Botanical Producers & Crop Insurance

As droughts, wildfires, hurricanes, and storms increase, more botanical producers are interested in crop insurance protection. Maybe you can relate. If so, then this guide is for you.

First, you need to know that traditional yield-based crop insurance policies cover commodity crops and a limited list of specialty crops. Many herbs don’t make that list; wildcrafted and foraged crops are excluded altogether. So, what options are left? Two flexible policies are available for botanical producers: Whole-Farm Revenue Protection (WFRP) and Micro Farm, revenue-based crop insurance policies that can cover cultivated botanicals as part of an insurance plan covering the farm’s total income. Foraged botanicals and value-added products can even be eligible for one or both policies.

WFRP and Micro Farm are unique because they insure expected revenue at the farm level. These products can insure specialty crops (including medicinal plants) and commodity-grade crops (corn, soybeans, and rice). Therefore, almost all crops grown by a farm can be covered by insuring the entire farm’s revenue. To do this, the farm provides its own historical income data to support the amount insured.

While herbs can be insured with either program, there are some limitations on the type of revenue eligible for WFRP or Micro Farm, which we’ll explore in the sections below.

When are cultivated botanicals insurable?

This is the most straightforward botanical category: herbs grown on the farm. Cultivated botanicals can be insured with a yield-based or revenue-based policy, depending on the circumstances. Traditional or yield-based crop insurance policies are typically used by more extensive operations, like a row crop operation. Designed for large-scale plantings of relatively consistent crops sold on the wholesale market, these policies are crop and location-specific. Farmers using yield-based policies purchase separate plans for each crop they grow. Plans are only available in counties where the crop can be grown successfully, and there is actuarial data on historical prices and yields. The USDA boasts yield-based coverage of over 100 crops and 76 specialty crops.

At the time of this writing, clary sage, flax, and hemp are the only crops identifiable as botanicals on the insurable list of crops in the USDA’s Actuarial Documents. Clary sage is not insurable anywhere in the North Central region. Flax is insurable in 16 counties in Minnesota, 3 in Idaho, and 16 in Montana. However, in South and North Dakota, flax is insurable in all counties. Hemp is widely covered (28 states).

A revenue-based plan (WFRP or Micro Farm) is the only option outside of these options. Remember that while herbs are a crop category in either plan, there is also an “other crops” designation for botanical products that don’t fit other categories.

When are foraged botanicals insurable?

The answer is a bit more complicated when it comes to herbs foraged in the woods and other natural areas. The default rule is that foraged or wildcrafted botanicals are not insurable. Under Federal Crop Insurance Act regulations, crops must be grown in planted acreage to be insurable. Essentially, this limits insurable crops to those that are cultivated. Volunteer crops are also explicitly excluded. WFRP defines “allowable revenue” as sales of produce and other commodities the farm raises. Forest products are excluded from allowable revenue.

This may seem like a dead end for insuring foraged botanical crops. However, WFRP and Micro Farm were designed, in part, to fill coverage gaps for specialty crop producers. The USDA has clearly defined specialty crops to exclude wild crops unless they are sufficiently managed. That management piece allows producers a small amount of agency to potentially get coverage for their foraged crops.

All of these exclusions and definitions turn on the factor of cultivation or management. This makes sense, considering crop insurance aims to protect a farmer’s time and financial investment into a plant that takes a long time to mature and is vulnerable to acts of nature or other forces outside their control. With wild plants, on the other hand, it is assumed there isn’t the same investment of time and money—wild plants will grow with or without a farmer’s intervention.

The USDA explicitly acknowledges that some wild crops can be brought into cultivation by applying some level of management. They provide maple syrup as an example. The USDA says that tapping maple trees is sufficient management to bring maple syrup under the umbrella of specialty crops despite its being a forest product.

Producers who rely on foraged products to generate dependable revenue for their businesses and livelihoods generally aren’t just going outside and picking what they find randomly. Producers may lease specific parcels of land to forage. They may also have to monitor the sites over the growing season for pests or interference, at times going so far as to clear the area of noxious weeds or invasives. Harvest can require specialized knowledge, skill, and precision to avoid stock depletion.

