USDA moves forward with crop insurance changes

By Sara Wyant

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, July 1, 2014 - The U. S. Department of Agriculture's (USDA) Risk Management Agency (RMA) filed an interim rule with the Federal Register, allowing USDA to move forward with changes to crop insurance provisions, as authorized in the 2014 farm bill. 

The provisions provide better options for beginning farmers, allow producers to have enterprise units for irrigated and non-irrigated crops, give farmers and ranchers the ability to purchase different levels of coverage for a variety of irrigation practices, provide guidance on conservation compliance, implement protections for native sod and provide adjustments to historical yields following significant disasters.

"Crop insurance is critical to the ongoing success of today's farmers and ranchers and our agriculture economy. These improvements provide additional flexibility to ensure families do not lose everything due to events beyond their control," said Agriculture Secretary Tom Vilsack. "We're also acting to provide more support to beginning farmers and ranchers so that they can manage their risk effectively. We need to not only encourage new farmers to get into agriculture, we must ensure they're not wiped out in their riskiest initial seasons so they can remain in agriculture for years to come." 

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Here's an overview of the interim rule, along with estimated costs and savings - based largely on Congressional Budget Office scoring estimates in January 2014.  

Beginning farmers and ranchers: The Farm Bill authorizes specific coverage benefits for beginning farmers and ranchers starting with the 2015 crop year. The changes announced yesterday exempt new farmers from paying the $300 administrative fee for catastrophic policies. New farmers' premium support rates will also increase 10 percentage points during their first five years of farming. Beginning farmers will also receive a greater yield adjustment when yields are below 60 percent of the applicable transitional yield. These incentives will be available for most insurance plans in the 2015 crop year and all plans by 2016. Annually, the Federal Crop Insurance Corporation (FCIC) anticipates these changes will cost $26.1 million.

Conservation compliance. Additional details will be rolled out later in July, but the new farm bill requires those enrolled in crop insurance, for certain agriculture commodities, to comply with conservation compliance requirements or forego premium subsidy. Annually, FCIC anticipates a savings of $4.6 million as a result of this change. 

USDA will determine an insured's eligibility for premium subsidy paid by FCIC at a time that is as close to the beginning of the next reinsurance year (July 1) as practical. The determination will be based on FSA and Natural Resources Conservation Service determinations regarding compliance with the highly erodible land conservation (HELC) and wetland conservation (WC) provisions. 

Insureds who do not have a certification of compliance, form AD-1026, on file with FSA prior to the beginning of the reinsurance year (July 1) will be ineligible for premium subsidy, unless insureds can demonstrate they are a beginning farmer or rancher who has not previously had an insurable interest in a crop or livestock and they began farming for the first time after the beginning of the reinsurance year but prior to the sales closing date. This means that an insured who is determined to be non-compliant on June 1, 2015, (2015 reinsurance year) will, unless otherwise exempted, be denied premium subsidy effective July 1, 2015, the start of the 2016 reinsurance year, and will not be eligible for any premium subsidy for any policies during the 2016 reinsurance year. Even if the insured becomes compliant during the 2016 reinsurance year, the insured will not be eligible for premium subsidy until the 2017 reinsurance year starting on July 1, 2016. 

Sodsaver: Starting in the fall of 2014, producers who till native sod and plant an annual crop on that land will see reductions in their crop insurance benefits during the first four years. Native sod is acreage that has never been tilled, or land which a producer cannot substantiate has ever been tilled for the production of a crop. The provision applies to acreage in all counties in Iowa, Minnesota, Montana, Nebraska, North Dakota, and South Dakota that is greater than five acres per policy and is producing annual crops. Annually, FCIC anticipates a savings of $11.4 million as a result of this change.

Irrigated/Non-irrigated: Additional flexibility for irrigated and non-irrigated enterprise units and coverage levels will be available in the spring of 2015. Section 11007 makes available insurance coverage by separate enterprise units based on irrigated and non-irrigated acreage of crops within counties. The new language allows two separate enterprise units, one for all irrigated acreage of the crop, and one for all non-irrigated acreage of the crop. However, both the irrigated and non-irrigated acreage must each separately qualify for enterprise units. Annually, FCIC anticipates a cost of $53.3 million as a result of this change. 

Section 11015 of the 2014 Farm Bill allows insureds with additional coverage policies to elect two separate coverage levels, one for all irrigated acreage of the crop in the county and one for all non-irrigated acreage of the crop in the county. This will be available where both an irrigated practice and non-irrigated practice is available in the actuarial documents. For example, an insured may choose a 65 percent coverage level for all irrigated acreage (corn irrigated practice) and an 80 percent coverage level for all non-irrigated acreage (corn non-irrigated practice). Annually, FCIC anticipates a cost of $16.8 million as a result of this change.

APH adjustment. Section 11009 allows insureds to exclude any recorded or appraised yield for any crop year in which the per planted acre yield in the county is at least 50 percent below the simple average for the crop in the county for the previous 10 consecutive crop years, and allows insureds in any county contiguous to a county in which an insured is eligible to exclude a recorded or appraised yield to also elect a similar adjustment. Annually, FCIC anticipates a cost of $35.7 million.


Correction of errors. Section 11019 allows for the correction of errors in information obtained from the producer within a reasonable amount of time and consistent with information provided to other agencies of the Department of Agriculture subject to certain limitations for maintaining program integrity. This section also provides for the payment of debt after the termination date in accordance with procedures and limitations established by the FCIC, if a producer inadvertently fails to pay a debt and has been determined to be ineligible to participate in the Federal crop insurance program. FCIC does not believe there are any additional cost outlays resulting from this change.

Additional information on implementation of these changes is available at the RMA website, www.rma.usda.gov

The interim rule is available to the public at the Federal Register at www.ofr.gov/inspection.aspx

More information is available on the RMA website at www.rma.usda.gov. Written comments on the rule can be submitted to www.regulations.gov by Sept. 2, 2014. All comments will be considered when the rule is made final. 

 

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