USDA changes prevented planting coverage for some crops

By Sara Wyant

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WASHINGTON, Nov. 22, 2016 - Responding to criticism from USDA's Office of Inspector General (OIG), the department's Risk Management Agency (RMA) announced updated factors for prevented planting coverage.

A 2013 OIG report looked at prevented planting claims from 2008 to 2011 - a time period when the agency paid producers about $4.6 billion in claims. 

The OIG found that “out of concern for covering a producer's preplanting costs in all cases, RMA set current prevented planting coverage levels above the percentages of guarantees that insureds needed to cover average preplanting costs. As a result, by establishing coverage levels that provided over $480 million in potentially excessive payments, we believe RMA inadvertently provided incentives to encourage prevented planting claims.” 

Subsequent to that report, RMA commissioned a third-party evaluation of prevented planting coverage, which provided recommendations for determining prevented planting factors. RMA evaluated the public comments and determined that adjustments to the evaluation's recommendations where necessary.

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“These improvements will ensure that the program continues to be a well-run program that provides a strong safety net for producers,” RMA noted in a release. Here are the new coverage factors, which will be effective for the spring of 2017. 

Prevented planting coverage provides producers protection if they are unable to plant an insured crop by the final planting date. When adverse weather prevents planting, a prevented planting payment is made to compensate for the producer's pre-planting costs generally incurred in preparation for planting the crop. These costs can include purchase of machinery, land rent, fertilizer, actions taken to ready thfield, pesticide, labor, and repairs. The prevented planting factor is a percentage of the individual insurance guarantee and varies by crop, based on an estimate of pre-planting costs.

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The RMA said that prevented planting factors will be reviewed and updated for all crops with prevented planting coverage, but these first seven crops are being updated for the Spring 2017 planting season. 

“Over time, the prevented planting factors may go up or down depending upon changes in input costs. RMA will evaluate the effectiveness of the recent changes and modify them as needed in coming years.

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