These factors can contribute to sufficient management to bring wild crops under the specialty crop umbrella. Documentation of as many management factors as possible is essential, as the USDA may question the inclusion of revenue from wild crops in a WFRP or Micro Farm application. With sufficient documentation, a producer could use the “other crop” designation for their WFRP or Micro Farm application.

Producers interested in pursuing WFRP or Micro Farm coverage should:

• Keep records of any management steps taken throughout the growing seasons.
• When visiting the foraging site, note observations and any actions or work the producer applies.
• Ensure land leases for foraging are exclusive and in writing.

Notably, this management level will not be possible for foraged crops on state or federal lands. Only private lands, whether owned by the botanical producer or exclusively leased by them, would have the conditions necessary for the wild crops to become insurable.

When are value-added botanical products insurable?

Producers who want to insure their value-added products, such as botanical teas and tinctures, can do so through Micro Farm. A Micro Farm policy is the only policy that covers value-added revenue. It is available in all counties and all 50 states. However, this product has the smallest revenue cap—income cannot exceed $350,000 for the first year and $400,000 for subsequent years.

Micro Farm provides an excellent avenue for botanical producers to acquire insurance against loss of expected revenue for their tinctures, salves, creams, capsules, and similar products due to a covered loss event. However, there are limits to what value-added products Micro Farm will cover.

One of the most important rules for botanical producers to know about value-added product coverage is that commodities purchased for resale cannot exceed 50% of the insurable revenue. What is a commodity purchased for resale? That would potentially be the glass bottles used for tinctures, the oil purchased to infuse, or the gelatin capsules filled with powdered, dried herbs. Many times, what producers purchase will just be the container for the product, but other times, purchased items will include product ingredients.

It is important to understand that allowable (insurable) revenue does not include commodities purchased for resale. If producers do purchase outside items or ingredients to use in their value-added botanical products, there are four principles to keep in mind:

1. The cost of the commodities purchased for resale cannot be included in the calculation for insured revenue.
2. The total revenue from commodities purchased for resale cannot exceed 50% of total revenue. If it does, that producer will not qualify for coverage.
3. Producers may need to advocate that ingredients purchased from third parties and later incorporated into value-added botanical products are not ‘commodities purchased for resale.’
4. If a producer purchases an item to replace a product they usually grow but lost it for an insurable reason, that purchase does not count towards their commodities purchased for resale total.

Below, we provide further guidance on each of these four principles.

#1 Calculating Insured Revenue with Commodities Purchased for Resale

Generally, if a producer buys an item that they will add value to, then the cost of the item bought will not be insurable. What is insurable is the expected revenue from the item after value has been added. Let’s start with a very simple example.

Say an herb producer purchases bottled water to sell alongside their herbs and other farm-grown products at their farm stand. The revenue they expect from the herbs they grow would be insurable through WFRP or Micro Farm. However, the revenue they expect from selling bottled water is not insurable. This is a clear-cut example, because bottled water is not the type of product WFRP or Micro Farm are designed to cover.

Things get more complicated when a producer purchases an item later incorporated into a value-added botanical product. Let’s consider a botanical producer who makes candied ginger to sell alongside their other products and herbs. This producer grows some of their own ginger but also purchases ginger from a third party to make sufficient quantities of their candied ginger.

The producer purchases 15 pounds of fresh ginger at a time to make an extra 30 servings of candied ginger for their market. They purchase the ginger at $5.00/pound for a total of $75.00 (15 lbs. * $5.00/lb.). That amount of ginger will make approximately 30 cups of candied ginger. The producer sells the candied ginger by the cup for $6.50 each. To calculate the insurable expected revenue, the producer must subtract the “basis,” which is the cost of the commodity purchased for resale, from the total expected revenue. In this example, the cost of purchasing ginger from a third party has to be subtracted. The total expected revenue for the 30 cups of candied ginger is $195.00 (30 * $6.50). However, the basis ($75.00) paid to purchase the ginger must be subtracted from the expected revenue. If all other requirements are met, Micro Farm would potentially insure the expected revenue of $120.00 ($195 – $75).

