A. Shields Specialist in Agricultural Policy
federal crop insurance program provides farmers with risk management tools to
address crop yield and/or revenue losses on their farms. Farmers can purchase
subsidized policies that pay an indemnity when their production or revenue
falls below a guaranteed level.
Historically, the federal crop insurance program primarily has covered
traditional farm program crops such as wheat, corn, and soybeans. However,
the crop insurance program has expanded in recent decades, and policies
are available now for a wide range of commodities, including specialty
crops such as fruits and vegetables. In 2009, specialty crop policies covered
more than 7 million acres, which was roughly one-half to three-quarters of
specialty crop area, depending on how total area is calculated. In total,
crop insurance is available for over 80 specialty crops, making the
program the primary financial safety net for specialty crop producers.
The federal crop insurance program is permanently authorized by the Federal
Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.). The U.S.
Department of Agriculture’s (USDA's) Risk Management Agency (RMA) operates
the Federal Crop Insurance Corporation (FCIC), which is the funding
mechanism for the program. Insurance policies are sold and completely serviced through
approved private insurance companies. The insurance companies’ losses are
reinsured by USDA, and their administrative and operating costs are
reimbursed by the federal government.
Federal crop insurance policies for specialty crops (and other crops as well)
are generally either yield-based or revenue-based. For most yield-based
policies, a producer can receive an indemnity if there is a yield loss
relative to the farmer’s “normal” (historical) yield. Insurable causes of loss include
drought, excess precipitation, hail, frost, freeze, fire (if due to natural
causes), and insects and disease. Revenue-based policies protect against
crop revenue loss resulting from declines in yield, price, or both.
Nursery crop producers can be protected against loss of an “asset” due to weather
damage (but not price loss). Also relevant for specialty crop producers is
whole-farm insurance, which protects against losses in whole farm revenue
rather than just for an individual crop. An endorsement is available in
some areas for protecting against loss due to quarantine.
While additional policies have been introduced in the last 10 years, producers
and some Members of Congress would like to enhance crop insurance for
specialty crop producers. In the 112th Congress, several legislative
proposals have been introduced. The Local Farms, Food, and Jobs Act of
2011 (H.R. 3286/S. 1773) would enhance whole farm insurance and insurance for
organic crops. The Rural Economic Farm and Ranch Sustainability and Hunger
(REFRESH) Act of 2011 (S. 1658 and H.R. 3111) would also enhance whole
farm insurance. The Specialty Crop Insurance Act of 2011 (S. 1905) would
support the development of new policies.
In the 112th Congress, specialty crop provisions in these and other proposals
have been included in the Senate-passed farm bill (S. 3240) and the House
committee-passed farm bill (H.R. 6083). The bills require USDA to conduct
more research on higher coverage levels for whole farm revenue insurance
and study insurance for food safety and contamination-related losses. A provision
would revise the value of crop insurance for all organic crops to reflect
prices of organic (not conventional) crops. For crops not insurable with
crop insurance, additional coverage would become available under the
existing Noninsured Crop Assistance Program (NAP). Finally, a provision in
S. 3240 would subsidize the purchase of existing private-sector index-based weather
insurance, which protects against specific weather events and not actual loss.
Date of Report: November 6, 2012
Number of Pages: 21 Order Number: R42813 Price: $29.95
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