Crop Insurance Today Third Quarter 2019 - 8

C r o p I n s u r a n c e
VisitWebsite
ag-risk.org

Whole-Farm Revenue Protection
Myths and Misperceptions
By Dean Strasser, NCIS

Producers of agricultural commodities are as
varied in their approach to farming as baseball
players are in their approach to hitting a baseball.
In today's agriculture, much like baseball, there
exists analytics for every facet of the game we
call farming. However, all farms have common
objectives; grow an exceptional product, stay in
business, and do even better next year.
The Federal crop insurance program has many
options for farmers to manage their risks and stay
in business. The Whole-Farm Revenue Protection (WFRP) product is the single most flexible
policy available to farmers that grow crops that
don't have a traditional Federal crop insurance
policy available. Many of the traditional products
cover commodities that have established markets
where the price guarantee is derived from commodity exchanges. Those products do not work
very well for farmers that grow niche market
commodities or sell directly to the public. WFRP
was also designed to work for farmers producing
a combination of commodities not covered by
another Federal crop insurance product as well
as those that are covered. Let's take a look at how
the WFRP policy works.
To begin, an insurance guarantee needs to
be established based on records provided by the
farmer. As mentioned earlier, no two farming operations are the same with each having their own
unique approach to producing commodities and
organizational structure. Establishing the WFRP
protection guarantee starts with building a revenue history. This information is gathered over a
specified period of years from an individual's tax
forms and other supporting records, primarily
information entered on the IRS Schedule F. However, not all entity types are required to complete
a Schedule F for tax reporting purposes. Without getting into too many details, these types of
entities must complete and submit a substitute
8

THIRDQUARTER2019

Schedule F for each year in the WFRP history
period. As the name infers, WFRP covers the
"whole" farming operation. It is very important
that farmers provide their crop insurance agent
with information about their organizational
structure, including pass-through and other related entities.
Next the farmer submits a farm plan to his/
her agent known as an "Intended Farm Operation Report." This plan will include many of the
same details that a farmer might provide to their
lender. Questions such as: which commodities
he/she intends to produce in the coming year
and number of acres of each; how many bushels/

The Federal crop insurance
program has many options
for farmers to manage
their risks and stay
in business.

pounds/head, etc., per acre or total is expected;
what price he/she can expect to receive; current
inventory or storage data; accounts receivables
and payables; and, the share of each of the commodities are just a few of the determinations a
farmer must report. Later in the policy year, the
farmer is afforded the opportunity to update the
Farm Operation Report with actual plantings,
purchases for resale, changes in intentions (subject to specified limitations), etc., that would affect the expected revenue of the operation.
The amount of insurance coverage provided
is a comparison of the result of the previous two
paragraphs. The amount of revenue produced
by the farming operation determined from the
Whole-Farm history period is compared to the
amount of revenue that the farming operation
is expected to produce based on the farm plan.
It is the lesser of these two amounts that form
the basis of coverage. There are adjustments
that can increase coverage when an operation
is showing a trend of increasing revenues or

http://www.ag-risk.org

Crop Insurance Today Third Quarter 2019

Table of Contents for the Digital Edition of Crop Insurance Today Third Quarter 2019