#2 Commodities Purchased for Resale Cannot Exceed 50% of Total Revenue

A botanical producer who buys the majority of the items they sell cannot insure their revenue through Micro Farm. Only producers that grow or produce 50% or more of their products can insure their revenue. As described above, producers must deduct the costs of the inputs purchased elsewhere from their total revenue. But, as long as the inputs from third parties are a minor portion of the expected revenue, the fact that commodities are purchased for resale is not an absolute barrier to insuring a farm’s value-added revenue.

#3 Determining What Commodities Are Purchased for Resale

Determining which items from a third party qualify as ‘commodities purchased for resale’ can be tricky. Many items purchased from outside sources are incorporated into botanical products, often changing the nature of the purchased commodity. Purchasing oil, which is then infused with farm-grown herbs, fundamentally differs from a producer who purchases bottled water to resell. The latter is bought and sold unchanged, whereas the botanical producer that purchases olive oil to infuse it with farm-grown herbs creates a fundamentally new product.

Final decisions about whether items are considered ‘commodities purchased for resale’ come down to how an insurance agent classifies them. Remember, how they are classified determines if the basis of the item has to be subtracted from insurable revenue and if they count towards the 50% limit on commodities purchased for resale.

Producers can refer to the Federal Crop Insurance Corporation’s (FCIC) definition of ‘commodities purchased for resale’ to prepare for conversations with insurance agents about insurable revenue. ‘Commodities purchased for resale’ are defined as commodities not produced by a farm but added to the operation and subsequently sold. Commodities purchased for further growth, development, or maturity are not included in this definition. This means there is a strong argument that many inputs purchased as ingredients for botanical products are not commodities purchased for resale!
Botanical producers wanting to insure their value-added products will want to protect as much of their expected revenue as possible. Producers can present a case to their insurance agent that purchases they’ve made from third parties have been further developed and transformed into fully insurable value-added products. Many inputs for botanical products are incorporated to such a degree that the expected revenue from the resulting product should be considered insurable. If advocating to an insurance agent for higher insurable revenue, refer to the definition of ‘commodities purchased for resale’ and the other principles outlined in this guide.

#4 Commodities Purchased for Resale to Replace Insurable Losses on Farm

To use WFRP or Micro Farm, revenue commodities purchased for resale must be less than 50% of a producer’s total revenue. One important exception to this 50% limit is purchases made to replace crops that suffered an insurable loss. If a botanical producer typically grows an input of a value-added product but loses that crop due to disease, pest pressure, or other insurable loss, then that purchase can be made without being considered a commodity purchased for resale.

For example, say a producer makes calendula salve but loses their entire calendula crop one year due to a pest infestation. As long as all other criteria are met, this producer could purchase calendula from another grower without being concerned about the purchase counting towards the ‘commodity purchased for resale’ limit.

Micro Farm provides an excellent avenue for botanical producers to acquire insurance against loss of farm revenue. Many botanical producers make tinctures, creams, capsules, or syrups—all of which have no other option for getting insurance coverage. Botanical producers that create value-added products from a combination of grown and wild crops can cover their value-added products even though wild crops are otherwise uninsurable. In this way, botanical producers who forage can protect their investment in foraging by insuring the revenue gained from value-added products with foraged ingredients.

Benefits & Requirements of WFRP and Micro Farm

WFRP and Micro Farm, despite their benefits, are generally underutilized. It is difficult to comb through the policies and regulations to understand how they apply to individual businesses, especially when the farm business is more innovative—like many botanical producers. Once botanical producers understand how their cultivated and foraged botanical crops can be covered, they need to turn to the mechanics of the programs to determine if WFRP or Micro Farm is right for their operation.

WFRP and Micro Farm are similar in that both revenue-based policies are available in all counties. However, there are some stark differences between the insurance products. Micro Farm benefits smaller operations that may have fewer years of tax records and rely on value-added products for much of their revenue.

