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Risk Management

Crop Insurance/Risk Management Information for Fruit Growers

The role of the USDA Risk Management Agency (RMA) is to help farmers manage their business risks through effective, market-based risk management solutions.  As part of this mission RMA, through the Federal Crop Insurance Corporation (FCIC), provides crop insurance to producers.  Fifteen private-sector insurance companies (commonly referred to as reinsurance companies) sell and service the policies. RMA develops and/or approves the premium rate, administers premium and expense subsidies, approves and supports products, and reinsures the companies.

Crop and revenue insurance are important risk management tools available to farmers.  The New England states have been identified as “underserved states” by RMA, primarily because the region’s farmers have not been significant users of crop insurance products. RMA, in collaboration with New England Land Grant Universities, State Departments of Agriculture and private industry associations, have been reaching out to growers and agricultural professionals to make them aware of the opportunities, as well as the limitations, of crop and revenue insurance policies.  The results of these efforts have led to improved farmer understanding and use of crop and revenue insurance products.

RMA continuously reviews and modifies insurance policies to better suit the particular needs of the region’s growers.  New England fruit growers who grow apples, blueberries, cranberries, grapes and peaches know the value of coverage for those crops.  Other crops can be covered as components of a whole farm revenue policy under the Whole Farm Revenue Protection (WFRP) policy.  Coverage under WFRP is based on total farm revenue, not production levels of individual insured crops.  WRFP is available in all counties in the country.

An important point to keep in mind is that coverage availability for individual crops varies by state and county.  Please check the RMA website or an authorized crop insurance sales agent to see which crops are available in your county.

If you grow a crop that is not covered by Federal crop insurance in your county you still have two options to obtain coverage on those crops.  1) Contact an authorized crop insurance sales agent to see if you could obtain coverage on the crop(s) under a "Written Agreement".  Even if an individual crop is not listed as an insured crop in your county, producers may request crop insurance coverage through a process called a “Written Agreement”.  A “Written Agreement” is a process completed by an authorized crop insurance sales agent that applies for coverage using actuarial data and prices for crops covered in other counties; or 2) The USDA-Farm Service Agency (FSA) administers the Noninsured Crop Disaster Assistance Program (NAP) which was developed to provide a basic level of coverage for non-insured crops in a county.

NAP offers catastrophic (CAT) coverage on losses over 50% of the producer's approved yield and losses are paid at 55% of the approved market price for the county.  Rather than paying an insurance premium for CAT coverage, producers have paid a service fee of $250/crop with a maximum of $750/county for CAT coverage.   Under provisions of the 2018 Farm Bill, the service fee will increase beginning in the 2020 crop year to $325/crop with a maximum of $825/county for CAT coverage.  The 2014 Farm Bill expanded NAP coverage to offer producers of noninsured crops “Buy-Up” coverage.  Under “Buy-Up” coverage a producer can elect coverage levels from 50 - 65% (in 5% increments) of the producer’s approved historical yield and losses are paid at 100% of the approved market price for the county.  The fee for “Buy-Up” coverage is a service fee of $250 (increasing to $325 in the 2020 crop year) plus a formula calculated by multiplying the acres of the crop times the producer’s historical yield for the crop times the coverage level times 5.25%.  Beginning, limited resource and traditionally underserved farmers are eligible for a waiver of the service fee plus a 50% reduction on the additional cost of “Buy-Up” coverage.  The 2018 Farm Bill has permanently authorized “Buy-Up” coverage under NAP.  Producers are encouraged to contact their local USDA-FSA Office for more information including sales closing deadlines for NAP.

For more information about RMA, crop insurance policies and risk management strategies go to the RMA website at  Specific information about polices for each New England State can be found under “Field Offices, Regional Office State Directory.” You can locate a crop insurance agent online at  Keep in mind that crop insurance agents are not employees of RMA or FCIC, rather, they are employed/contracted by private reinsurance companies.  Crop insurance agents are the professionals with on-the-ground experience and knowledge of what works and what doesn’t for a particular situation.  Part of the effort to improve service in New England includes increased communications with well-informed agents.  Your unique scenarios will help this to happen, whether or not you actually purchase coverage.

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

  • The volatility of farm income has increased significantly in recent years. Environmental and economic conditions have let to greater variability and uncertainty in farm sales and profits.
  • There has been a trend away from funding historical “ad hoc disaster programs” that have at times provided direct financial assistance to producers where losses have been catastrophic. Congress has been under constant pressure to share the management of risk with the farmer.
  • Lenders see crop insurance as a means to reduce their risk exposure, improving a farmer’s eligibility as well as an opportunity to secure better loan terms.
  • Crop and 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.  Under Federal Crop Insurance policies, the Federal Government subsidizes from 38 to 75 percent of the premium cost depending on the crop, type of policy and the coverage level selected by the grower, making crop insurance affordable to fruit growers.  

