Risk Management for Oilseed and Direct Seed Cropping Systems

Transcription

1 Risk Management for Oilseed and Direct Seed Cropping Systems Dave Paul USDA Risk Management Agency Multiple Peril Crop Insurance Update January 21, 2014

2 DISCLAIMER The purpose of the following material is to promote awareness of risk management concepts and to highlight USDA s risk management products, features, benefits and availability. This presentation does not provide full details of policy provisions or approved procedures. Producers should consult with a local agent for specific details and program requirements. 2

3 Agenda A presentation that explores risk management for direct seed and oilseed cropping systems, Federal crop insurance updates and oilseed coverage, cover crop discussions, changes and a look ahead to the future of crop insurance in the NW. Participation Updates Federal Multi-peril Crop Insurance updates and oilseed coverage Insured Crops and Seeding Methods Cover crops and Interplanting RMA process for requesting changes to current coverage to adapt to new research and production practices

4 Pacific Northwest All Crops Liability 4.5 Coverage in Billions of Dollars * CAT Buy-Up * data not final updated 10/28/2013

5 Insurance Participation: PNW Wheat Liability Coverage in Billions of Dollars * CAT APH Revenue 3.6M acres insured in 2013 data not final updated 11/4/13

6 Insurance Participation: PNW Canola Liability Coverage in Millions of Dollars * CAT APH Revenue data not final Updated 12/3/13

7 Small Grains and Oilseed Insurance Options Production Only Plans Yield and Revenue Plans Actual Production History (APH) Yield Protection (for crops with Revenue Protection) Revenue Protection Revenue Protection with Harvest Price Exclusion APH crops: Flax, Mustard, Safflower Yield Protection: Canola/Rapeseed/ Wheat, Barley, etc. Revenue Protection: Canola/Wheat, Barley, etc. CAT coverage: All

8 2013 Wheat Demographics RPHPE 5% PNW CAT 4% YP 7% YP 13% CAT 8% Idaho RPHPE 4% RP 84% RP 75% YP 4% RPHPE 14% CAT 2% Oregon RPHPE 3% YP 5% CAT 2% Washington RP 80% RP 90% 8

9 Oilseed Crops Insurance Availability Canola/Rapeseed Okanogan Stevens Pend Oreille Boundary Bonner *Spring only: Blaine, Bonneville, Fremont, Jefferson, Madison, Teton Mustard/Canola/Rapeseed Douglas Lincoln Spokane Kootenai Mustard/Canola/Rapeseed/Flax Mustard/Canola/Rapeseed/Safflower Klickitat Adams Whitman Benewah Latah Garfield Nez Columbia Perce Lewis Walla Walla Asotin Clearwater Sherman Gilliam Morrow Umatilla Wallowa Idaho Wasco Union Adams Washington Fremont Gooding Blaine Lincoln Jerome Minidoka Jefferson Madison Teton Bonneville Bingham Caribou Power Bannock Twin Falls Cassia Oneida Franklin

10 2013 Canola Demographics YP 20% CAT 4% PNW YP 18% CAT 5% IDAHO RPHPE 1% RPHPE 1% RP 75% RP 76% YP 12% RPHPE 2% CAT 4% WASHINGTON YP 33% CAT 1% OREGON RP 82% RPHPE 2% RP 64% 10

11 Indemnity Claim Policy Renewal Change Options Application Sales Closing Cancellation Termination Dates Inspection Insurance Basics Insurance Cycle Treat your insurance as part of your business Acceptance Notice of Damage or Loss of Production What do I need to know as an insured? Insurance Attaches Premium Billing Acreage Reports Schedule of Insurance 11

12 Important things to consider during the insurance year Make a folder for all your current year s crop insurance Fall and spring Sales Closing Dates depending on the crop/county. You should receive a copy of the Basic Policy, Crop Provisions and Special Provisions of Insurance each year. Be sure to have this in your INSURANCE FOLDER Review and know what you have coverage for this is your business. Treat it as such. Your coverage is determined by unit based on your approved APH, the insurance plan, level of coverage, and price. The insurance plan, level of coverage and price are chosen at the time the Application, or the Policy Change in subsequent years, is completed. 12

