Friday, February 20, 2015

What's New in Crop Insurance for 2015?

By Jayson K. Harper, Professor of Agricultural Economics, Penn State University

The answer? A lot.  There have been many new changes coming out of the 2014 Farm Bill, as well as several improvements in recent years that have made crop insurance more flexible and provide additional coverage for your farm.  Some of the changes you should consider for your risk management plan in 2015 include: enterprise units, trend adjusted yields, the supplemental coverage option, and whole-farm revenue insurance.  There have also been improvements made for organic producers, new benefits for beginning farmers, and a provision that allows farmers to exclude extremely low yields due to bad weather from calculation of their Actual Production History (APH).  With the improved NAP (from FSA) with Buy-up protection the 65% coverage level at 100% of established prices, producers can purchase meaningful protection for each crop that they grow.

Remember, the sign-up deadline for spring seeded crops is March 16, 2015.  A list of crop insurance agents who sell crop insurance in Pennsylvania can be found here.

Another important deadline that farmers should be aware of is the deadline for conservation compliance certification.  In order to be eligible for the premium subsidy on crop insurance policies in 2016, farmers must file form AD-1026 (Highly Erodible Land Conservation (HELC) and Wetland Conservation (WC) Certification) with FSA by June 1, 2015.

Enterprise Units.  Enterprise units have been available for several years now, but many farmers are not aware of how they work.  When choosing your crop insurance coverage in Pennsylvania you have the choice of basic, optional, or enterprise units.  Your choice of insurance unit will have an impact on your cost of insurance, the likelihood of collecting for losses, and how you will need to keep and report your yield records.

You receive one basic unit for the land you own and cash rent within a county.  You also receive one basic unit for each landlord with whom you crop share rent.  Each crop share landowner can also insure their own interest in the crop as a separate unit.  Each different crop also creates a separate unit, and tracts of land in different counties must be insured as separate units.  Each crop/county can have a different type of policy and level of coverage, and could receive a loss payment separate from the other units.  Separate production records must be kept for each basic unit.  Insuring all acres as basic units entitles producers to a discount on their premiums.

Basic units may be divided into optional units when a crop is being grown under distinctly different production practices.  For example, a grower with both irrigated and non-irrigated acres of the same crop may qualify for optional units.  Other special farming types or practices may also qualify acres to be insured as separate units.  Optional units may also be established by FSA farm serial number or on a section equivalent basis for annual crops.  Optional unites based on section equivalents must be requested through a crop insurance agent, contain a block of land at least one mile square, and be clearly indicated on a map using identifiable boundaries.  Separate APH records must also be kept and reported for each optional unit.  Farmers selecting optional units do not receive the premium discount allowed for basic units.

An enterprise unit combines all of the acres of a single crop within a county in which you have a financial interest into a single unit, regardless of whether they are owned or rented, or how many landlords are involved (separate enterprise unites may be available for irrigated and non-irrigated acreage of a crop).  Because enterprise units are usually larger than basic units or optional units, this would make it less likely that the overall yield in a given year would be low enough to trigger a loss payment.  This is especially true if you have a very large acreage of the insured crop that is widely dispersed.  However, this isn't the case for most Pennsylvania farmers and in many of these situations there is no real difference between choosing basic and enterprise units.  This is important because enterprise units are eligible for additional premium discounts over basic units.

Examples of the cost of both yield protection and revenue protection coverage for a farmer with 130 bushel APH yield in a medium risk county are given in Table 1.  Using basic units rather than option units generally results in a cost savings of around $2 - $4 per acre.  Switching from optional units to enterprise units would result in substantial savings, in some cases up to $15 per acre.  Carefully consider the difference between using basic and enterprise units for your farm; you could reduce your premiums and keep the same level of overall protection.  The cost savings from using enterprise units could also be used to purchase higher levels of coverage for your farm than under either basic or optional units without increasing your farm's crop insurance costs.  For example, if you insured at the 75% level before using either optional or basic units, you could now insure at the 80% level with enterprise units and also save a couple dollars per acre.

