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RMA: Proposed Revisions for Crop Insurance11-12-02 - Organic Trade Association
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RMA: Proposed Revisions for Crop Insurance 11-12-02

 

The Organic Trade Association Proposes Revisions to RMA’s Proposed Rule for Crop Insurance:

Comment on “Proposed Basic Provisions”, Fed. Reg. Vol. 67, No. 181, Sep. 18, 2002

 Submitted by Tom Hutcheson,
 Associate Policy Director

November 12, 2002

First, the Organic Trade Association thanks RMA very much for its willingness to extend the deadline so that those affected by the rule can have more of an opportunity to comment.


General Comments


In general, the definition of “good farming practices” and all regulatory references to “good farming practices” should be revised in the final rule.  The final rule should 1) distinguish between sustainable and organic farming practices and address both in each reference to good farming practices; 2) clearly place sustainable and organic practices on an equal footing with conventional practices; 3) include a strong statement of non-discrimination against sustainable and organic practices and systems; and 4) not require sustainable or organic farming systems to be commonly in use in a given geographic area in order for producers using those systems to be eligible.


The final rule should add a review process for “good farming practices” determinations to require that the producer be given an opportunity to review and respond to the evidence available to or considered by the agency staff person who made the original adverse determination.

The final rule should also include a clear statement that organic crop insurance coverage (a) will not include insurance premium surcharges and (b) will include full recognition of organic price premiums when making indemnity payments.

To support farmers’ choices in transitioning to organic production, the final rule should include a provision for a waiver with respect to multiyear record requirements in the case of farmers transitioning to organic.  The same waiver should apply to beginning farmers so that they are not precluded from obtaining insurance.

OTA strongly supports the proposal to eliminate the mandatory arbitration requirement in disputes between producers and the government and disputes between producers and insurance companies.  (Mandatory arbitration can be quite costly to the producer and eliminates access to any other form of dispute resolution.)

Specific Comments


Definitions of Good Farming Practices and Sustainable Agriculture Practices Deficient


OTA has serious concerns with the proposed definition for “good farming practices” and urges that significant revisions be made in the final rule.


The existing definition for good farming practices reads as follows:

“Good farming practices. The cultural practices generally in use in the county for the crop to make normal progress toward maturity and produce at least the yield used to determine the production guarantee or amount of insurance, and are those recognized by the Cooperative State Research, Education, and Extension Service as compatible with agronomic and weather conditions in the county.”  (7 CFR 457(b))


Congress addressed the issue of good farming practices in the Agricultural Risk Protection Act of 2000 (ARPA) due to an outpouring of instances in which “cultural practices generally in use in the county” and “recognized by…Extension Service” resulted in producers using sustainable and organic farming systems and practices being discriminated against in seeking insurance and settling claims.  In ARPA, Congress amended Section 508(a) of the Federal Crop Insurance Act to change the general exclusion of losses due to failure of the producer to follow good farming practices to “the failure of the producer to follow good farming practices, including scientifically sound sustainable and organic farming practices.” (ARPA, Section 123).


The House Committee Report (106-300) with respect to this provision directs FCIC “to establish specific guidelines defining what constitutes good farming practices relative to producers engaged in scientifically sound sustainable and organic farming practices”  (page 34).


The Senate Committee Report (106-247) further clarifies the intent of Congress:

“The Committee is aware of anecdotal reports from producers utilizing sustainable or organic farming systems that describe discriminatory treatment resulting from narrow definitions of “good farming practices” that fail to adequately recognize non-conventional farming methods.  By clarifying that “good farming practices” includes “scientifically sound sustainable and organic farming practices,” the Committee intends for the Department to develop guidelines that will minimize any such future discrimination.  The Committee also encourages the Department to continue and increase efforts to involve crop insurers, lenders, and other farming-related businesses in educational and training activities exploring alternative farming systems and opportunities” (page17).


The proposed new definition (pages 58921 and 58926) substitutes “commonly used in the area” for the current “generally in use in the county,” inserts the clause “including sustainable farming practices” immediately following, and substitutes FCIC for CSREES.  In Part 407, but not in Part 457, the definition includes reference to organic practices approved under the Federal Organic Food Production Act.  The proposed revised definition also adds a new requirement that producers who are not using conventional practices should contact the insurance company to determine if their sustainable and organic practices are insurable.  By reference, the new definition also incorporates a new proposed definition of sustainable farming practice as any “system or process” recognized by NRCS as conserving or enhancing natural resources and the environment.


The proposed definition seems unclear and does not sufficiently incorporate the intent of Congress in ARPA.  The problems with the proposal are multiple and interrelated.


