More Restrictive Written Agreements Among Crop Insurance Changes for 2003

Doug Hagel, director of the Billings Regional Office of USDA’s Risk Management Agency, outlined crop insurance changes for the 2003 crop year at the recent Prairie Grains Conference in Grand Forks, N.D. 

Hagel says that many of the changes are in response to language in the 2000 Agriculture Risk Protection Act (ARPA), requiring RMA to do more to protect program integrity and actuarial soundness.

One of the changes may have a major impact on producers who apply for written agreements.  Hagel explains that written agreements offer producers crop insurance in a county that does not have a program for a crop, type, or practice. 

For the past few years, a grower who wanted insurance coverage on a crop through a written agreement could use crop production records of a similar crop as evidence he/she had the necessary resources to produce a crop they had not grown before.   New rules for written agreements require acceptable crop production records of the crop for the most recent three consecutive crop years as evidence that the producer can and has successfully grown the crop for which they are requesting insurance.

In addition to the more restrictive rules governing new written agreements, the Regional Offices have been directed by Manager’s bulletin MGR-02-001 to deny re-issuance of existing written agreements to those producers who have a minimum of two crops in which an indemnity was paid, and an accumulative loss ratio of three dollars or greater for all crop years the written agreement was in effect. The bulletin expires December 31, 2002. It is not yet known if it will be reissued or incorporated into the existing procedure.

Assigning yields for added land requests will also be evaluated in more detail.  The RO may consider factors, which may include, but are not limited to, insurance experience and the appropriateness of allowing yields from small acreages to be applied to much larger acreages. 

The procedure for combining and dividing units has also changed, which will decrease the occurrences of combining a high yield unit with a low yield unit for one crop year, then dividing it the next crop year to increase the yield guarantee. Optional units will be combined if the insured makes a written statement that he or she intends to continue using the unit structure requested. When two or more units are combined, the original unit’s acres and production will be maintained separately and entered on the acreage report separately for yield purposes, but will be considered one unit for indemnity purposes.

Changes specific to North and South Dakota included, but are not limited to, adding additional types of dry beans (i.e. desi and small kabuli garbanzo, pinto, dark red and light red kidney) to some counties, adding forage seeding insurance to all counties where it was previously unavailable, removal of millet insurance from pilot status and limited expansion, and clarification of actuarial statements.

Transitional yields (T-yields) have also been adjusted on all small grains and many other crops.  According to Hagel, using National Agriculture Statistics Service yield data with a base period of 1991-2000 increased the T-yields in most but not all cases. Transitional yields are used when an insured has less than the four years of actual records needed to calculate an actual production history yield.

Another change, which was actually implemented for the 2002 crop year by interim rule, has been entered into the federal register as final rule.  It concerns who can grade samples for quality adjustment. The new regulations allow a grain grader not licensed under state law, but who is employed by a warehouse operator who has a commodity storage agreement with the Commodity Credit Corporation and is in compliance with state law regarding warehouses to grade grain for quality adjustment purposes.

There are relatively few changes for the 2003 crop year compared to other years, says Hagel. However, he stressed the importance of farmers discussing crop insurance coverage with their agents to “assure you understand how or if crop insurance changes affect you individually.”

Hagel encourages producers to consult with their agents earlier rather than later, as agents typically will have less time to work with producers on analyzing their coverage options as the signup deadline of March 15 draws near.

Information on crop insurance policies for 2003, as well as proposed crop insurance changes for crop year 2004, can be found on the RMA website at www.rma.usda.gov.