Table 1: Example of farmer paid premiums for yield protection and revenue protection coverage by unit structure (130 bu. APH yield, medium risk county)

Coverage level
Yield Protection
Revenue Protection


You may not want to use enterprise units if you have variable farms and inconsistent crop production histories, if disease and quality issues appear only on some farms, if the farms are dispersed throughout the county or if you have irrigated and non-irrigated acreage in the same unit.  For many farmers, however, enterprise units could provide a simple way to cut costs and provide additional coverage for their operation.

Trend Adjusted Yields.  Pennsylvania farmers have the option to use trend adjusted (TA) yields to increase their actual production history (APH) yields for corn and soybeans.  This adjustment better reflects increases in yield experienced  by farmers using certain farming practices, including hybrids with modified genetic traits.  This change is important because the APH yield underlies the insurance guarantees for both the yield protection and revenue protection crop insurance plants.  The TA option has been available to Pennsylvania farmers since 2013.

Your main choice when electing to take the TA option will be either to: 1) benefit from the protection afforded by a higher insurance yield or revenue guarantee or 2) move to a lover level of coverage and take advantage of higher premium subsidies.  A producer electing the TA option and keeping the same coverage level will likely pay a slightly higher premium because of the higher TA APH yield (because your premium cost is influenced by many factors, it is important to discuss all your options with your crop insurance agent).  A benefit for some farmers may be the opportunity to use a TA APH and opt for a lower level of coverage that provides a similar yield or revenue guarantee.  Although the overall level of protection would be similar, selecting a lower coverage level would be less expensive because of the way in which crop insurance premiums are subsidized by the Federal government.  For example, if you are currently insuring your corn or soybeans at 85% coverage level, you may be able to get a similar level of protection at lower cost by using the TA option and insuring at the 80% level.  The amount of subsidy varies greatly depending on the coverage level and insurance unit (ie. basic, enterprise, optional, or whole farm units) you select.

More information on trend adjusted yields can be found here; contact your crop insurance agent for a more detailed evaluation of your coverage options.

Supplemental Coverage Option.  The Supplemental Coverage Option (SCO) provides additional coverage for the deductible on your crop insurance policy based on purchase of additional county level coverage.  SCO is available for corn and soybean for both the yield and revenue protection policies.  Like your other crop insurance, SCO is heavily subsidized with the Federal government paying 65% of the premium cost for you.  Because higher levels of crop insurance are subsidized less than lower levels, SCO may be a more cost effective way to provide additional coverage for many farms.

SCO is purchased as an endorsement to your crop insurance coverage and must be purchased by the sales closing date.  The amount of SCO coverage depends on the liability, coverage level, and approved yield of your underlying policy.  If you elect to participate in the Farm Service Agency's Agricultural Risk Coverage program (ARC) you are not eligible to participate in the SCO.

The SCO works the same as your underlying crop insurance policy: it provides additional yield protection for yield yield protection policies and additional revenue protection for revenue protection policies.  The loss payment trigger for SCO is different because it is based on county yields or revenues rather than your farm's yields and revenues.

SCO is meant to help cover potential losses between the coverage level you select and 86% of the expected county yield or revenue.  For example, if you have a revenue protection policy at the 75% coverage level, you decided to accept the first 25% of any losses as a deductible (in exchange for lower crop insurance premiums) before the crop insurance policy kicks in.  In the case of a 75% coverage level, up to 11% (86% - 75%) of the expected county yield or revenue could be covered using SCO.  Lower levels of coverage would have higher levels of coverage under SCO.  If the underlying coverage is revenue and the harvest price is lower than the spring projected price, the loss trigger for SCO may increase proportionally.

An interesting feature of this coverage is that you will now have both individual and county loss triggers.  It is possible that you could: 1) have a loss payment based on losses calculated both at the county level and at the farm level, 2) have a loss payment based on losses at the county level, or 3) have a loss payment based on losses on your farm.  Because your crop insurance policy will now have both individual and county insurance triggers with SCO, it is very important to consider how your farm's risk compares to the risk at the county level and if SCO provides the protection you are expecting.

Whole-Farm Revenue Protection.  The WFRP insurance plan provides a way to cover all commodities sold by the farm under a single policy.  A farm can protect up to $8.5 million in revenue under this plan.  Any farm meeting eligibility requirements can purchase WFRP including those with specialty or organic commodities (both crops and livestock), or those marketing to local, regional, farm-identity preserved, specialty, or direct markets.  WFRP replaces the Adjusted Gross Revenue plans (AGR and AGR-Lite) that were available in previous years.

