Organic Insurance Questions

January 7, 2017 02:22 AM
Organic Insurance Questions

No yield means big dollars?

Percy Carroll is easing along the back roads of Matagorda County in southeast Texas, taking note of a 300-acre field of green grass and weeds staggered 1' to 2' high. It’s a farmer’s expanded version of hell’s half acre, and inside the woolly, overgrown stand hides a skeletal corn crop, barely 6" tall with no chance of yield. Carroll, 66, gets nauseated staring at the tangled acreage as the truth sinks in: Lock, stock and smoking barrel, the field is a financial winner.


“Pure and simple, they’ll harvest this field with a disk,” Carroll says. “No yield means big bucks. Rest assured, failure is rewarded because the Risk Management Agency [RMA] will pay up in full.”

A field of weeds can pay better than a field of corn, and costs almost nothing to produce. Carroll and a growing number of Texas farmers say a crop insurance racket is hiding in plain sight, plucking millions from the pockets of U.S. taxpayers.

Carroll claims growers are gaming the organic crop insurance system and pushing up land rent for conventional producers. “They plant, walk away, and let the grass take over. Come harvest time, the insurance adjustor shows up and zeroes it out,” he says. Following the phantom harvest, the ground is worked a single time to qualify for program guidelines, and then the cycle repeats the following year, according to Carroll.

“It’s not everybody around here in organic farming” who is involved in these activities, Carroll says, “but anyone with eyes can see what’s going on.”  

Crop insurance is intended as a means to manage risk. But taking advantage of crop insurance rules allows for the total elimination of risk. Organic target (T) yields in Matagorda County are written as follows: corn, 64 bu. at $8.40 per bushel; soybeans, 24 bu. at $16.87 per bushel; cotton, 656 lb. at $1.22 per pound; and rice, 4,774 lb. at $15.90 per hundred pounds.

Joe Jenkins farms 5,000 acres of corn, grain sorghum and cotton in Matagorda and Jackson counties. While he gets $3.50 for his corn, he says he watches some organic producers get $8.50 while spending almost nothing on inputs, fertilizer, cultivation, ditch cutting, land leveling or any other management cost.

In 2011, RMA began offering price elections for organic crops. As organic production insurance has expanded to include more crops and county coverage, the abuse has grown in tandem in Matagorda County, Carroll says. However, RMA says they don’t see organic crop insurance abuse as a growing problem. 

“There’s always the potential for abuse in any insurance program, but we monitor in a variety of ways and any identification of possible abuse is immediately defused,” according to agency officials. 

“Anomalous claims in a county might just mean adjustments are needed and wouldn’t necessarily be an indication of insurance abuse,” adds John Shea, RMA’s public affairs director.

Producer Ed Gurecky cites 2016 as the worst year for organic crop insurance abuse he’s ever seen in Matagorda County and says standard farming practices are conspicuously absent from most organic fields. Gurecky says overgrown rows, yellowing crops due to fertilizer deficiency and an absence of ditch work were consistently present in the fields he observed.

Gurecky dealt with 15" of rain prior to cotton harvest, but hustled to pick early, yet still was hit with premature seed sprouting problems that forced him to pay an extra $5 per bale at ginning. (Many producers in his area were affected by even worse quality issues and paid an extra $25 per bale.) However, insurance pays according to yield and Gurecky grew 2-bale cotton, pushing him beyond the claim threshold. “I was honest and cut no corners,” he explains. 

As a crop consultant working the Texas coast, Paul Pilsner says he began noticing organic-crop insurance abuse in 2014. “It’s happening right here in Texas and robbing millions from U.S. taxpayers,” he says.

Most organic acreage in Matagorda County derives from pasture passed from traditional rice ground, Pilsner says. Simply, last-resort ground is organic heaven. Lease the pasture; plow the land; plant the seed; close up shop; get paid. Most conventional corn growers hit around 100 bu. to 150 bu. per acre in Pilsner’s work area, yet he says organic-insurance abusers are intentionally shooting blanks. 

In early 2014, Carroll says he first reported his concerns about apparent crop insurance abuse in Jackson, Matagorda and Wharton Counties to RMA officials. He says he was told no rules or guidelines were broken. 

In May of 2016, he sent a letter to USDA’s Office of the Inspector General, asking for an investigation, and followed with a second letter in August. Carroll has yet to hear from the agency, but was given a case number. 

Then Carroll knocked on the door of Rep. Blake Farenthold, R–27th District, asking for his help in the investigation. “Suddenly I got a call from RMA,” Carroll says. “They say the numbers will be reviewed for 2018, but can’t be changed for 2017. ”

Carroll stops short of throwing fraud accusations at particular farmers associated with apparent crop insurance abuse, but RMA doesn’t necessarily make the distinction. 

If a crop-insurance policyholder purposefully acts in a manner contrary to proper crop production, RMA can technically impose penalties. 

“Intentional disregard of appropriate farming technique is grounds for penalty and an avenue for sanctions,” Shea says. 


Another Point of View

A previous version of this article that appeared on prompted the Organic Trade Association to make the following points, which have been edited for space:

  • No crop insurance, whether for organic or conventional, covers losses when producers do not follow good farming practices.  
  • Planting crops without fertilizer and never cultivating certainly would not be considered good farming practices, and losses from such a system should not be eligible for an indemnity payment. 
  • Data from USDA’s Risk Management Agency show from 2006 to 2015 the Loss Ratio for organic crop insurance in Texas was 1.83 and for conventional it was 1.37. Taxpayers are underwriting the crop-insurance safety net for all producers in Texas, not just organic.
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