See the chart below for the most important differences (and many similarities):

	Revenue Caps	Historical Revenue Data Req’d	Coverage Levels	Resale Limits	Can the farmer have other crop insurance policies?	Value-Added Revenue Coverage
Whole–Farm Revenue Protection	$17 million	5 consecutive years of Schedule F or other farm tax forms	50-85% of approved revenue	No more than 50% of total revenue from commodities purchased for resale	Yes: Individual crop policies can also be purchased	No: post-production operations are not allowable revenue
Micro Farm	$350,000 (first year) $400,000 (subsequent years)	3 consecutive years of Schedule F or other farm tax forms	50-85% of approved revenue	No more than 50% of total revenue from commodities purchased for resale	Yes: Individual crop policies can also be purchased	Yes: post-production can be included in allowable revenue

These policies are generally the only options for botanical producers. For more specific information on applying to either program, read Farm Commons’ Crop and Livestock Insurance Options for Diversified Operations, paying special attention to the section What does it take to get WFRP?

Farmer Basil

Let’s explore how to choose between WFRP and Micro Farm using the example of Farmer Basil. Basil grows, purchases, and forages herbs and mushrooms for their operation. After a few years of losses due to various factors—drought, bad seed, and closed farmers’ markets—Basil decides it is time to purchase a crop insurance policy. They’ve heard that there are insurance plans designed for smaller specialty crop producers and wants to determine if either of those options is right for them.

Basil forages on a neighbor’s 100-acre partly wooded lot. Basil only has verbal permission but has foraged the land for years. The neighbor lives in another state and only visits a few times yearly to hunt. They verbally agree that Basil has the right to forage on the land. Basil has never seen anyone else on the land.

Like you, Basil reads this guide. First, Basil does a financial calculation. Their average revenue is $112,000.00. 25% of that, or $28,000.00, is from value-added products they made and sold (tinctures, salves, and creams). 65% ($72,800) is from selling crops they cultivated and sold: herbs and a mix of vegetables and flowers. 10% ($11,200) of their revenue is from foraged wild crops, including herbs and mushrooms.

Basil has tax records for the last seven years of their business. They have enough historical data on their revenue to apply to either WFRP or Micro Farm. Because value-added production is a sizable percentage of their revenue, the Micro Farm policy makes more sense for Basil.

If Basil were able to get a written, exclusive lease and establish records of management of the stands of mushrooms and herbs on their neighbor’s land, they might be able to get coverage for their wild foraged crops as well as their other revenue. However, revenue from wild foraged crops is only 10% of the business. WFRP won’t cover the value-added revenue, which makes up a much larger portion of Basil’s business—25%.

Therefore, under the best circumstances, Basil will only have $84,000 of allowable revenue for the WFRP policy but up to the entire $112,000 of revenue under the Micro Farm policy.

Basil decides that the Micro Farm policy is better for their operation.

Basil purchases a Micro Farm plan at 85% coverage for an anticipated revenue of $112,000, so $95,200 ($112,000*85%) of Basil’s revenue for the upcoming tax year is insured. At the end of the season, Basil grossed $77,000 due to covered losses. Basil looks to their Micro Farm plan to help cover losses. Basil was guaranteed $95,200 and therefore received a payout of $18,200 ($95,200-$77,000). Using RMA’s Cost Estimator, Basil finds that their premium amount would be approximately $4,272.00 for the year to get this coverage.

Of course, if the foraged crops were not considered sufficiently managed to be insured, then Basil’s allowable revenue would drop to $100,800, and only $85,680 would be guaranteed through the crop insurance policy. Basil’s gross without foraged goods would be $69,300, so their payout would be $16,380.

Moving Forward

Now it’s time to evaluate your farm practices and determine whether Whole-Farm Revenue Protection or Micro Farm crop insurance suits your needs and goals. We’ll do this through a step-by-step assessment of your botanical products, production methods, and projected revenue streams. You can print this assessment out or use a pen and paper to write out your responses. Let’s begin!