WFRP is available at the 50, 55, 60, 65, 70, 75, 80, and 85% coverage levels.  The 80% and 85% coverage levels are only available to farms producing at least three commodities that meet minimum revenue requirements.  The premium subsidy levels range from 55 to 80%.  You can buy WFRP alone or with other buy-up level (additional) Federal crop insurance policies.  If you buy WFRP with another policy, the WFRP premium is reduced due to the coverage provided by the other policy.  You must purchase your other crop insurance policies at buy-up levels of protection to participate in WFRP (catastrophic (CAT) levels of coverage do not qualify).

In order to be eligible for WFRP you must have five consecutive years of federal tax returns for your farm (ie. for eligibility in 2015 you must have 2009 - 2013 tax records), be able to meet the diversification requirements of the policy, and produce commodities on-farm that generate at least 50% of your farm's total revenue.

Other Crop Insurance Improvements.  There have been several other improvements to crop insurance that came out of the 2014 Farm Bill including:

1) Improved protection for organic and contracted crops

  • Organic elections have been made available for more crops
  • Organic price coverage has been extended to eight more crops (oats, peppermint, apricots, apples, blueberries, almonds, pears, and grapes for juice) for a total of sixteen (producer has the option of using organic or conventional prices).  Organic prices and additional crops will be available for 2016.
  • The 5% premium surcharge for organic price options has been eliminated.
  • For many crops, a contract price may be used if the crop is contracted by the acreage reporting deadline and the price is higher than the established price.

2) New options for low APH yields

  • Farmers can choose to exclude disaster years from their production history if the county yield in that year was less than 50% of the county (or adjacent county's) 10-year average
  • New and beginning farmers get a 80% yield plug for replacing low APH yields; the current 60% yield plug is retained for everyone else.

3) New benefits for being beginning farmers (available for the first five years of insurable crop interest)

  • Beginning farmers are eligible for an additional 10% premium subsidy buy-up coverage
  • They are exempted from paying the administrative fee for catastrophic (CAT) and buy-up policies
  • They can use the production history of an existing farming operation, if they were previously involved in the decision making or physical activities of the farm
  • An increase in the substituted yield for yield adjustment, which allows a replacement of a low yield due to an insured cause of loss, from 60 to 80 percent of the applicable transitional yield (T-yield) for the crop in the county.

Thursday, February 12, 2015

Accepting credit and debit payments

As a small business owner, it is becoming increasingly more difficult to be cash only. Many consumers rely heavily on their credit/debit cards. If you currently provide or are thinking about adding credit/debit payment as an option for your customers, it is critical to securely process payments.

To help regulate credit card security standards, the Payment Card Industry Security Standards Council (PCI SSC) was founded in 2006 by 5 of the largest payment brands: American Express, Discover, JCB International, MasterCard, and Visa. Below are some highlights to help you navigate payment processing.

What is PCI compliance?
"The PCI Data Security Standard is a multifaceted security standard that includes requirements for security management, policies, procedures, network architecture, software design and other critical protective measures. The PCI Data Security Standard is comprised of 12 general requirements designed to: Build and maintain a secure network; Protect cardholder data; Ensure the maintenance of vulnerability management programs; Implement strong access control measures; Regularly monitor and test networks; and Ensure the maintenance of information security policies."

Do all merchants, including those with minimal credit card processing need to be compliant?
The PCI SSC requires all merchants, regardless of size, to be PCI compliant.

How do I get started?
The PCI SSC website has great tools to help you get started including videos, a self-assessment questionnaire, and a reference guide.

This may seem like a lot of work, but remember that customers' card information is your responsibility to protect. If your business is found to have a data breach, you could be liable for fines, penalties, and/or loss of ability to accept credit/debit cards. By providing secure card processing, you will instill confidence in your customers!

Friday, January 30, 2015

Building a Website for Your Small Business

Creating a useful website is a very important part of attracting customers. Most people, myself included, would find the task of creating a website themselves quite daunting and would immediately want to hire a web designer. But in doing some research of my own, building your own conventional website (meaning not overly complex or customized) may not be as difficult as it appears.

