USDA Whole Farm Revenue Protection
- [Instructor] Getting crop insurance coverage is an important consideration for all farmers.
The Federal Crop Insurance Program was established in the 1930s to protect agricultural producers from yield losses from most natural causes.
Although the program was used on a limited basis for its first 50 years, mostly in the mid-west, in the early 1980s coverages were expanded and producer premium subsidies were increased making it more appealing to all producers.
Although price loss coverage, agricultural risk coverage and supplemental coverage option policies will apply to one kind of commodity, such as wheat, feed grains, soybeans and so on.
Whole farm revenue protection is a program that insures the income from all the crops or livestock produced on the farm.
WFRP insurance coverage benefits diversified crop and livestock farms by providing income protection for everything produced at a very low cost.
WFRP insurance covers losses from natural causes like other crop insurance products, as well as unexpected declining market prices within the production year.
You may still insure individual crops under traditional crop insurance programs and use WFRP to provide a blanket protection much like your farm owners policy.
This program works well for producers of vegetable crops where crop insurance products are not available.
It also provides good coverage for livestock producers since the income from the sale of the livestock and crops may be insured up to 85% of the historical value.
The product provides protection up to an $8.5 million liability limit with a premium subsidy of 50% to 80% when at least two crops are produced.
Additional premium discount is provided for increased diversification, which is stair stepped up to seven crops produced.
This product also includes some incidental market readiness expenses necessary to make the crop ready for sale such as washing, trimming and packaging.
Another insurance feature is replant coverage for crop loss early enough to allow replanting.
A limitation of WFRP is that eligibility is denied if expected revenue from animal products or nursery commodities is greater than $1 million.
This may also be used in combination with an existing nursery policy.
You will need to keep certain things in mind in order to get WFRP coverage for your farm.
You'll need Internal Revenue Service 1040 schedule F documents, one for each of the previous five years to be eligible to apply for WFRP since coverage is based on the revenues filed over that five year period.
Pre-qualified new and beginning farmers can purchase the coverage with three years records.
The sales closing date for WFRP is March 15 in most places, but it depends on the county in which you live.
It might also be January 31 or February 28 so it is not good to wait until the closing date to apply.
The discussion with your crop insurance sales person and verification of documents for this product may take several days to complete.
If you are a tree fruit grower considering WFRP, a discussion with your crop insurance sales person should take place before November 20, the sales closing date for individual fruit crop policies to better protect your crop and income.
For farms with corporate business structures such as C or S corporations, your sales person can transfer the necessary information from these tax documents into the required documents for WFRP.
Here's an example of WFRP coverage focusing on a Cumberland County New Jersey farm.
Please bear in mind that it is just an example.
Your coverage may be very different due to unique aspects of your operation.
As you can see, the sample farm has a variety of products all listed under one WFRP policy.
Adding all anticipated returns from production, the total approved revenue that is insured is $50,000.
As we discussed initially revenues can be insurance up to 85% of historic values.
In this case, 75% of the $50,000 is insured.
This leads to a total premium of $2,325.
The USDA backed subsidy in this case is $1,860 so the farmer is only required to pay $465.
You'll need to keep certain things in mind in order to get adequate WFRP coverage for your farm making sure that your unique circumstances are all covered.
While each farm is very different, there are certain items that you will want to prepare and take along with you when meeting with your crop insurance broker.
You'll need to complete the application for whole farm revenue protection.
You'll want to have a good handle on the farm history for the past five years including any explanations for higher or lower revenues.
Of course you'll want to have copies handy of your most recent schedule F to prove what your income was for the previous tax year and a farm operation report.
Your allowable expenses should be well documented as well as your allowable revenues for coverage.
If applicable, you should have beginning and end of the year inventory reports for any covered items that are regularly produced in one year, but sold in the next.
If applicable, you should have accounts receivable and payable reports that show items that you ordinarily sell in one year, but for which revenues don't actually hit your checkbook until the following year.
You should also have record of revenues from items purchased for resale purposes to deduct from the total income since you did not grow these items yourself.
If market animals or nursery commodities are being covered, you'll need to have an inventory and accounting worksheet.
And finally, you'll need to have a verifiable complete marketing record for each commodity.
You can also get much information about whole farm revenue protection by visiting the USDA Risk Management Agency's website.
Now that you know where to start, it's time to take action.
If you need to find a certified crop insurance sales person in your area, go to the Risk Management Agency website listed here to begin the process.
You'll be glad you did.
We thank USDA for funding that has helped to support development of this program addressing proactive farm risk management strategies.