13 Application Acceptance Some things the company should check on the application: Does it Identify the correct person and person type (e.g., individual, partnership, co-owner, joint venture, corporation, etc.); Is the application signed by a person(s) having authority/capacity to enter into a binding contract; and Does the application contains all the required information to insure the crop, including: All applicable SSNs, EINs and/or RANs; All person(s) who have a SBI and their respective identification numbers and person types; Plan of insurance; Coverage level; Percentage of price election or projected price, as applicable; and Crop and type, as applicable. Make sure this matches what is reported at FSA 13

14 Policy Change by Sales Closing/Cancellation Date Canola/Rapeseed August 31 st for fall and March 15 for Spring; Wheat September 30 th. On or before the cancellation date, the insured may: Cancel all crop policies in a county or a specific crop(s) in a county following the initial crop year insured. Change the Insurance Plan, percentage of projected price/price election and/or coverage level. Select Enterprise Units You should receive a POLICY CONFIRMATION each year. This form is issued to the insured after the company accepts the completed application or policy change form. PUT A COPY IN YOUR INSURANCE FOLDER AFTER YOU HAVE REVIEWED IT 14

15 Replanting Winter Acreage Any acreage of the crop that was damaged, to the extent that a majority of growers in the area would not normally further care for the crop, must be replanted (unless the company agrees that replanting is not practical) for coverage to continue. Damage must occur after the earliest fall final planting date in the county The wheat replant payment will be the lesser of 20 percent of the production guarantee or 4 bushels for wheat; 175 pounds for canola; or 5 bushels for barley When it is practical to replant and the crop is not replanted, insurance does not attach. Other provisions apply Producers can also purchase the Winter Coverage Endorsement. 15

16 PRODUCTION REPORT An annual production report is required to collect the prior crop year(s) production - the information contained within the production report is used to establish the approved APH yield. This is the yield your guarantee is based on. Remember to Include: All acreage and production (insured and uninsurable/uninsured) by P/T/TMA for each APH crop year being reported Conform at least to the unit structure (EU, BU, and/or OU) that applies for the current crop year in which the insured had an interest in the crop for each APH crop year production reports are certified. Exception: This does not prohibit the insured from reporting production at a level lower than the elected unit structure if such production can be summed to the elected unit structure by the company Report all APH crop years continuously when multiple years of production history are certified; there cannot be a break in continuity of production history. Remember your production report must be supported by acceptable production evidence Keep this information in your INSURANCE FILE 16

17 ACREAGE REPORT The acreage report is required annually and determines the amount of insurance provided, premium, and establishes the insurable share at the time insurance attaches. Review and sign your acreage report make sure it matches what you report at FSA. Place a copy in your INSURANCE FILE. It is imperative that the information required is accurate. Coverage cannot be increased except in specific situations Inaccurate information reported on the acreage report can result in overand under-reported coverage or unreported units that may adversely affect the coverage and/or any potential loss. For example, if your share is different at the time of loss compared to the time insurance attached, the insured share will be the lesser of: the share at the time insurance attached; or the share determined by the company at the earlier of the time of loss or the beginning of harvest 17

18 Schedule of Insurance or Summary of Coverage This form is issued to the insured after the crop(s) is planted, reports acreage, and the company has calculated the associated premium and liability. This is one of the most important pieces of information you get. Check it for accuracy Contact the company if anything is in error immediately File in your INSURANCE FOLDER 18

19 Premium Billing Annual Premium and Administrative Fees - annual premium is earned and payable at the time coverage begins. You will be billed for the premium and administrative fee not earlier than August 1 st for Canola/Rapeseed and August 15 th for Wheat. Interest will start to accrue on the first day of the month following the issuance of the notice by the company, provided that a minimum of 30 days have passed from the premium billing date specified in the Special Provisions. For wheat interest would start to accrue on September 15 th. For Canola/Rapeseed interest would start to accrue on September 1 st. Check your billing statement does it match your schedule of insurance? Contact your company immediately if there are problems / errors. DO NOT FORGET TO PAY 19

20 Notice of Damage Refer to your policy best advice we can give you is to notify your company or agent immediately when there has been damage. The Policy state that all notices required to be received by the company within 72 hours may be made by the insured by telephone or in person, but the insured must confirm the notice in writing within 15 days. Follow-up in WRITING your notice of loss protects you! Place a Copy of your NOTICE in your INSURANCE FILE. 20

