AGR Lite Crop Insurance: A potential option for your farm?

1. AGR Lite Crop Insurance: A potential option for your farm? Presentation for Grayson Landcare Meeting Independence, VA February 18, 2013 Jennifer Lamb, Fellow, Appalachian Sustainable Development

2. A Brief Introduction to Risk Management • Different types of risk in operating an agricultural business • Production Risk-weather, pest, disease • Marketing Risk-prices, rising input costs • Financial Risk—ex. farm policy on your buildings/livestock • Legal Risk—ex. liability insurance • Human Resource Risk—relationships that affect your business http://farm-risk-plans.rma.usda.gov/index.aspx?action=riskman.home • Designing a risk management program adapted for your operation takes all of these factors into account • This presentation addresses two options you may want to consider to help manage production and marketing risk

3. Risk Management Options • Yield Insurance • APH (Actual Production History) • Protects against yield loss • Revenue Insurance • Revenue protection • Whole Farm Revenue Insurance • Index Insurance • Loss determined by area—hay/forage • NAP (purchased through FSA) • Non-Insured Crop Disaster Assistance Program • $250/crop, up to $750 for an operation • Special request • Policy is not available in your county

4. A look at managing production risk through AGR Lite Crop Insurance • Subsidized whole farm revenue crop insurance • Not commodity based • Means that you can be growing different crops, expanding, or experimenting • Can insure both crops and livestock in one policy • (only federally subsidized crop insurance policy which does this) • Allows organic/local producers to incorporate price premiums they receive into their projected revenue calculation • Purchased through private insurer, underwritten by federal government (USDA RMA) • Provides producer with a payment when revenue falls below projected revenue while incurring at least 70% of average costs • Covers a wide range of risks which would cause low revenue • weather, price, pest, and disease etc. • Not neglect or mismanagement

5. Do you qualify? • Must have had the same farm for 7 years, producing 5 years and able to supply farm income tax records • For 2013, need 2007-2011 tax records • Have less than 2 million in Farm Income (1 million in liability) • Targeted toward organic and mixed/diversified producers • Minimum of 1-3 commodities based on coverage level • Tends to be the ‘best value’ when producers have between 3-10 commodities • Important exemptions: • Does not cover any value-added activities • Ex: making apple cider from apples • No more than 50% income from resale • No more than 83.35% potatoes

6. How it works: • Adjusted Gross Revenue (AGR) is calculated based upon tax records for past 5 years • Average expenses calculated for past 5 years • When revenue falls below loss inception point due to causes other than neglect or mismanagement and average expenditures are made, a payment is triggered

7. Determining whether AGR Lite is right for you • AGR Lite Wizard • Developed and tested with farmers • Web and CD based tool • Allows you to input information from your farm to determine • Eligibility • Walk through various loss scenarios • Uses county specific actuarial data to calculate premiums and payouts under different scenarios • Allows you to print the forms to take to an agent, and search for an agent in your area

8. Appalachian Harvest Farm Example -AGR Lite Wizard • https://www.agrlitewizard.com • Small diversified farm • Greenhouse • 1 acre Tomatoes • 1 acre Squash • 1 acre Turnips • 3 head Cattle

9. Flood Loss Scenario • Lose about 25% of greenhouse crop and all tomatoes • Projected income: $94, 672 • Actual income: $67,888 • Loss inception point: $75, 738 • Loss payment: $7,065 (90% of loss below inception point) • Premium: $2,759

10. Flood Loss-Comparison to NAP

11. Severe Loss Scenario-Pest Infestation • 50% yield loss on greenhouse, tomatoes, squash, and turnips • Projected income: $94, 672 • Actual income: $51, 619 • Loss inception point: $75,738 • Loss payment: $21,707 (90% of loss below inception point) • Premium: $2,759

12. Pest loss-Comparison to NAP

13. Final notes • Whether or not this is a good fit will depend upon your operation, records, and future plans • Encourage you to try the online wizard and see what you think https://www.agrlitewizard.com • Wizard uses actuarial data, and prints the forms for you to take to an agent directly—no one is trying to sell you something • National Center for Appropriate Technology (NCAT) ATTRA hotline for expert help • 1-800-346-9140 (English) 7 a.m. to 7 p.m. Central Time • https://attra.ncat.org/ask.php • Sign up for AGR Lite is by March 15, 2013 • Good luck! Contact me: Jennifer Lamb jlamb@asdevelop.org