Person adding content to their website. (photo credit:

To do it yourself, you can use a website builder, which is a tool that allows a user to create their own website without writing code. (Here is a list of some of the most popular website builders.)

This very useful article from Site Builder Report describes some questions to ask yourself to help determine if you should build it yourself or hire a web designer.

1. What is my budget? If you have a small to mid-size budget (which the author defines as $5,000 or less), then you should use a website builder. A competent website designer will usually cost this much or more. You will also need to pay a monthly fee for your website hosting. (Web hosts provide space on a server for your data and allow it to be available on the internet.) By comparison, a website builder like Squarespace, costs $8-$24 per month, which includes hosting.

2. I have a friend, family member, etc. who quoted me a low price. Shouldn't I use them? "Designing websites is a very complicated and involved thing. A very low quote probably means that this person "does not do web design for a living. And that’s a red flag."

3. What do I need/want in a website? "Think convention for website builder. Think customization for website designer...Use things like photo galleries, forms, paragraphs, basic e-commerce, and text." These will help you build a website that is functional without custom designing each piece.

If you really want 100% customization, then you will need a website designer.

4. Can I do it myself? "Trying to do it yourself will open you up to some of the realities of web design and will give you a sense of the constraints and challenges of web design. This will make you so much better when you try to actually hire a web designer. Plus, you may surprise yourself and realize you can do it yourself."

Hopefully this post has made you realize that hiring a website designer is not your only option; you can try to do it yourself. If you do find that you want/need a web designer, I will discuss some tips on helping you to choose a one in a future post. Happy site building!

Wednesday, January 14, 2015

Getting ahead of consumer buying behavior.

Consumer Trends: why bother?

Identifying what buyers want today and tomorrow is powerful!          
photo credit: snivdesign
As a farm / food retailer we may occasionally wonder what drives not only our current customers, but also those elusive potential customers. One source of insight is “consumer trends.” While these trends may not exactly match the demographics we chase with our retail products; they can be quite helpful in understanding what is happening and what might happen next in the retail shopping environment. You never know – you may actually get ahead of a trend, and end up being the next big thing?

When I consider some research into consumer buying behaviors I check with a hand full of widely recognized experts. Many of these experts are willing to share quite a bit of research and guidance at no-cost.

Listed in no particular order are possible sources:

And don’t forget to participate with your local Extension Education system when exploring consumer trends. For example; at the widely acclaimed Mid Atlantic Fruit & Vegetable Conference  at Hershey   Penn State Extension Educator Heather Mikulas will be sharing her research on Food Trends the morning of Tuesday, January 27th .

One axiom of retail I stick by is that our customers are telling us what to do. Our challenge is to listen to them. Consider spending some time and effort understanding purchasing expectations of your customers – you will likely be well rewarded.

Tuesday, January 6, 2015

An Agricultural Nonprofit Still Has to Make a Profit

By Juliette Enfield, Penn State Extension Educator, Warren Co

A farm can provide benefits to a community that are not always easy to measure in economic terms. A farm can keep land in agricultural production, be used as a teaching tool or be used to grow food for charity. A for-profit farm may not have the capacity or time to focus on these types of educational or charitable activities. Quiet Creek Herb Farm and School for Country Living in Brookville, PA, Lundale Farm in Kimberton, PA, and The Rodale Institute in Kutztown, PA are a few examples of nonprofit agricultural organizations in Pennsylvania.  Quiet Creek Herb Farm and The Rodale Institute focus on agricultural and homesteading education through classes, publications, and research. Lundale Farm preserves farmland by leasing land to farmers.

A farm can be a valuable teaching tool.
What is a Nonprofit?
Churches, public schools, public clinics and hospitals, political organizations, research institutes, chambers of commerce, fraternal organizations, private foundations, museums, and public charities are all nonprofits. Nonprofits contribute to society by providing social and educational opportunities that we all enjoy. The most significant differences between a nonprofit organization and a for-profit business is that the nonprofit organization does not have to pay property tax, sales tax, or corporate income tax, and they have a charitable mission that drives the organization. The tax code used by nonprofit corporations is 501c3, which you may have heard of already. A typical for-profit business will pay the IRS taxes that amount to between 15-35% of their annual revenue. However, both nonprofits and for-profits have to earn enough revenue to cover their costs in order to function. Just like with any business, the nonprofit must fill a unique niche in order to earn its revenues, and should have a business plan. To determine whether or not your organization would fill a unique niche, research what other nonprofits in Pennsylvania are doing at .

