in another. This will allow you to differentiate those acres in your insurance policies. We recommend creating that separate entity for organic crops during the transition period.

3. Additional Insurance Protection

Multi-peril insurance may not be fully adequate to cover the value of your organic crops, so you may want to consider alternative policies for additional protection. Hail coverage is a common one if you’re in a high-risk area for hail damage, but there’s also weather-index insurance, which can cover extreme rainfall, drought and temperatures.

4. Whole-Farm Revenue Protection

If you have organic crops that are not covered under organic crop insurance, one option is whole-farm revenue protection, which would put all commodities on the farm under one insurance policy for up to $8.5 million in insured revenue. Whole-farm revenue also works well when you have at least three crops.

It’s important to note there are very few agents versed in this program, so if you’re interested in it, be sure to find a knowledgeable agent and work with them early, because it takes extra time to bring in all of the data required and get the policy set up.

5. Develop a Strategy for a Strong APH

In addition to creating the right insurance plan, you’ll also want to create a strategy on how you will build up your APH and replace T-yields.

T-yields are conservatively low, and in a way are an inadvertent built-in penalty for organic growers. Because of this, you’ll want to replace them with actual yields as quickly as possible to improve your insurance guarantees and revenue floor, assuming that your actual yields will be higher than the T-yields. But it takes some strategy on how to accelerate your departure from T-yields without harming your organic production.

Crop rotation is the main component to this strategy, as you’ll want a rotation that not only builds up your APH, but is also agronomically sound to maximize yields. This is another area where it’s important to work with an expert like AgriSecure, which can help you develop a rotation that is beneficial to both your revenue floor and the agronomics of organic production.

Looking for Advice? 

As outlined above, crop insurance can provide wonderful revenue guarantees for many organic crops IF it is structured correctly. If you are seeking out advice on crop insurance, both AgriSecure and FBN Crop Insurance are eager to help. While AgriSecure is not a licensed crop insurance provider, we can help you understand different crop options and rotations and prepare questions to ask a crop insurance agent.

FBN Crop Insurance, on the other hand, is committed to providing the best service possible on all crop acres — including transition and organic!

Contact FBN Crop Insurance and/or AgriSecure to learn more.

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