First, despite the clear intent of Congress for the agency to fix the problem of discrimination, the standard in the revised definition continues to be conventional, unsustainable practices rather than the full range of conventional and alternative systems.  OTA recommends the final rule reword the definition to either put conventional and sustainable or organic practices on an equal footing in a single sentence, or separating them into two clear and distinct sentences of equal weight and status.


Second, the proposed definition in Part 457 fails to include organic systems and refers only to sustainable practices, again despite the clear language of ARPA.  The proposed new section 37 of Part 457, pertaining to organic farming, does include as subsection (f): “In addition to the applicable definition of “good farming practices”, organic farming practices will be considered to be good farming practices if they are those specified in the organic plan.”  This seems unnecessarily confusing.  OTA recommends the reference be placed directly into the definition and that in each occurrence of the definition a clear reference be made to “sustainable and organic”, not just “sustainable”, practices.


Third, the sole reference to sustainable practices is inserted into the sentence in such a way as to imply only “conventional” sustainable practices are acceptable, as if there must be a critical mass of such producers in a given county or area for the non-discrimination policy to hold.  This also seems to contradict congressional intent.  Again, OTA recommends equal footing be given to sustainable and organic practices and that non-discrimination be across the board and without regard to the number of alternative producers in a given area.


Fourth, the third problem identified above is compounded by the narrow definition proposed for sustainable practices.  The proposed definition makes sustainable farming practices synonymous with conservation practice standards in the local NRCS Field Office Technical Guide.  Yet Congress has on several occasions, including in the recently passed Farm Security and Rural Investment Act of 2002, provided opportunity for producer-based research, demonstration, and pilot testing of alternative approaches to conventional conservation practices precisely to expand the domain of the technical guides to include innovative, sustainable practices.


OTA believes that FCIC’s assigned task of creating guidelines for sustainable and organic practices in incomplete if it merely cross-references another agency’s criteria for conservation practices without review to determine the adequacy of those standards for crop insurance purposes.  OTA recommends a more accurate definition be used for sustainable practices be placed in the final rule.  At the very least, it should reflect the existing statutory definition of sustainable agriculture (17 U.S.C. 3103(17)), though a more detailed definition would offer more direct guidance and be preferable.  The revised definition could then incorporate an “including” clause to reference the NRCS approved practices and systems. OTA notes that the Sustainable Agriculture Coalition is in a position to offer a more detailed definition that expands on the statutory definition of sustainable agriculture and would help address the congressional concern giving rise to the ARPA Section 123 provision.


Fifth, the definition is very unclear with regard to who is making the determination of what constitute good farming practices.  FCIC, NRCS, and private insurers are all referenced or cross-referenced, while CSREES has been specifically deleted.  Perhaps the intention of the revision is for FCIC to make the determinations.  However, OTA is unaware of any guidelines from FCIC defining good farming practices.  If guidelines are being developed, OTA strongly encourages the agency to make them available for public notice and comment.


The final sentence of the proposed new definition seems to imply that insurance companies will make these determinations.  OTA does not believe most insurance providers are sufficiently competent to make these determinations.  If they were, the discrimination problem that Congress was addressing in ARPA would not exist to begin with.


Organic farmers have built their businesses on an experimental approach to developing innovative approaches to incorporating ecological principles into agriculture.  It is these farmer scientists who have led the way in establishing the scientific validity of ecological production.  OTA appreciates FCIC’s necessary concern to avoid paying farmers for engaging in inappropriate or even fraudulent practices.  However, OTA urges you to differentiate the innovative practices and good faith experiments of the current leaders in agricultural innovation from inappropriate or fraudulent activity.


To that end, OTA proposes that RMA consult with USDA’s Agricultural Research Service (ARS) and the Organic Farming Research Foundation in developing a framework for good sustainable and organic farming practices definition that recognizes current practices as well as providing provisions for the kind of experimentation—for instance, in varied and complex crop rotations—that may be unfamiliar to

RMA but have made organic farming the successful and reliable practice it is today.

Substituting FCIC and NRCS as arbiters in place of Extension does little if anything to rectify the problem absent clear guidelines and a plan of action.  We recommend the final rule provide far greater clarity about how good farming practice decisions will be made and by whom, and how they will be communicated to all parties.  We also recommend the agency take to heart the words of the Senate report and “increase efforts to involve crop insurers, lenders, and other farming-related businesses in educational and training activities exploring alternative farming systems and opportunities.”  In the long run, insufficient knowledge and training in sustainable and organic farming systems will result in the continuation of existing problems in serving the steadily growing alternative agriculture sector.