The Big Five: Types of Agricultural Risk

As you think about managing risk to stabilize farm income, there are five basic sources of agricultural risk that you should consider - production, marketing, financial, legal, and human resource management risks. There are different tools and strategies you can use to manage each of these risks.

1) Production Risks

Production risks relate to the possibility that your yield or output levels will be lower than anticipated.  Major sources of production risks arise from inclement weather conditions (such as drought, freezes, or excessive rainfall at harvest), but may also result from damage due to insect pests and disease.

Tools and Strategies:

  • Follow recommended production practices.
  • Diversify enterprises by growing different crops and varieties.
  • Expand production or plant excess acreage.
  • Purchase multi-peril crop insurance coverage to stabilize income.
  • Adopt appropriate technology such as drip irrigation, tile drainage, or resistant varieties.
  • Consider site selection - use or rent acreage less susceptible to specific pests or frost.
  • Maintain equipment and keep facilities in good working condition.

2) Marketing/Price Risks

Marketing risks relate to the possibility that you will lose the market for your products or that the price received will be less than expected. Common sources of marketing risk include lower prices due to increased supply or decreased consumer demand; loss of market access due to the relocation or closing of a processor or other buyer; and, lack of marketing power due to the small size of farm sellers relative to others in the market.

Tools and Strategies:

  • Develop a marketing plan with realistic sales forecasts and target prices.
  • Form or join a marketing cooperative to enhance prices and guarantee a market.
  • Increase direct marketing efforts to capture a higher price.
  • Market through multiple channels or outlets to reduce reliance on a single market.
  • Enter into sales or price contracts with buyers.
  • Spread harvest and sales over the season by scheduling planting and considering storage options.
  • Conduct basic market research - survey your customers.

3) Financial Risks

Financial risks relate to the possibility of having insufficient cash to meet expected obligations, lower than expected profits, and loss of net worth.  Sources of financial risk commonly result from the production and marketing risks described earlier.  In addition financial risks may also be caused by increases in key input costs, increases in interest rates, excessive borrowing, lack of adequate cash or credit reserves, and changes in exchange rates.

Tools and Strategies:

  • Develop a comprehensive business plan identifying mission, objectives and goals.
  • Monitor financial ratios and benchmarks related to liquidity, solvency and profitability.
  • Control key farm expenses.
  • Conduct a trend analysis to assess what’s happening with farm income and net worth over time.
  • Purchase whole farm revenue insurance, such as AGR or AGR-Lite, to provide a safety net.
  • Communicate with suppliers and lenders to review and renegotiate exiting contracts and loan terms.
  • Consider leasing and rental options rather than purchasing machinery, equipment or land.
  • Evaluate the possibility of business expansion (getting larger) or contraction (reducing size).
  • Control or defer unnecessary family and household expenditures.
  • Find off-farm employment for a family member, preferably a job with benefits such health insurance, group life insurance, and a retirement program.
  • Use non-farm investments such as IRAs or mutual funds to diversify your asset portfolio.

4) Legal and Environmental Risks

 In part, legal risks relate to fulfilling business agreements and contracts. Another major source of legal risk is tort liability, i.e., causing injury to another person or property due to negligence.  Legal risk is also related to environmental liability and concerns about water quality, erosion and pesticide use.

 Tools and Strategies:

  • Review business insurance policies and be certain to carry sufficient liability coverage.
  • Evaluate your choice of business legal structure; a sole proprietorship is not always the best business organization.
  • Understand business contracts and agreements; ask questions if you are unsure.
  • Take time to develop good relationships with neighbors and address their concerns.
  • Use good agricultural practices to limit environmental risk.
  • Know and follow State and Federal regulations related to your farming operation.

5) Human Resource Management Risks

Human resource risks pertain to risks associated with individuals and their relationships to each other, their families and the farm business. Sources of human resource risk include the three D’s: divorce, death, or disability of a business owner, manager, employee or family member.  It also includes risks arising from poor communications and people-management practices.

Tools and Strategies:

  • Develop and practice good “people skills” for family as well as employees.
  • Evaluate alternative sources of labor.
  • Provide adequate training for employees, formalized programs may help your safety record as well as improve performance.
  • Communicate with employees and family members.
  • Recognize and reward good performance.
  • Review estate and business transfer plans to help insure the farm continues.
  • Consider long-term care and life insurance needs.
Managing risk starts with identifying the most crucial risks you face; understanding the potential impacts and likelihood of undesirable outcomes; and, identifying and taking possible steps to mitigate or lessen the impacts.  It’s unlikely any one person understands all the areas of risk a farming operation faces.  If you don’t know the answer or find it difficult to initiate risk management planning on your own, seek assistance.

Originally written by Michael Sciabarrasi, Extension Professor, Agricultural Business Management, UNH Cooperative Extension and updated by Tom Smiarowski, Extension Educator, Crop Insurance/Risk Management Education, UMass Extension. Adapted from version appearing in prior edition.  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.