Protecting the 'whole farm'

BOWMAN, N.D. - Like all farmers and ranchers, Myles Richard wants to reduce financial risk. Now, the Bowman, N.D., farmer has a nearly new tool - whole farm revenue protection - to help with that.

"It's been an excellent fit on our farm," says Richard, who's using WFRP, as it's often called, for the second year. "I'm not saying it will be an ideal fit on every operation. But I strongly encourage farmers to invest the time to learn about it."

WFRP protects revenue from a farmer's entire farm, not just one crop. Launched in 2016 as a new option in the federal crop insurance program, it allows ag producers, who might not have access to crop or revenue insurance for each crop they grow, to insure all their crops and livestock in one policy.

What's more, WFRP, in some cases, allows farmers to insure "at much higher levels," and at lower premiums, says Kevin Hilton, a Bowman-based insurance representative for Farm Credit Services of Mandan/Bowman. Hilton also has clients in northwest South Dakota and eastern Montana.

WFRP appears to be particularly attractive in western South Dakota, western North Dakota and eastern Montana. Many ag producers in the area raise livestock, and whole farm revenue protection gives them an important new insurance option.

Many farmers in the area also raise multiple crops, some of which now, for the first time, can be covered by federal crop insurance. One example: Corn for grain hasn't been grown long enough in the western Dakotas and eastern Montana to be eligible for other federal crop insurance programs - but can be insured under WFRP.

Ag producers in the area have taken note, Hilton says.

Last year, he wrote three WFRP policies that covered about 9,000 acres. This year, he wrote 15 covering 90,000 acres.

Policies written by Hilton this year "cover everything from buffalo to sheep to cattle (and) basically every crop we can grow in southwest North Dakota," he says.

Final 2017 statistics from the U.S. Department of Agriculture's Risk Management Agency, which manages the federal crop insurance program, aren't available yet. But numbers through May 1 show farmers' growing interest:

• Montana: 145 WFRP policies sold in 2017, up from 140 in 2016.

• South Dakota: 103 policies sold this year, up from 36 last year.

• North Dakota: 46 policies sold this year, up from 15 last year.

Montana's higher numbers reflect, at least in part, that some crop insurance agents there work for companies based in the Pacific Northwest, where WFRP is particularly popular. That connection apparently encouraged Montana-based agents to offer whole farm revenue protection, according to information from the RMA.

By all accounts, whole farm revenue protection isn't easy to understand or simple to implement.

"Crop insurance agents and farmers/ranchers are still learning about the WFRP policy and its benefits, which is why there is growing interest," said Eric Bashore, a Billings, Mont.-based RMA regional office director. His region covers Montana, North Dakota, South Dakota and Wyoming.

"There's a heck of a learning curve on this. It's very complex. There are a lot of moving parts," Hilton says. "There's probably more moving pieces on this insurance than any other type of insurance the government has ever had."

Adopting WFRP requires a different way of looking at crop insurance, says Toby Stroh, assistant professor of agriculture at Dickinson State University in North Dakota.

In multi-peril crop insurance, each crop on a farm is treated separately. WFRP, in contrast, "puts an umbrella over the entire farm. Some producers just aren't going to be comfortable with that," at least not initially, says Stroh, who stresses he's not an expert on WFRP. "So it's going to take a paradigm shift to use this."

But he also says, "The producers today are very good. They're going to figure it out."

Reducing risk

Insurance is all about limiting risk. By raising more commodities, a producer diversifies his operation, reduces risk and becomes more attractive to insurers.

In WFRP, each additional commodity raised, up to seven, lowers the premium. More than seven can be covered, but having more doesn't reduce the premium.

Richard reaches the seven-commodity count, which contributes to WFRP's appeal. Raising many different crops is agronomically sound, too, he notes.

Don't equate WFRP solely with raising multiple crops, however.

Farmers who raise a single ag commodity that isn't eligible for multi-peril can get whole farm revenue protection, Hilton says.

But farmers who raise a single commodity that is eligible for multi-peril can't be insured through whole farm revenue protection, he says. For example, farmers in his area who raise only wheat - which is eligible for multi-peril - can't get WFRP.

Roadblocks, deadlines

Farming operations that have expanded significantly in the past few years might be underinsured with WFRP coverage, which is based on income from past years, Hilton says.

And farmers with existing catastrophic coverage, another farm insurance product, are prevented from having WFRP, he says.

It's too late for Upper Midwest farmers and ranchers to apply for whole farm revenue protection in 2017. The deadline was March 15. But producers would do well to start checking into WFRP for use in 2018, Richard says.

"It's not an easy thing to understand. But you really owe it to yourself to look into it," he says.

What is whole farm revenue protection? The U.S. Department of Agriculture's Risk Management Agency has this definition of whole farm revenue protection:

It "provides a risk management safety net for all commodities on the farm under one insurance policy. This insurance plan is tailored for any farm with up to $8.5 million in insured revenue, including farms with specialty or organic commodities (both crops and livestock), or those marketing to local, regional, farm-identity preserved, specialty, or direct markets.

To learn more: www.rma.usda.gov/pubs/rme/wfrpfactsheet.pdf .

Another option for farmers Federal crop insurance seeks to protect farmers from "unavoidable risk" associated with bad weather, crop disease and insects. Taxpayers pick up some of the cost, farmers the rest. Crop insurance policies are sold and serviced through private companies. The federal government subsidizes the program to keep it affordable.

But diversified, organic and specialty crop producers had been underserved by existing crop insurance programs, experts say. So, the 2014 farm bill directed the U.S. Department of Agriculture to develop programs to help those producers. Whole farm revenue protection, first available in all counties nationwide in 2016, seeks to do that.