Finally, and perhaps most importantly, the proposed new definition in essence places the burden of proof on sustainable and organic producers to demonstrate they are in compliance with a vague, ill-defined “good farming practices” standard.  Once again, this is in contradiction to the intent of Congress that the agency issue guidelines to reduce discrimination.  It is unfair to victims of discrimination to force them to accept the burden of proving their insurability absent at the very least a strong, clear statement prohibiting discrimination and a clear, accurate definition of sustainable farming practices.


In summary, we recommend the final rule substantially rewrite this definition to place scientifically sound sustainable and organic practices on an equal footing with conventional practices and to include a clear, strong, and direct policy statement on anti-discrimination, utilize a more sufficient definition of sustainable farming practices, incorporate references to organic practices directly in the good farming practice definition, and remove any suggestion that the burden of proof lies with the producer or that private insurers will be the final arbiters of what constitutes good farming practices.


Moreover, beyond the definition itself, all references to “good farming practices” need to reflect the ARPA Section 123 provision.  For instance, in 407.9(3)(c)(2) the statement is made that insurance will not be available if good farming practices are not followed, with the unqualified warning that if “any farming practice is not established or widely used in the area, it may not be considered a good farming practice.”  In this instance, there is not even an attempt to reflect the ARPA provision in question.  This sentence if clearly deficient and at odds with the statute and must be changed.  By the same token, 457.8(b)(2) states, “if any farming practice, type, class, or variety is not established or widely used in the area, it may not be considered a good farming practice.”  This sentence also fails to reflect the ARPA provision and should be modified in the final rule.


Buffer Zones


OTA recommends the proposed definition be changed to allow the buffer acreage on a certified organic operation to be accounted sufficient for insurance purposes, and for a correction in language to reflect the reality that no buffer zone can prevent the possibility of unintended contact with substances prohibited in organic production.


New Organic Farming Practices Section Begs Questions Raised by Suspension of Insurance on Organic Farming Practices in Summer of 2001


Over a year ago, RMA suspended insurance on organic farming practices for all crops.  The major issues raised then by the organic community – the organic premium surcharge based on a perception of risk not backed by evidence, the refusal to account for the organic price premium, and the need for insurance against risks of drift and GMO contamination – are still not addressed in this proposed rule.  While the proposed rule does add the possibility of organic insurance based on actuarial information in the future, the likelihood of organic policies based on anything but written agreements in the near term is small.  That leaves most producers with the unenviable choice of insuring under biased and economically untenable written agreements (as witnessed by the 2001 offering), insuring without written agreement and facing continued bias against organic farming practices despite the attempt by Congress to eliminate such discrimination, or doing without insurance.


Organic producers should not be expected to agree to insurance by written agreement if they are forced to pay more than other producers and receive no benefit from their price premium on claims.  While the provisions of 457.37 provide some basic regulatory framework for future organic policies, they do nothing to resolve the most basic and important questions confronting the agency with respect to organic coverage.  OTA recommends the final rule at least add a clear statement that organic coverage by written agreement cannot and will not include premium surcharges not backed by solid scientific evidence and will include recognition of relevant, real world price premiums.  Anything short of such a revision to the proposed rule would appear to continue an institutional bias against organic farming more than two years after Congress changed the crop insurance statute to prohibit such discrimination.


OTA Supports Elimination of Mandatory Arbitration

OTA supports the deletion of mandatory arbitration in 407.16 and 457.20 and agree with the rationale provided in the abstract to the rule.  Mandatory arbitration can be costly, has proven to be ineffective in many instances, and has overreached its original objectives.


OTA Supports Expansion of Definition of Beneficial Interest


The proposed addition to the definition of substantial beneficial interest greatly diminishes the chances for spouses to manipulate the system unfairly for their benefit.  Two other proposed new requirements -- that all entities with 10 percent or greater interests in an operation to provide social security numbers and that a single policy be required where the same people are involved in multiple farming operations -- also would help prevent fraud and abuse.


Limited Resource Producer Definition Is Over-Restrictive


The preamble to the rule specifically solicits comments with respect to the definition of “limited resource farmer” under consideration by USDA agencies.  We believe the two-fold definition presented is overly restrictive and should be amended.  Total household income and annual gross farm sales cannot be neatly correlated from year to year. OTA proposes a revision of the maximum gross farm sales number from $100,000 to $250,000 and the deletion of the farm assets and household income tests in the first factor. 


OTA also calls attention to the fact that 75% of county median income in many of the most rural and farming dependent counties in the country would be considerably below the poverty line.  OTA supports a revision to the second test from 75% of median county income to at least 175% of the relevant poverty line.


Thank you for your consideration.

 
 
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