Disaster Programs Discourage Organic and Natural Food Production
Buried in the military supplementalspending bill currently workingits way to a presidential veto areprovisions to provide disasterassistance to farmers who sufferednatural disaster losses all the wayfrom Hurricane Katrina almost twoyears ago to freezes over this year’sEaster weekend. This funding islong overdue, and vitally necessaryfor the many farmers who arewaitingforit. But,likemanyFederalAgriculture programs, the structureof current programs and proposalsdo much to discourage farmersfrom responding to expandinghigher-value, environmentally-sound markets like organic andothers, and create a competitivedisadvantage for those who do.In a nutshell, to decrease costsand encourage participation, cropdisaster payments supplement cropinsurance or, where there is nocrop insurance, the Non-InsuredCrop Disaster Assistance Program,or NAP payments. NAP providescrop-insurance-like beneﬁts tocrops without policies, and requiresthat the farmer sign up in advance ofthe season, just like crop insurance.No crop insurance or NAP, nopayment.But crop insurance and NAP workvery poorly for alternative marketslike direct markets and organic,and work not at all for independentlivestock producers. So theproducers that we would mostlike to encourage; the innovativeproducers who are responding toemerging markets and bringinga greater share of our food dollarback to the farm and our ruralcommunities, are the least likely tobe assisted by disaster programs.The disincentives are built into theprogram. Crop insurance requiresorganic producers to pay anadditional 5% premium, assumes alower yield than conventional, andpays beneﬁts based on the lowerconventional price. They pay morefor less.Because their crop is valued at theconventional price, the organicDisasterProgramsDiscourageOrganicand Natural Food ProductionScott Marlow, Farm Sustainability Program DirectorRAFI-USAApril 25, 2007Scott Marlow discusses a lost crop with farmer Rob Turner in the wake of HurricaneFloyd. RAFI’s work with farmers shows that current disaster policy puts organicand specialty farmers at a disadvantage.Photo by Rob Amberg
producer has a smaller percentageof his return covered by moreexpensivepolicies. Becauseorganicproducers get lower crop insurancebeneﬁts for higher premiums, theyare less likely to participate in theprogram. Because they do notparticipate in the program, eventhough it is the correct ﬁnancialdecision, they are then excludedfrom crop loss payments.While the disadvantages areobvious for organic production,they are even more extreme formore recently emerging marketslike grass-fed beef, pastured porkor poultry, and vegetables marketeddirectly to restaurants or at farmersmarkets.The effects do not end with disasterprograms. When innovativefarmers go in to see their bankerto get operating loans, they are at aﬁnancial disadvantage. Operatingloans use the crop as collateral.Generallytheworthofthatcollateralis based on assured income, whichis determined by, you guessed it,crop insurance. Bankers seldomvalue specialty crops at their fullvalue without some assurancebecause, as one banker told RAFI,“Just because you can get that pricefor it doesn’t mean I can get thatprice for it if you go belly up.” Thelack of effective crop insurancedoesn’t just hurt in the event of adisaster, it hurts every time they goto the bank.Which brings us to the mostcommon disaster assistanceprogram; the emergency loanprogram. Emergency loans areavailable from local Farm ServicesAgency ofﬁces whenever a disasteris declared. They provide low-interest loans, usually around 3 ¾%for the amount of the documentedlosses. But the farmer still has tobe eligible for the loan, and mustshow repayment ability. Thatbudget is once again determined bythe valuation of the crop, and theavailability of crop insurance, andonce again the innovative farmer isat a disadvantage.In recent years a whole series offederal and state programs haveaimed at encouraging farmers tofollow emerging markets and carrythe value of their crops further intothe marketplace. But at the sametime, our agricultural ﬁnancialinfrastructure, determined byfederal policy, makes it almostimpossible to survive if they do.The bridge to the future becomes acliff. It is about time that our federalprograms reward those innovativefarmers who follow emergingmarkets and provide fresh fooddirectly to our communities.In the long term, we must developcrop insurance that provideseffective risk management forinnovative crops and markets.Programs like the Adjusted GrossRevenue crop insurance programshow some promise, but extremelyslow rates of adoption show thatthey are not yet effective. Beyondthese pilots, according to USDAofﬁcials, we are looking at 10 to 15years for the development of newprograms.In the mean time, which means inthis disaster supplemental and inthis farm bill, we must shift theterms of crop insurance and disasterprograms to recognize highervalue markets when the farmer candocument a price history, eliminatethe increased premium for organic,develop price and yield histories foralternative markets and address theneeds of our growing communityof farmers providing fresh foodsdirectly to consumers.We have all said that this is thetransition that we want to see. Wenow have to make it possible forfarmers to make it.RAFI is a nonproﬁt organizationthat works for community, equity,and diversity in agriculture. Formore information on RAFI or ourwork on disaster programs, visitour Web site, www.raﬁusa.org.