Whole farm revenue protection is a good insurance option for diverse operations that have a variety of livestock, fruits and vegetables.
This insurance plan is tailored for any farm with up to $8.5 million in insured revenue, including farms with specialty or organic commodities or those marketing to local, regional, farm-identity preserved, specialty or direct markets.
Elizabeth Higgins, a Cornell Cooperative Extension ag business management specialist, outlined the pros and cons of such coverage during an Aug. 16 webinar.
“You have one policy instead of a whole bunch of other policies,” said Higgins, who works for Extension’s Eastern New York Commercial Horticulture Program at the Hudson Valley Research Lab in Highland. “It’s much simpler that way.”
This type of insurance is available in all parts of New York and covers all crops including some that other policies might not be available for.
The federal government encourages farms to be more diversified, and may subsidize up to 80 percent of the cost of premiums.
“Diversity does matter,” Higgins said. “The more diversified you are, the more the federal government subsidizes your premiums. Indemnity payments are also higher.”
Each commodity must provide a certain percentage of the expected farm revenue to be counted, and commodities providing small amounts of revenue may be grouped to meet the qualification.
Because all farm revenue is insured together under one policy, this type of coverage is extremely valuable in case of cataclysmic events such as Hurricane Irene and Tropical Storm Lee, whose ravaging floodwaters inundated and wiped out large areas of eastern upstate New York and western New England in 2011.
It’s also good in case of a sudden, unexpected market drop such as a restaurant closing, or a farmer’s market severely impacted by bad weather for several straight weeks.
Commodities such as timber, forest products, and animals for sport (race horses), show or pets are not covered.
Also, indemnities are based on the farm’s total revenue stream. So it’s possible that a farm could lose one crop, and get no payment for it if the crop accounts for a very small percentage of the farm’s income.
Even with whole farm protection, farms may still purchase another policy for just one crop such as corn. But if yield is down and the farm receives payment, this counts toward the farm’s overall revenue stream, which might keep it from receiving a whole farm payment as well.
“You’re creating different scenarios under which you’re receiving an indemnity payment,” Higgins said.
Because whole farm insurance is based on the farm’s income track record, the biggest drawback for this type of policy is that it’s somewhat difficult for beginning farmers to obtain coverage.
“In general you need five years of history with this program,” Higgins said. “It’s a fairly complex program. You have to have good records. You can’t insure revenue you’ve never reported.”
However, beginning farmers and ranchers may qualify with three historic years of taxes if they’ve been farming the previous year. So to qualify for 2019, for example, taxes must have been filed in 2015, 2016 and 2017 and the applicant also must have been farming in 2018.
Qualifying beginning farmers and ranchers receive an extra 10 percent premium subsidy.
Whole farm revenue protection covers revenue produced in the insurance year. So a commodity not harvested or sold will not count as revenue, nor will a commodity grown last year and sold this year.
Insured revenue is the lower of:
• An insurance year’s expected revenue, determined by the farm plan, at the selected coverage level, or:
• The farm’s historic revenue adjusted for growth at the selected coverage level.
Higgins strongly encouraged farm owners to consult an insurance agent before deciding on coverage.
Farmers must provide their agent with five years of tax forms, and a list of goods the farm expects to produce during the insured year.
For more information, about whole farm revenue protection see: www.rma.usda.gov/policies/wfrp.html.
Source: Paul Post, Lancaster Farming
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