Risk Management and Crop Insurance

United States Department of Agriculture Risk Management Agency June 15, 2022

The USDA Risk Management Agency (RMA) helps farmers manage their business risks through effective, market-based risk management solutions. As part of its mission, RMA provides federal crop insurance to producers through the Federal Crop Insurance Corporation (FCIC). While private-sector insurance companies sell and service the policies, RMA approves and supports products, develops and approves premium rates, administers premium and expense subsidies, and reinsures the private companies. RMA also supports educational and outreach programs on managing farming risks.

Crop and revenue insurance are important risk management tools available to America’s farmers, however, the New England states are considered “underserved states” by RMA because insurance enrollment by farmers in this region continues to be less than the national average. Since its creation in 1996, RMA, in collaboration with New England Land Grant Universities, State Departments of Agriculture and private industry, have been reaching out to growers and agricultural professionals to make them aware of the opportunities, as well as the limitations, of crop insurance policies. The results of these efforts have steadily improved farmer understanding and use of crop insurance in the region.

Since 2000, existing insurance policies have been significantly modified and new products introduced to better suit the unique needs of the region’s growers. Federal crop insurance is available in New England in select states and select counties for farmers who grow sweet corn (available in all counties), potatoes and green peas when production losses occur due to adverse weather and other insured causes. For other noninsured vegetable crops, a grower may submit a written request for crop insurance coverage by completing and submitting appropriate forms through their crop insurance agent. Alternatively, protection for these other noninsured vegetable crops is available from the USDA - Farm Service Agency (FSA) through the Noninsured Crop Disaster Assistance Program (NAP).  NAP coverage provides a catastrophic level option, which allows a producer to protect 50% of their historical yield at 55% of the average market price. NAP provides a “Buy-Up” coverage option, allowing farmers to insure up to 65% of their historical yield at 100% of the average market price. The NAP administrative fee does not apply if a farmer meets one of the definitions of a beginning farmer, limited resource farmer, socially disadvantaged farmer, or veteran farmer. These individuals are also eligible for a 50% reduction in the cost of additional coverage under NAP. Vegetable producers interested in learning more about NAP, coverage options and anticipated costs of NAP coverage are encouraged to contact the FSA Office that serves their farming operation.

For an overall revenue coverage option, Whole-Farm Revenue Protection (WFRP) provides coverage for all crops grown on a farm under one policy by insuring farm revenue losses due to unavoidable natural causes. WFRP coverage was first available for the 2015 season, replacing the Adjusted Gross Revenue (AGR) pilot program. For the 2022 crop year, RMA introduced the Micro Farm Program, which is a revenue based policy for operations with up to $350,000 in approved revenue, including farms with specialty or organic crops and those farms that market directly to consumers.

For more information about RMA, crop insurance policies and risk management strategies go to the RMA website at http://www.rma.usda.gov/ [1]. Specific information about polices for each New England State can be found by clicking on the “Commodities” Tab on the RMA home page and then looking up the commodity and selecting the appropriate State.

You can locate a crop insurance agent online at: http://www.rma.usda.gov/en/information-Tools/Agent-Locator-Page [2]. Keep in mind that crop insurance agents are not employees of RMA or FCIC, rather, they or their company contract with USDA to sell and service federal crop insurance policies. More importantly, crop insurance agents are professionals with on-the-ground experience and knowledge of what works and what doesn’t for a particular situation. Spending time with an agent can help you decide if and how crop or revenue insurance might best fit your needs.

Is now the time to be covered by federal crop insurance? Let’s consider a few important factors which may help you decide:

  • The volatility of farm income has increased significantly over the past few decades. Environmental and economic conditions have led to greater variability and uncertainty in farm sales and profits.
  • There has been a trend away from Congress funding the common “disaster based programs” that have sometimes provided “free insurance” in areas where losses are catastrophic. Congress is under increasing pressure to encourage growers to share in the management of farming risks.  
  • Lenders see federal crop insurance as a means to reduce their risk exposure, improving a farmer’s ability to secure better loan terms.
  • federal crop and whole farm revenue insurance can be a very good value if the coverage fits your needs. Due to significant ongoing subsidies from the federal government, farmers do not pay for the full cost of coverage. For the Fresh Market Sweet Corn policy, the federal government subsidizes from 55 to 100 percent of the premium cost depending on the coverage level selected by the grower. For the Potatoes and Green Peas policies, subsidies range from 55 to 67 percent.     
  • There are discounts available for underserved populations. This includes people farming for less than 10 years (beginning farmers) women farmers, veteran farmers, limited resource farmers, and socially disadvantaged farmers. 

Federal crop and revenue insurance policies, along with NAP coverage for noninsured crops is your primary protection if a natural disaster were to damage your crops.  If coverage makes sense for your upcoming growing season, find out more information as soon as possible. Keep in mind that many applications must be completed in the fall or winter prior to planting.

This information is provided by The United States Department of Agriculture's Risk Management Agency (RMA), in cooperation with the Extension programs of the New England states. Developed by Michael Sciabarrasi, Extension Professor (Retired), UNH Cooperative Extension and Paul Russell and Thomas Smiarowski, Agricultural Risk Management Educators, UMass Extension. Updated by Christina Howard, UMaine Extension.