If you’ve found that most traditional crop insurance programs don’t fit your farming operation, there is a relatively new program that might help you reduce both production and marketing risks.
Instead of insuring individual crops, the Adjusted Gross Revenue-Lite program – or AGR-Lite – provides whole-farm revenue protection against market fluctuations as well as natural disasters such as drought or flood. It covers crops that are otherwise difficult or impossible to insure (such as forage, fruit and vegetables), as well as revenue from animals and animal products.
AGR-Lite is especially well-suited for those faced with volatile markets or where weather can radically affect crop quality. If you raise meat goats, for example, and prices plummet when cheap imports flood the market, you’re covered. Or if your fresh-market apples are hit by hail and you have to sell them for processing, AGR-Lite coverage can help make up some of the difference.
This program also rewards diversification by providing better coverage and lower premiums for farms that produce two or more crops.
To improve the program for 2006, the USDA Risk Management Agency recently increased the maximum liability from $250,000 to $1 million and extended the closing date to March 15. That should give you with plenty of time this winter to investigate whether or not AGR-Lite is a smart risk management strategy for you.
How It Works
The Pennsylvania Department of Agriculture pioneered AGR-Lite in 2003, specifically to respond to needs of small farms. The following year, it was offered to farmers in New York and 11 other Northeast states.
AGR-Lite is very, very different from most traditional crop insurance programs where you buy coverage for each crop. Here, one plan covers the whole farm. It’s like a revenue safety net that’s not tied to individual crops.
Instead, AGR-Lite uses historic tax information (you’ll need to dig out 5-year’s-worth of IRS 1040 Schedule F’s) to determine your average insurable revenue. If you’re a growing operation, there’s an indexing system that takes increasing revenue into account. When you apply, you’ll also submit a farm report that details what crops and livestock you intend to produce and their expected revenue for the insured year.
Coverage levels (which determine how low your revenue needs to drop before indemnity payments kick in) range from 65 to 80 percent, based on how many crops you grow. The more you grow (up to four crops), the higher you can choose your coverage. Then you can choose payment levels between 65 and 90 percent. These determine how much of your loss below your coverage level will be reimbursed.
For example, say your coverage level was 80 percent, your payment level was 90 percent, and your insurable revenue was $100,000. If bad weather or markets forced your revenue down to $70,000, that’s $10,000 below your 80 percent coverage level ($80,000). You’d receive a nice check for $9,000 (90 percent of your loss below the coverage level).
Premiums are subsidized by about 50 percent, which make them a good value if the coverage matches your needs. But I still see farmers get sticker shock even though the premiums amount to only about 1 to 3 percent of gross revenue.
Works For Organic Farmers, Too
You can combine AGR-Lite with other insurance programs. If you grow lots of sweet corn, for example, you can insure that with traditional crop insurance and use AGR-Lite to cover your overall revenue. If this is the case, your AGR-Lite premium will be reduced.
But AGR-Lite isn’t a panacea. It doesn’t absolve you of your responsibilities to farm well. It’s designed to cover revenue losses from market fluctuations and unavoidable natural perils, such as drought or hail or even delayed planting caused by wet weather. But payments will not be made for losses due to negligence, mismanagement or wrongdoing by you, your family, employees or others.
For example, if drought dries up your irrigation well and your revenue is reduced, you’re covered. But if there’s water in the well and you fail to maintain the pump, you’re not. Similarly, if a storm causes a power outage and crops in the cooler spoil, you’re covered. But if your compressor breaks down, you’re not. Same goes for other mechanical failures, theft or failure to use “accepted production practices.”
Fortunately for organic farmers, certified organic production is considered an accepted practice.
The Fine Print
That’s the gist of the program. But there are more details that you should discuss with your insurance agent – many designed to prevent people from taking unfair advantage of the program. Also, keep in mind that:
One other consideration: Because the program is based on revenue – not crop losses – you can’t file your claim until you file your taxes. So you won’t get immediate cash in case of a crop failure like you would with traditional crop insurance. As with traditional programs, you should still report major problems (like when the well runs dry) to your insurance agent within 72 hours and document them when they occur. It’s important to have a good working relationship with your insurance agent.
So how can you tell whether or not AGR-Lite is worth looking into? Why not go ahead and dig out those Schedule F’s. Has your income been erratic or consistent? If erratic due to fluctuating markets and fickle weather, it’s more likely that this program might work for you.
If you like figuring things out for yourself, you can visit our Risk Management for Horticultural Crops website to read more about AGR-Lite. There’s also an online tool at the USDA’s Risk Management Agency website that can help you calculate AGR-Lite premiums.
You should also talk to a crop insurance agent and attend one of the educational meetings sponsored by the New York State Crop Insurance Education Program, or similar programs in other states. See Resource spotlight sidebar for more information on all of these follow-up steps.
Wen-fei Uva is a Senior Extension Associate in the Department of Applied Economics and Management at Cornell University’s College of Agriculture and Life Sciences. Craig Cramer is a Communications Specialist in the Department of Horticulture.
Here are more resources to help you make decisions about AGR-Lite:
Educational sessions – The New York State Crop Insurance Education Program (CIE) sponsors educational events explaining AGR-Lite and other insurance programs and risk management strategies.
Look for events in your area on the New York State Department of Agriculture and Markets crop insurance calendar or the NY Farms! calendar. For more information, contact Christopher Reed, CIE program manager: (518) 672-7743 or chr@capital.net.
Other states have similar programs. Here are key contacts:
Connecticut
Norman Bender, University of Connecticut, 860-885-2827, norman.bender@uconn.edu.
Massachusetts
Rick Chandler, Massachusetts Department of Agricultural Resources 413-577-0459, rchandler@umext.umass.edu
Kathy Ruhf, Northeast Sustainable Agriculture Working Group 413-323-9878 kzruhf@verizon.net
Pennsylvania
Gene Gantz, USDA Risk Management Agency, 717-497-6398,
gantz@pa.net
Kyle Nagurny, Pennsylvania Department of Agriculture, 717-772-3094, knagurny@state.pa.us
New Jersey
Sharon Kinsey, N.J. Department of Agriculture, 609-984-1966,
agmkins@ag.state.nj.us
Or check with your local Cooperative Extension or FSA office.
Crop insurance agents – If you are considering AGR-Lite or other options, it helps to work with a trusted crop insurance agent. Word of mouth is a good way to find one. Your county’s FSA office can provide a list of local agents, or you can find agents through the USDA Risk Management Agency's website.
Risk Management for Horticultural Crops – Cornell Department of Applied Economics and Management website includes comparison of AGR and AGR-Lite programs, AGR-Lite case studies and more crop insurance and risk management resources.
USDA Risk Management Agency hosts an online Premium calculator that allows you calculate AGR-Lite premiums.
- Reprinted with permission from Small Farms Journal