The revenue made by a nonprofit organization is used for sustaining the organization and accomplishing its charitable mission, not for distribution to employees or shareholders. The only type of nonprofit organization structure that exists in Pennsylvania is a nonprofit corporation. Corporations have a unique structure that is very different from a sole proprietorship or a partnership. In contrast to sole proprietorships and partnerships, corporations allow business owners to claim the business’s assets instead of the owners’ personal assets if debt or legal issues arise. The state in which the corporation is created assumes some liability for the business and therefore, all finances of the corporation, including salaries, expenditures and revenues must be made publicly accessible. The nonprofit corporation can work with an accountant to keep detailed financial records which they must submit to the IRS and the Department of State every year. These agencies could take away tax exempt status if the nonprofit fails to file these records or if they are generating income that does not relate to their stated mission. In addition to having a sustainable business plan, nonprofit corporations are required to have a board of directors and a fundraising plan.

The Board of Directors
The board of directors must have a protocol for voting on operating procedures for the organization as well as a president, a treasurer, and a secretary. The operating procedures, or bylaws, are voted in and agreed upon by the board. A business attorney can help with the creation of the bylaws. The complexity of the bylaws is up to the organization but they can include rules such as board meeting procedures and roles of employees.  Board directors are either employees of the nonprofit or volunteers who share a passion for the organizations’ mission. The board is responsible for keeping the organization true to its mission, and it ensures that programs and plans are implemented. Although the board of directors is a mandatory part of a nonprofit, offering additional board memberships is optional. Additional members can help to steer the organization, offer diverse skill sets, and help with fundraising by paying membership dues. Board members have to be at least 18 years old and do not have to be residents of Pennsylvania. NOLO gives some great considerations for forming a board

The board is responsible for keeping the organization true to its mission and it ensures that programs and plans are implemented.
Fundraising is an essential activity for nonprofits to engage in since revenues are low and accomplishing any mission costs money. Fundraising includes soliciting donations and applying for grants. Nonprofit organizations accept donations from businesses and individuals. These donations are tax-deductible for the donor, which is an incentive to donate. Many public and private grants are available for nonprofit organizations.  Since fundraising is an important part of a nonprofit organization, there should be a fundraising coordinator or grant writer on staff or on the board. For example, if the goal of your agricultural organization is education, you may need to seek grants that will cover the costs for school children to come to your farm. Penn State Extension offers grant writing workshops.
Look online for dates and locations.

Although a nonprofit organization is mission driven and tax exempt, it has to be just as competitive as a for-profit business in order to succeed. Critical components of a nonprofit include a well thought out mission and business plan, a committed board of directors, a fundraising plan, an attorney and an accountant.

For more information on nonprofit management, The Pennsylvania Association of Nonprofit Organizations offers workshops, publications, and conferences. Additional questions about forming an agricultural nonprofit in Pennsylvania can be directed to the Penn State Agricultural Law Resource and Reference Center.

Monday, December 29, 2014

Encouraging Consumer Purchasing, Part II

Last week I wrote about providing your customers with ideas on how your fresh and processed products can be used in ways other than their primary purpose.  This week I have a couple of more ideas that might just work for your business.

Value-added, but “light”

Processing your own value-added products (for example, processing tomatoes and other ingredients into pasta sauce, salsa, etc.) may seem overwhelming, but you do have another option for offering “meal solutions.”

What might you do if you have most, if not all, of the ingredients for salsa or pasta sauce, but you don’t feel that the private label approach (an item manufactured by another business but labeled as your own branded product) is appropriate for your business?  Or, perhaps you have an idea for a processed product and cannot find the right “finished” product offered by a private label company?

One option is to create a “light” version of a value-added product by selecting a recipe and assembling ingredients in the amounts appropriate for the recipe.  

