1

SWOT Analysis for Federal Crop Insurance Corporation

The Communicators

Department of Integrative Sciences and Arts, Arizona State University

OGL355: Leading Organizational Innovation and Change

Dr. B

September 9, 2020
 2

SWOT Analysis for Federal Crop Insurance Corporation

This paper will go into detail about our SWOT analysis for Federal Crop

Insurance Corporation, including the strengths, weaknesses, opportunities and threats to

the corporation. We will be making a list of these aspects and will go into further detail in

the following sections. It is very important for any organization to understand their

strengths and weaknesses in order to continue prospering in their strong areas and make

improvements to areas that are lacking or causing a decrease in revenue. It is also

important to have knowledge of what resources are available, potential opportunities for

the organization, and potential threats that could cause harm to the business operations.

SWOT Analysis

Strengths Weaknesses
● Security provided to agricultural ● Changes in government
producers. administrations could cause
● Education and training of AIPs as turnover in the organization.
well as independent agents ● Appeals process for denied claims
provides one on one service to the ● Availability of programs in
agricultural producers. specific areas
● Federal crop insurance program is
permanently authorized by
congress by the Federal Crop
Insurance Act.
● Program flexibility
● Development of new programs
Opportunities Threats
 3

● Hemp, marijuana and other new ● Political discord in the congress

crops and products.
● Beginner farmers
● Farmers transitioning from
non-organic crops to organic.
● Higher cost of farming equipment.
and between congress and white
house.
● Continuity of the family farm
● Financial Stability of AIPs
● Increasing crop and livestock
prices.

Strengths

The Federal Crop Insurance Company (FCIC) provides a safety net to American

agricultural producers through subsidies to Approved Insurance Providers (AIPs)

covering crop and livestock losses. In the case of depressed prices for a variety of

reasons, agricultural producers would suffer losses that could threaten the financial

viability of their farms and ranches for which there was no insurance coverage or

insurance coverage was cost prohibitive. This could result in the loss of many farms and

ranches threatening the country's food supply. In the event of catastrophic losses due to

natural disasters, producers get their money in an expedited manner rather than waiting

for a disaster declaration from congress or the President.

The continuation of the program in some form or another is secured through the

permanent authorization of the Federal Crop Insurance Protection Act of 1980.

Previously, the cost to agricultural producers was high and there was low participation.

With passage of the act, not only did the cost to agriculture producers go down, but
 4

producers were assured the program would be in place permanently, thereby increasing

participation amongst the suppliers of the nations food sources.

There is some flexibility within the programs offered by the FCIC to provide for

insurance even after an event may have triggered an insurable claim. For instance, should

a farmer be delayed in planting a crop (perhaps because of a flooded field) past the

normal last planting date, the program still allows for reduced coverage if the farmer

decides to plant despite the event. This allows the farmer to take a chance that they can

risk planting late in an effort to make as much as possible, but reducing the risk slightly

in the event the crop fails to mature as necessary. (Racantuer, I 2014)

Crop insurance premiums and benefits have historically been based upon the

average yields for the farm or rancher in question. There is a program in place which

benefits a beginning farmer and rancher to not only acquire affordable insurance, but

does not penalize them if they have a poor yield in their beginning years. Instead, the

FCIC will allow for the premium and benefits to be based on a county-wide T-Yield

(Racanteur, 2014).

As congress passes farm bills on a semi-regular basis, the FCIC becomes

authorized to add new crops and products to its offerings. The programs are tested and

either renewed or dropped from coverage depending on actuarial factors. The 2018 Farm

Bill for instance approved the funding for non traditional agricultural products including

hemp ( Crop Insurance, ND)

 5

Weaknesses

The changes within administrations (both in Congress and the White House) can

cause disruptions within the workforce at the FCIC. This can cause an issue with

maintaining continuity within programs and training for AIPs, independent agents and the

agriculture producers. This lack of continuity can affect the participation rate within the

program by agricultural producers. The changes within the organization can also cause

uncertainty among the AIPs causing variances in actuarial calculations or AIPs leaving

the program because of the uncertainty of a program or change in processes and

procedures.

When an agricultural producer files a claim and it is rejected by an AIP, there is

no appeals process through the FCIC or the Risk Management Agency which works with

the FCIC to administer the Crop Insurance Program. The lack of an appeals process

reduces faith in the program and may cause participants to not continue with the program,

instead self insuring their farms and ranches.

The FCIC through this Crop Insurance Program does not re-insure all crops in all

areas of the country. In fact, crop coverage availability can vary by county within a state.

In some cases this may be due to the general makeup of farm land within an area. In other

cases it may be due to lack of experience for that crop in that particular area. Programs

could be developed to alleviate some of this in the same manner in which the program

has begun to help new farmers and ranchers.

 6

Opportunities

Farm Bills are passed by the United States Congress on a regular basis. As bills

are approved, new programs are added to the Crop Insurance Program that provide

support for the FCIC. Providing subsidized coverage for the agricultural producers. The

2014 Farm Bill created programs that solidified the Crop Insurance Program of the FCIC

as the primary tool for farmers in managing price and production risk (Shields 2015). The

2018 Farm Bill added products to cover non-traditional commodities such as hemp (Crop

Insurance, ND). As the future of agriculture expands into additional areas, it appears that

congress is at least willing to consider additional issues.

While an ideal opportunity for growth with the decriminalization of marijuana

would be ideal, unfortunately, for farmers, marijuana is not eligible for insurance through

the FCIC. This is not surprising because the federal government has prohibited marijuana

for some time (Stoa, 2017). Most insurance companies, private or federal, are wary of

getting involved in the marijuana industry as it is ruled illegal by the federal government.

