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Updated 6/07/06

Insurance and Risk Management

Food and Farming Business Resource: Managing Risk in Today's Agricultural Systems

Successful businesses identify what their risks are, and develop strategies to effectively reduce them. Wall Street companies do a "SWAT" analysis; this refers to knowing their Strengths, Weaknesses, Opportunities and Threats. Farm operations should simply think through what are the things that would keep me from being successful? What are some worst case scenarios for me? Most likely the worst things won't happen, but if you have a plan in place to deal with them they won't wake you up in the middle of the night, and should some of them occur, you are ready to respond quickly with effective solutions. In addition to the links on this page you will also want to see the business plan section on the Operating Efficiently/Growing Your Business page for ideas on how to plan ahead for possible risk factors.

photo by Leslie Zenz

Insurance

Insurance is often one of the most overlooked pieces of running a farm business. In today's litigious culture, it is wise to have adequate coverage for all your farm activities. Insurance coverage can be found for nearly any activity in which you wish to engage. However, the cost of coverage may not be economically viable for your farm. Shop around for the insurance that best suits your needs, and carefully balance this into your farm business plan.

If your farming operation is very small, you may be able to simply add coverage to your homeowner's policy. Larger operations may require a farm policy that includes property coverage as well as liability coverage for physical injury and ingested food products. A farm policy can also cover a roadside stand, whether or not it is on your property, and may be extended by endorsement to cover a farmers market stand. Farms that process foods or sell primarily flowers or other non-edibles may require a Commercial General Liability policy.

Small Business Insurance Publications from the Office of the Insurance Commissioner
http://www.insurance.wa.gov/publications/inspublications_smallbusiness.asp

Risk Management Agency / U.S. Department of Agriculture http://www.rma.usda.gov/
The RMA web page is an excellent resource for producers, agribusinesses and others interested in the Federal crop insurance program. The site supports RMA's primary goal to foster, at reasonable cost, an environment of financial stability, safety, and confidence, enabling the American agricultural producer to manage the perils associated with nature and markets.

Building a Risk Management Plan
http://www.rma.usda.gov/pubs/1998/barmp/index.html
Research indicates that the typical agribusiness, in terms of risk management, tend to only address marketing fundamentals or crop insurance. Instead, farmers need to understand all components of risk and be able to put together a comprehensive risk management plan. The goal is to help you increase your profitability and prosper in this new era of free-market agriculture. How does your farm rate? In this excellent risk management guide there are two short quizzes to help you gain some perspective. First, you will measure your knowledge and use of risk management tools. Then, rate your farm's financial strength. You may be surprised! This guide gives you a lot of easy to read information as well as many useful contacts to help you improve your risk management.

Introduction to Risk Management Brochure
http://www.rma.usda.gov/pubs/1997/riskmgmt.pdf

Crop insurance policy (Where to find)
http://www.rma.usda.gov/policies/

RMA Pilot Programs
http://www.rma.usda.gov/pilots/

To calculate your crop insurance premium
http://www.rma.usda.gov/tools/

Insurance Resources for Farmers
http://www.metrokc.gov/wsu%2Dce/agriculture/PDFs/Insurance.pdf
This is a very comprehensive website that provides clear explanations of types of insurance and why you need them. It also contains links to many resources to help you find good coverage.

Adjusted Gross Revenue Lite
In the past, many small-scale operations that produce a wide variety of crops found crop insurance to be unavailable for many of their crops. However, in 2004, Washington producers gained access to a crop insurance program called Adjusted Gross Revenue Lite (AGR-Lite). This program covers revenue losses due to natural disaster or market downturns for agriculture commodities produced during the insurance year (based on your tax schedule F). AGR-Lite covers organic and direct marketing farms as well as more conventional operations.

Advantages of AGR-Lite Crop Insurance
AGR-Lite crop insurance allows a producer to cover multiple types of crops under one umbrella. It provides reimbursement for lost revenue on a sliding scale, depending on the level of coverage chosen. A portion of the premium may be paid by the government, and this coverage can be combined with other Federal crop insurance programs.

Locate Your Nearest Insurance Agent
For information about federal crop insurance or AGR-Lite contact your insurance agent. For a list of insurance agents in the state of Washington visit the Insurance Provider Directory from the USDA Risk Management Agency or the Agent Locator List from RMA

Insurance Providers Directory for 2006
http://www3.rma.usda.gov/tools/agents/companies/

RMA Agent Locator List for 2006
http://www3.rma.usda.gov/tools/agents/companies/

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Food Safety

The safety of the food your business produces is a number one concern for the public and government agencies. The following links outline regulations and best practices for food safety compliance.

Safe Handling of Farm Produce
http://king.wsu.edu/agriculture/PDFs/SafeProduce.pdf

"The Green Book" Handbook of Regulations for Direct Farm Marketing
/Marketing/SmallFarm/docs/greenbook.aspx
This publication contains information about the regulatory landscape governing the sales of farm products in Washington State. It is a comprehensive guide to direct marketing strategies and contains an extensive resource section of organizations and relevant publications.

Food Safety
http://vm.cfsan.fda.gov/~dms/prodguid.html
FDA Publication "Good Agricultural Practices"

Food Labeling Guide
http://www.cfsan.fda.gov/~dms/flg-5-1.html

Food Processors License Handbook
http://www.agr.wa.gov/FoodAnimal/FoodProcessors/LicenseHandbook.aspx

Matrix of rules & regulations for Food Processing
www.agr.wa.gov/foodanimal/foodprocessors/default.htm

Field Sanitation
http://www.hort.cornell.edu/commercialvegetables/issues/foodsafe.html#Post-Harvest%20Handling

Good Agricultural Practices Program
http://www.gaps.cornell.edu/
Unprocessed fruits and vegetables can be at risk for microbiological contamination during production and harvest. The USDA, FDA and CDC developed the Good Agricultural Practices. These guidelines are the standard for safe harvesting and handling procedures.

Hazard Analysis and Critical Control Points Program Guidelines
http://smallfarms.wsu.edu/marketing/onfarmprocessing.html#H

Disaster Preparedness for Livestock
http://king.wsu.edu/agriculture/PDFs/DstrPrep.pdf
This webpage is a simple PDF file that provides a list of supplies, a Dietary Chart, and on the second page a very good outline for developing a your own Farm Disaster Preparedness plan.

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