For example, I’m sure that your customers would probably like to make your family’s award-winning salsa for their New Year’s Eve or Super Bowl party.  What you would need to do to accommodate them would be to assemble enough of each of the ingredients so that your customer would only need to refer to your recipe and prepare the salsa from all that was provided in the package.

If your recipe calls for salt and/or pepper or another pantry staple, you could omit it from the value-added light package and alert the customer that they need to add these one or two ingredients to make the dish.

What food trend does your product pair with or complement? 

Along with suggesting additional ways that your fresh and value-added products can be used as an ingredient or in a unique way, consider how you can link your goods with longstanding and/or the latest food trends.  According to a couple of sources, “fermented” foods such as kimchee and sauerkraut will gain notice in 2015.  Which of your foods would complement these dishes, or what ingredients could consumers buy from you to make their own?

Perhaps you do not make and sell your own alcoholic beverages, but your product would be a perfect pairing for a local wine, craft beer, hard cider, or even a distillery’s hard liquor (we've seen great growth in consumption - and will continue to see interest in these beverages continue).  Where can you find information as to potential pairings that you could suggest to your customers?  Here is a short list of resources:
  • offers suggestions for a fair number of fresh or dried fruits, while provides an Infographic on pairing wine and vegetables.
  • WineFolly posted a wine guide that also provides a list of what prepared foods (e.g. salty foods, vegetable dishes, roasted foods, sweets). 
  • •A downloadable chart created by the Brewers Association shows what beers pair with salads and a wide variety of meat dishes, while a list of foods that pair well with hard ciders can be found here:

While these are just a few ideas, these strategies can help you provide your customers with one, two, three, or more ways to use the products you sell.  You’re really only limited by your imagination.

Monday, December 22, 2014

Encouraging Consumer Purchasing, Part I

In past blogs, our group has discussed the importance of providing food samples, mass customization, benefits of offering value-added products, and other strategies to encourage customers to purchase your products.  Each of these is designed to alert and remind customers about what you sell and increase consumer purchases.   In today’s blog, I wanted to provide a few more ideas that can also help increase purchasing.

How many different ways can customers use your products?

Your customers probably have a pretty good idea of how to use most of your products.  Fresh fruit are eaten without any preparation or they can be used as an ingredient in more common dishes, the same with vegetables.  The value-added products that you offer, such as jams and chutneys, can be spread on toast or crackers. 

There is at least a primary and a secondary food use for everything you sell.  But, there are probably many more ways that your products could be used, and the more ways that a customer can use your products – the more products they might purchase.

You might have noticed this strategy on packages of products you buy for your own household or in magazine advertisements.  For example:

  • A well-know brand of an instant coffee drink suggests using the powder as a creamer in other drinks.
  • “Gourmet” jars of peanut butter suggest uses that go well beyond sandwiches.   Peanut butter is a perfect ingredient for Thai food, African peanut stew, and what would be better than a peanut butter and chocolate s’more (though expect it to be a bit more “gooey”)?  
  • Cereals are no longer just from breakfast - they can be used in casseroles, as breading for meats, and so much more.  
  • Maybe your soy sauce bottle has been in your pantry or fridge for quite a while and only gets used to flavor rice?  A more prominent soy sauce company developed magazines and online ads with Thanksgiving meal recipes that listed their product as one of the ingredients. 

Of course some of these ideas are not new and novel; and consumers probably have a similar recipe already saved.  But, many times consumers need to be reminded about the multiple uses that a product can provide, or the recipe needs to be promoted at the right time of the year.  Might the turkey basting recipe appeal to consumers during the summer?  Maybe or maybe not, but when a consumer (who is not a vegetarian/vegan or one who doesn’t like turkey) thinks about the meal they will have on Thanksgiving, a majority think of turkey and how to give it flavor and keep the meat moist.  Soy sauce, apparently, can do just that.  

So, how many different ways can a consumer use fresh produce and value-added products you sell?  A search on recipe websites, review of any recipes you may have provided customers in the past, or just brainstorming can provide a fair number of ideas.  Another approach is to look at more traditional recipes and substitute one or two of the ingredients listed with your products to change the flavor, texture, or other attribute. 

Once your list of ideas is complete, think about the timing of when you should promote them on your website, via social media, in newsletters, and using in-store signage.

Next week I will take about a couple of other ways that can increase consumer purchasing.