21 Inspections and Loss Adjustment Participate actively in your claims adjustment. Take your INSURANCE FILE with you Ask questions Make sure you are comfortable with the adjustment Ask questions and get clear answers 21

22 Your Insurance Options Some things to consider when working with your agent before the sales closing date MPCI Yield Policies protect the insured against production losses. Yield Guarantees based on the Approved APH Revenue Policies provide protection against production loss, price decline or increase or a combination of both. Projected and Harvest Price Important Concepts for Revenue Protection Used to establish your coverage and to determine whether you have a loss. 22

23 Developing Yields & Guarantees Crop: Wheat Type: Winter Practice: Summerfallow Section: 7 Township: 2N Range: Year 2W Production (Bu.) Acres Unit OU Yield , , , , , Producer can select a guaranteed Coverage Level of 50% to 85% (most crops) of their Approved APH (increments of 5%), and a Price Level up to 100% of the maximum established price for loss payment purposes. For example, if your unit APH is 70 bu / acre, and you select: 80% coverage, then 70 bu x 80% = 56 bu / ac yield protection guarantee Same basis when selecting a Yield Protection Price Election. 100% price ($6.72/bu) x 56 bu guarantee = $ / acre yield protection guarantee Preliminary Yield 350/ 5 years = 70 Total = 350 Approved Yield 70 When production falls below the guarantee for yield protection, indemnity payments begin. 23

24 Units Important to Look at Unit Options Basic Standard Policy Optional Furthest Breakdown and most expensive Enterprise Entire crop in the county least expensive This is where an experienced crop insurance agent can help if you are relying on T-Yields on some units Particularly on a SF rotation Look at your unit structure Are you planting on that unit every year? If not, could you combine one or more to improve your actual yields and force less reliance on T-Yields Can split out in future years 24

25 CRP Basic Units -- 2 Units Owner / Operator Share Rent (2/3 Smith / 1/3 Green) 25

26 CRP Optional Units -- 8 Units 26

27 CRP Enterprise Units -- 2 Units If barley was planted in the NE sections Wheat Barley Owner / Operator Share Rent (2/3 Smith / 1/3 Green)

28 Insurance Plan Choices Once the APH databases are set up by unit/p/t the next step is to decide on the Insurance Plan to use to cover the insured acreage. Yield Protection or Revenue Protection is available for the following crops: -Corn -Canola/Rapeseed -Malting Barley -Wheat -Barley -Dry Peas & Lentils Note: Crops with Revenue and Yield Protection will NOT have an RMA established price election. Reference Commodity Exchange Price Provisions 28

29 Yield and Revenue Protection Options Yield Protection Guarantee based on the projected price (approved APH yield x coverage level x projected price) Revenue Protection Guarantee based on the higher of the projected or harvest price. Upside and downside price protection. Revenue Protection with Harvest Price Exclusion Guarantee based on the projected price only. Only downside price protection. 29

30 Unit Structure and Plan Choice Impacts on Premiums Example: Winter Wheat Non Irrigated 70 bushel / acre average yield 80 / 85 percent coverage level 1,000 acres 2014 Projected Price = $6.72; volatility factor = 0.22 Winter Wheat (80% coverage level) Yield Protection $/ac Revenue Protection $/ac Revenue Protection with Harvest Price Exclusion $/ac Basic Unit $3.68 $9.81 $7.83 Optional Unit $4.19 $10.41 $8.25 Enterprise Unit $2.12 $5.89 $4.68 Winter Wheat (85% coverage level) Yield Protection $/ac Revenue Protection $/ac Revenue Protection with Harvest Price Exclusion $/ac Basic Unit $5.42 $15.37 $11.80 Optional Unit $6.11 $16.11 $12.33 Enterprise Unit $3.76 $11.31 $ * displayed on a per acre cost basis

31 Unit Structure and Plan Choice Impacts on Premiums Example: Lincoln County, WA Producer Premium Comparison* (varies by county/yield/acres/ etc ) Fall Oleic Canola Summerfallow 1,535 lb/ acre average yield 100 acres 2014 Projected Price = $ CANOLA (75% coverage level) Yield Protection $/ac Revenue Protection $/ac Revenue Protection with Harvest Price Exclusion $/ac Basic Unit $11.88 $14.28 $12.55 Optional Unit $13.20 $15.65 $13.86 Enterprise Unit $5.43 $6.64 $5.77 CANOLA (85% coverage level) Yield Protection $/ac Revenue Protection $/ac Basic Unit $23.10 $27.85 $24.62 Optional Unit $25.67 $30.43 $27.15 Enterprise Unit $14.97 $18.57 $16.14 Revenue Protection with Harvest Price Exclusion $/ac * displayed on a per acre cost basis 31