The FCIC has developed programs for beginning farmers to offer them the ability to

afford the coverage for the first five years. Farmers can take advantage of a higher yield

on their crops and waive a $300 administrative fee (FSA, 2017). This is an excellent

opportunity for the FCIC because it gets farmers and producers in the books, and brings

the farmer's commitment to insuring their items. Another opportunity for the FCIC is the

increasing costs to operate a farm or ranch, including equipment, research and

development as well as feed and seed products, many banks are requiring agricultural

producers to acquire insurance through the FCIC’s crop insurance program.

 7

​Threats

Political issues will continue to be an issue for the FCIC. Luckily, the Federal

Crop Insurance Act makes crop insurance subsidies permanent. However, funding of the

program, as well as the types of programs and the farms and ranches that qualify can be

added or deleted in subsequent farm bills. The biggest political threat is congress

requiring additional programs to be covered while reducing the budget at the same time.

This would cause subsidies to be reduced and producers to carry more of the risk. This

would result in a reduction in participation by the farmers and ranchers.

As the current owners of farms and ranches age, a new group of young farmers

will need to step in or there will be a decline in the number of family farms. This decline

may lead to an increase in corporate farm ownership. Coupled with the possibility of

political changes, congress may be unwilling to provide the kind of subsidies for

insurance to corporate farms/ranches that have been afforded family farms. This could

cause a reduction in funding for farms/ranches.

The financial stability of Approved Insurance Providers has been an issue in the

past and could be an issue as produce and livestock prices climb in the future (GAO,

2004). If a spike in prices occurs followed by an insurable event, the insurance

companies may have in issue meeting the payment demands of insured losses above the

FCIC subsidy amount. Currently there are 16 Approved Insurance Providers. Reduction

in the number of insurance providers would likely raise premiums which would increase

the demand for subsidies from the FCIC reinsurance program in future years.
 8

Conclusion

Our SWOT analysis for Federal Crop Insurance Corporation includes the

strengths, weaknesses, opportunities, and threats to the corporation. The SWOT analysis

identified how to protect farmers and their revenue. It has also identified what resources

are available, potential opportunities for the organization, and potential threats that could

cause harm to the business operations. Strengths that were identified throughout the

SWOT were; what support do farmers get from The Federal Crop Insurance Company

(FCIC), and how can they maximize profitability. The FCIC provides a safety net to

American agricultural producers through subsidies to Approved Insurance Providers

(AIPs) covering crop and livestock losses. Natural disasters can impact farmers and

whether they can stay on schedule to plan are some of the struggles they encounter.

However, the FCIC provides flexibility and reduced coverage costs, and still allows the

farmers to take risks and plant to maximize profitability even though a natural disaster

may have impacted their schedules or what crops to plant. Catastrophic losses from

natural disasters are coverage that the FCIC continues to protect by the Federal Crop

Insurance program of 1980. Weaknesses that have been identified are; how the federal

government such as our congress and president can have an impact on the farmers. With

changes to our government can change perspectives and change what they find is

necessary to cover. This also impacts what bills pass. This directly affects the AIP,

independent farmers, and producers. Another identified weakness is the claims process

for denied claims from the farmers. If a claim is denied the FCIC does not support a

system or approach that can allow room for appeals. The opportunities identified were;
 9

the sustainability of bills and the support to new farmers. Farm bills are passed to protect

farmers and support the FCIC continuously to support farmers. Also, new farmers get

some relief by being granted a fee waiver for the administrative fees. They also see more

affordable prices for coverage for the first five years. The last part of our analysis

captured the threats. Politics play a huge role in the FCIC. As congress changes so follow

the budget. These budget changes impact the farmers as they are requiring more

resources with a continuous shrinkage to the budget. The last identified risk was as

farmers age so does the farms. The risk lies where if families don’t continue to operate

the farms it brings opportunity for corporate ran farms to take over.

APPROVAL: (sign off with initials by 12pm AZ time 09/09/2020) - plan

to submit by 1-2pm 09/10/2020

Florentina Jilliene Megan Delia Bill Ahmad

Lang - ​FL  Pearsall - Lioi - ​ML  Rohan - Tucker - Hamid-
JP  DR  WJT AH 
 10

References

Crop Insurance (ND), ​History​ retrieved from

https://cropinsuranceinamerica.org/about-crop-insurance/history/

GAO (June 1, 2014) ​USDA Needs to Improve Oversight of Insurance Companies,

General Accounting Office retrieved from

https://www.govinfo.gov/content/pkg/GAOREPORTS-GAO-04-517/html/GAOREPORT

S-GAO-04-517.htm

A Guide to USDA Sustainable Farming Programs​ [Scholarly project]. (2017, January). In

Growing Opportunity.​ Retrieved 2020, from

https://sustainableagriculture.net/wp-content/uploads/2017/02/FSA-Guide-Final.pdf

Raconteur, I. (August 2014) ​Federal Crop Insurance Questions Answered, ​ Farm

Horizons , retrieved from

http://www.herald-journal.com/farmhorizons/2014-farm/federal-crop-insurance.html

Shields, D. (December 13, 2010) ​Federal Crop Insurance Background and Issues,

Congressional Research Service retrieved from

https://adriansmith.house.gov/sites/adriansmith.house.gov/files/CRS%20-%20Crop%20I

nsurance.pdf

Shields, D (August 13, 2015) ​Federal Crop Insurance Background, ​ Congressional

Research Services, retrieved from ​https://fas.org/sgp/crs/misc/R40532.pdf

 11

Stoa, R. (2017, March). Marijuana Agriculture Law: Regulation At The Root Of An

Industry [Review]. ​Florida Law Review​, ​69​(2) Retrieved from

https://scholarship.law.ufl.edu/cgi/viewcontent.cgi?article=1361&context=flr