Organic producers are not happy with their crop insurance.
Maurice Gaultier, Manitoba Agricultural Services Corporation (MASC) insurance sales and service manager for the southern region, faced pointed questions Jan. 18 during his organic insurance update at Ag Days.
MASC and the Manitoba Organic Alliance have been looking for a middle road on insurance for months. Both have said that the program is not working as it stands. Farmer uptake lags, there are wide concerns over valuation and MASC’s bottom line lands in the red every season.
There will be no substantial changes to the program this year and a 2019 timeline is still questionable as well, Gaultier said, to the disappointment of the crowd.
MASC’s price valuation falls far short of what a producer could expect on the market.
The insurance provider values oats and wheat at 1-1/2 times their conventional price, a bar that both sides agree is below market price. Flax, meanwhile, doubles its value.
Organic red spring wheat is valued at $9.39 per bushel, while winter wheat brings in $6.94, oats are valued at $4.16 and flax goes up to $22.10 a bushel.
Those prices are “a joke,” producers told Gaultier Jan. 18.
“It hasn’t been $9 in 10 years,” one listener said when presented with wheat valuation numbers.
Yuri Genik, who farms near Dauphin, estimates that the actual price point lies between two and four times conventional prices.
MASC, however, argues that it is already losing money from the organic program.
The corporation lost about $300,000 on the organic program between 2005 and 2015, Doug Wilcox, MASC manager of insurance program development, said during the Manitoba Organic Alliance annual meeting in October.
“We’re paying out far more than what the premium is actually bringing in,” Gaultier said.
Higher values will also come with higher premiums, MASC warns. Organic wheat now comes with a $17.72 per acre premium, compared to $6.22 for conventional, while flax will cost the producer $20.74 an acre, compared to $7.27 in conventional flax. The spread is tighter for oats, at $13.34 compared to $6 per acre for conventional.
Gaultier also noted that a producer’s coverage will improve with successful years. There is a 10-year transition for each crop before probable yield is based entirely on individual yield, although the corporation also has a five-year fast track for new organic producers.
Genik isn’t totally satisfied with that argument.
“They’re charging us a much higher premium for a lot less coverage… it doesn’t take somebody very smart to figure out that, that just isn’t a sustainable thing to be even carrying,” he said. “It doesn’t take risk off. It actually, in some cases like myself, added risk to the plate because of the cost of the insurance and what just happened after.”
His farm was “devastated” last year after a hard spring meant he missed seeding windows, he said.
Despite complaints in the room, Alan McKenzie says he has had good experience with his adjusters. The longtime organic producer was one of several organic speakers on the lineup during Ag Days.
“We’ve had very good adjusters who’ve treated us fairly and, yes, the organic coverage is not near enough money for what you pay for it, so we, half of the time, just use conventional coverage because it’s dollar-for-dollar better bang for your buck,” he said.
About three-quarters of his crop could be insured organic this year, but only a quarter of his acres will typically have organic insurance, he said.
“If I’m feeling confident that it’s a good, clean field, I’ll just roll the dice and run conventional on it, where, if I’m concerned that it might have some weed pressure issues or something like that, that could cause some red flags to show up, or I’m just kind of worried in general, then I’ll kind of throw the organic coverage on it,” he said.
At the same time, current valuation is “ridiculous,” he added.
“You can traditionally show that wheat has been 2.5 times (conventional), so I think that’s where it should really come out at — at least twice anyway,” he said, pointing to the markup on flax.
“I understand too that higher valuation comes with a higher premium and then it comes to a point of, how much you can afford. But definitely it’s way too low,” he said.
Katherine Storey, president of the Manitoba Organic Alliance, agrees.
“You can’t have numbers like that and expect people to participate,” she said.
Laura Telford, organic specialist with Manitoba Agriculture, estimates that there are over 170 organic producers in Manitoba and a small portion of those insure organic.
MASC says that some farmers may choose to insure their crops conventionally, although it’s unclear how many producers have taken them up on the option. Farms that choose conventional insurance take a risk on weeds, since weeds are a designated peril in organic insurance and farmers can get coverage for having to reseed.
MASC’s profit problem may stem from this shrinking pool, farmers say. Profitable producers have slowly dropped out of the program, creating a higher proportion of high-risk users in the pool and eating at MASC’s bottom line, they argued Jan. 18.
“It’s a self-fulfilling prophecy,” Genik said.
“The cost of the premiums are high, the coverage is terrible and so, in the end, it ends up that more and more people keep dropping out. The ones who are actually doing a fairly good job or doing the best they can, the ones who will be supporting the program with higher yields and much fewer claims are now gone, so now you’re left with a lot more of these people who have claims more often that are basically taking away from the system,” he added.
Storey, however, says it shouldn’t matter how many are participating in the program.
“Either the program works or it doesn’t and it’s our job to figure out why it’s not working and maybe we won’t be able to offer a solution because of that small pool, but at least we should be able to identify where in the program the programs are happening,” she said.
Lack of data
The small pool also ties into data availability.
MASC is confident in its conventional crop data, since the vast majority of acres are insured. With fewer participants, that is not the case in organic insurance.
MASC estimates that only one-third of organic producers are insured organically and kicking data back into the corporation. They guess another one-third are using conventional insurance and one-third do not insure with MASC at all.
The corporation says changes this year may help address some of that lack. Farmers will be able to report acres as organic, even if they’re not insured organic.
Price data is also a sticking point, David Van Deynze, MASC vice-president of insurance operations says.
“Typically, for our conventional crops, there’s a lot of forecasting data,” he said. “There’s a lot of people who are in that business to say what the price of wheat is going to be a year from now — canola, same thing — there’s just not that level of data and forecasting tools available for organic crops, so it’s a challenge for us to essentially predict what the organic price is going to be into the future and that’s kind of the way our insurance program is designed.”
Producers in the Jan. 18 meeting argued that they are already producing acreage and yield data in their seeding and harvest reports.
They have provided contracts to indicate what they would have been paid for a crop while trying to make a claim, they added.
Van Deynze, however, says there is an inherent bias to relying on claims for price data.
“Only a small percentage of producers actually make claims, right? So we don’t get a very representative dataset in the first place,” he said. “And then secondly, sometimes with contract prices, if there’s a claim, there could be a claim on a crop because of quality issues, for example, so now you’ve got a price that we receive, but it might be a lower quality than what the normal quality is for a particular crop.”
More crops needed
Only three crops meet the acreage needed to be insured, MASC says, although the Manitoba Organic Alliance argues that hemp, peas, fall rye and barley should also make the list.
Wilcox’s figures showed 1,964 acres of organic barley and 2,991 acres of rye in 2016, he presented last October. MASC usually requires a consistent 5,000 acres before insuring a crop.
“We’ve been asked once or twice in the past to potentially insure those crops, but we’re worried about taking on a large acreage of organic crops when, with the core programs we have right now having high losses, we’re hoping to get those programs organized and straightened out before we expand to forages or barley or hemp or whatever is recommended we go forward with next,” he said at the time.
Storey says that all issues brought up Jan. 18 have also made their way to a working group between the Manitoba Organic Alliance and MASC.
The group has had two meetings, with another expected in February or March.
“We’re understanding the program more. They’re understanding organics more. I think it’s going in a good direction. I have no idea how long it’s going to take,” Storey said.
Changes can’t come fast enough for Genik. The producer says he will not insure organic again until changes are made.
This article first appeared on OrganicBiz.