Price Analysis, Risk Assessment, and Insurance for Organic Crops
The Agricultural Risk Protection Act of 2000 recognized organic farming as a"good farming practice," making federal crop insurance coverage available for organiccrops, and taking into account the idiosyncrasies of the organic production system. Inaddition to the production risks covered for conventional producers, organic farmerswho sign up for coverage are compensated for production losses from damage due toinsects, disease, and/or weeds. However, the incorporation of organic production intothe crop insurance rating structure has been limited. Organic producers are charged anarbitrary 5% premium surcharge over conventional crop insurance. The actuarialfairness of this premium is, at least, questionable. In addition, in the case of crop failure,organic farmers receive compensation based on the prices of conventionally producedcrops. Thus, price premiums that organic producers are able to obtain in the market arenot compensated for under the current insurance policy structure.The Food, Conservation and Energy Act of 2008, which amends part of theFederal Crop Insurance Act, was written to investigate some of these claims, requiringthe U.S. Department of Agriculture to examine the currently offered federal cropinsurance coverage for organic crops as described in the organic policy provisions of theAct (Title XII). Such provisions established the need to review, among other things, theunderwriting risk and loss experience of organic crops; determine whether significant,consistent, or systematic variations in loss history exist between organic and nonorganicproduction; and modify the coverage for organic crops in accordance with the results.Here we present the major findings of three analyses we performed on keyelements of the insurance of organic cropsâ€”prices, yields, and revenueâ€”in an effort tocontribute to the design of an organic crop insurance policy that covers organicproducers according to their idiosyncratic risks.
|Date of creation:||21 Aug 2011|
|Date of revision:|
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- Delate, K. M. & Duffy, Michael & Chase, Craig A. & Holste, A. & Friedrich, H. & Wantate, N, 2003. "An Economic Comparison of Organic and Conventional Grain Crops in a Long-Term Agroecological Research (Ltar) Site in Iowa," Staff General Research Papers 11818, Iowa State University, Department of Economics.
- McBride, William D. & Greene, Catherine R., 2008. "The Profitability of Organic Soybean Production," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6449, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Klonsky, Karen & Greene, Catherine R., 2005. "Widespread Adoption of Organic Agriculture in the US: Are Market-Driven Policies Enough?," 2005 Annual meeting, July 24-27, Providence, RI 19382, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Loureiro, Maria L. & McCluskey, Jill J. & Mittelhammer, Ronald C., 2001. "Assessing Consumer Preferences For Organic, Eco-Labeled, And Regular Apples," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(02), December.
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