32 Unit Structure and Plan Choice Impacts on Premiums Example: Lewis County, ID Producer Premium Comparison* (varies by county/yield/acres/ etc ) Fall Oleic Canola Summerfallow 1585 lb/ acre average yield 100 acres 2014 Projected Price = $ CANOLA (75% coverage level) Yield Protection $/ac Revenue Protection $/ac Revenue Protection with Harvest Price Exclusion $/ac Basic Unit $16.80 $22.13 $18.49 Optional Unit $18.67 $24.12 $20.37 Enterprise Unit $7.67 $10.36 $8.54 CANOLA (85% coverage level) Yield Protection $/ac Revenue Protection $/ac Basic Unit $33.47 $43.60 $36.86 Optional Unit $37.19 $47.42 $40.45 Enterprise Unit $21.70 $29.35 $24.32 Revenue Protection with Harvest Price Exclusion $/ac * displayed on a per acre cost basis 32

33 Canola/Rapeseed Insured Crop The crop insured will be all canola and rapeseed in the county for which a premium rate is provided by the actuarial table: In which you have a share; That is planted for harvest as seed; and That is not, unless allowed by Special Provisions or by written agreement: Interplanted with another crop; or Planted into an established grass or legume. Interplanted means acreage on which two or more crops are planted in a manner that does not permit separate agronomic maintenance or harvest of the insured crop

34 Planted acreage - Seeding Land in which seed, plants, or trees have been placed, appropriate for the insured crop and planting method, at the correct depth, into a seedbed that has been properly prepared for the planting method and production practice. Except for flax, land on which seed is initially spread onto the soil surface by any method and subsequently is mechanically incorporated into the soil in a timely manner and at the proper depth will be considered planted. Acreage planted in any other manner will not be insurable unless otherwise provided by the Special Provisions, actuarial documents, or by written agreement.

35 Fall Canola Earliest Planting Dates Irrigated practice: August 1 All other practices: Oregon: July 1 Idaho/Washington: July 15 To be eligible for a replant payment no acreage of the crop must be planted before the earliest planting date.

36 Inter-Seed Winter Wheat with Tillage Radish Issue: The grower intends to inter-seed winter wheat with tillage radish. The producer is contemplating this interplanting practice under the encouragement by NRCS. The wheat crop is insurable under the terms of the policy without needing a written agreement. Even though the radish is inter-seeded with the wheat during planting, this does not meet the Basic Provisions definition of interplanted (acreage on which two or more crops are planted in a manner that does not permit separate agronomic maintenance or harvest of the insured crop). Since the radishes will die out before the wheat is harvested, the wheat is able to be harvested separately of the radishes. The is no obstacles to insuring wheat will tillage radish s as long as good farming practices are followed with this practice.

37 Cover Crops RMA Factsheet (Handout) Recognizing the advances and added benefits of cover crop practices, and trying to provide more flexibility in the face of changing conditions, RMA revised its cover crop procedures by employing new guidelines. Now, you will determine the recommended termination time for a cover crop by using the NRCS Cover Crop Termination Guidelines for Non-Irrigated Cropland on the NRCS web site. You can find more information about cover crops and commercial crop insurability in your county Special Provisions at webapp.rma.usda.gov/apps/ actuarialinformationbrowser/. SPOI Statement 2014 spring filed crops: Insurance shall attach to a crop following a cover crop when the cover crop meets the definition provided in the Basic Provisions, was planted within the last 12 months, and is managed and terminated according to NRCS guidelines. If growing conditions warrant a deviation from the guidelines, producers should contact either Extension or the local NRCS for management guidance. For information on cover crop management and termination guidelines, refer to the Cover Crop Termination Guidelines published at:

38 Requesting Changes RMA process for requesting changes to current coverage to adapt to new research and production practices Call Fax Write Dave Paul, Director E Sprague Ave., Suite 201 Spokane Valley, WA

39 Questions? USDA Risk Management Agency Dave Paul, Director E Sprague Ave, Suite 201 Spokane, WA