1. List the botanicals that you use in your operation. Check if you cultivate, forage, or purchase these botanicals. If you procure the botanical in another way, write that way in after checking the last box.

a. __________________ Cultivate Forage Purchase ____________
b. __________________ Cultivate Forage Purchase ____________
c. __________________ Cultivate Forage Purchase ____________
d. __________________ Cultivate Forage Purchase ____________
e. __________________ Cultivate Forage Purchase ____________
f. __________________ Cultivate Forage Purchase ____________
g. __________________ Cultivate Forage Purchase ____________
h. __________________ Cultivate Forage Purchase ____________
i. __________________ Cultivate Forage Purchase ____________
j. __________________ Cultivate Forage Purchase ____________

2. What percentage of your revenue is from commodities purchased for resale? If more than 50%, you are ineligible for WFRP or Micro Farm. Refer to the guide to help determine what purchases fall under ‘commodities purchased for resale’; you are also encouraged to speak with an insurance agent.

• ______________%

3. Of the crops you listed above that are foraged, do you forage them on public lands or private lands? There are rules against using botanical products foraged on public lands commercially that you should be aware of; see our Legal Guide for Minnesota Botanical Producers (also available for North Dakota, Wisconsin, Illinois, and Michigan).

• ____Private Land _____Public Lands  ____Both
• If you forage on private land, let’s explore what type of management you exert over those wild crops.

1. ____I have exclusive permission to forage on the land, but it is not in writing
2. ____I own the land I forage
3. ____I have exclusive, written permission to forage the land
4. ____I harvest carefully to avoid stock depletion and could describe those methods and their reasoning
5. ____I routinely monitor the land for pests, weeds, or other interference with the wild crop and keep records of this activity
6. Other: ________________________________________
7. Other: ________________________________________

• Are there any management activities that you do or could begin doing on the land you forage? How would you document these activities?

4. Based on your answers and brainstorming above, do you think you have an argument to include foraged wild crops as allowable revenue for WFRP or Micro Farm?
a. ___Yes ___No ___ I need more information, for example:

_______________________________________________________________________________________________________________________________________________________________________________

If not, then you can still apply to WFRP but will have to exclude wild foraged crops from your allowable revenue. Micro Farm is also still an option, and some wild foraged crop revenue might get coverage under your value-added product revenue. If yes, then you can include revenue from managed, wild-foraged crops in your WFRP or Micro Farm applications.

5. Estimate how much of your revenue comes from post-product activities like adding value to botanicals: ______________%

• The higher the percentage here, the more likely Micro Farm is the best option for your operation, as long as you meet the other requirements.

6. Is your operation’s overall revenue below $350,000? Generally, if your revenue exceeds $350,000 and you’ve never had a Micro Farm policy, you are only eligible for the WFRP plan (which doesn’t cover value-added products). However, revenue adjustments can be made. Be sure to talk to an insurance agent to review your farmer’s revenue before giving up on Micro Farm. If you are sure you don’t qualify, you can skip to #9.

• ____Yes ____No

7. Do you include non-insurable wild foraged crops in your value-added products? If yes, then under Micro-Farm, your valued-added product revenue could be covered, giving you a small amount of wild foraged crop coverage regardless of management questions.
a. ____Yes ____No

8. How many years have you been filing a Schedule F or similar farm tax form? If 3 or more, you can apply for Micro Farm coverage. If 5 or more, you can apply for WFRP.
a. ______________________

9. What next steps do you intend to implement? After each step you check off, set a deadline for yourself.

• ____Contact a crop insurance agent to discuss my farm and whether my coverage plan is workable. Deadline: ____________________________
• ____Use RMA’s Cost Estimator to determine what a premium would be under WFRP or Micro Farm. Deadline: ____________________________
• ____Talk to the owners of the land I forage to try to gain exclusive, written access to the land. Deadline: __________________________________
• ____Do financial calculations to determine if WFRP or Micro Farm make financial sense for me. Deadline: ________________________________
• ____Contact Farm Commons staff to ask questions or get help developing my Action Plan. Deadline: ______________________________________
• ____Review foraging rules on public lands for my state and make a plan to resolve any violations of foraging laws. Deadline: ___________________
• ____Purchase crop insurance for the upcoming season. Deadline: ________
• ____Other: __________________________________________________
• ____Other: __________________________________________________
• ____Other: __________________________________________________

Funder Acknowledgments

The work was supported by USDA/NIFA under Award Number 2023-70027-40444.