USDA expands insurance for farmers transitioning to organic production

19-Feb-2016 - Last updated on 19-Feb-2016 at 13:56 GMT

Source: iStock

The financially daunting three-year transition to certified organic production just became a little less risky for farmers thanks the USDA expanding crop insurance to better reflect the product’s actual value.

Agriculture Secretary Tom Vilsack announced Feb. 18 that farmers transitioning from conventional to certified organic production can now insure their crops at a higher price than traditional crops.

Previously, farmers could only insure transitioning crops at the same price as conventionally grown products, even though they often are worth more given the demand for organic is far outstripping supply. This imbalance is prompting some manufacturers to contract transitional crops at a higher rate in order to guarantee sufficient long-term supply of organic crops.

While there are approved limits, the ability to insure crops at the Contract Price Addendum, rather than the USDA’s Risk Management Agency price election could mean farmers could ensure their crops at a value that is almost double.

For example, USDA said, under the higher Contract Price Addendum, a transitioning farmer in Nebraska could use a contract price for millet up to $7.34 per bushel as opposed to the lower existing RMA price elections of $3.67.

The US Department of Agriculture also announced it is significantly expanding the types of crops eligible for higher insurance coverage from only four varieties in 2011 to 57 crops. Among the new crops for 2016 are barley, rice and wheat. Grapefruit, lemons and oranges will be added in 2017, the department noted.

Lowering the barriers to production

The move is necessary to encourage more farmers to endure the three year transition period to organic production, which can be a financially straining time in which they must use organic techniques that likely will result in a lower yield but cannot yet charge the premium price of certified organic, the USDA explained.

It also noted that the change, along with others recently made by the department, should help close the increasing gap between organic supply and demand.

The Organic Trade Association lauded the move as a “small but important tool” to encourage more farmers to transition to organic.

“It is not easy to transition to organic, and transitioning farmers should have a strong safety net. Organic supply in the US is falling short of the robust demand for organic products, and farmers need to have the proper tools and incentives to transition to organic production,” said OTA CEO and Executive Director Laura Batcha.

She added that OTA looks forward to working with USDA to further build out a “tool kit” for farmers transitioning to organic production.

Other ‘tools’ to help farmers

USDA also is encouraging organic farming through a series of financial arrangements and increased enforcement.

For example, USDA is expanding equivalency arrangements with other countries to simplify and lower the cost of exporting organic crops from America. This includes establishing such an arrangement with Switzerland in July, with Korea and Japan in 2014 and with the UK in 2012.

In addition, in 2014, USDA eliminated the 5% surcharge on organic policy premiums for all crops.

The department also recently improved employee training around organic so they can better support farmers.