Crop Insurance Update and Overview

Transcription

1 Crop Insurance Update and Overview To Those That work in ACRES, Not in Hours We Thank You

2 This training is conducted by Agra View, LLC. This material/event is funded in partnership by USDA Risk Management (RMA) under award # RM17RMEPP522C011/

3 Crop Insurance The Farm Safety Net Agriculture is an inherently risky business. Farmers and ranchers need to regularly manage for adverse weather, financial, marketing, production, humanresource, and legal risks. For some farming and ranching operations, crop insurance is the difference between staying in business or going out of business after a disaster.

4 What is MPCI Crop Insurance? The Multiple Peril Crop Insurance (MPCI) program provides financial assistance to producers of insurable crops to protect against natural disasters that result in lower yield, crop losses, or loss of revenue. Provides coverage when low yields, loss of revenue, or prevented planting occurs due to natural disasters.

5 Crop Insurance Basic Information Individual Plans Individual plans Individual plans are based upon the insured s production and for some coverage, revenue history. Actual Production History (APH) Guarantees the producer a yield based on their production history, which is why it is called the APH plan. Actual Revenue History (ARH) Actual Revenue History is based upon the insured s revenue history for the crop insured. The guarantee is calculated based upon the insured s production and revenue history. A loss occurs when the revenue to count for the current year falls below the insured s guaranteed revenue. Yield Protection (YP) Yield Protection plan is very similar to the APH plan, but is only available on crops that are eligible for Revenue Protection (RP). The Yield Protection plan of insurance provides protection against a loss of production.

6 Crop Insurance Basic Information Revenue Plans Revenue Protection (RP) protects against a loss of revenue Price increase or decrease, loss of production, or a combination of both Available for the same crops where YP coverage is available. Revenue Protection/Harvest Price Exclusion (HP HPE ) is similar to RP BUT Provides coverage against loss of revenue caused by price decrease, low yields or a combination of both Price increase is not covered because the guarantee is not adjusted up by the harvest price for this plan. Dollar Plans of Insurance are available for some commodities. Usually insured in dollar per acre or some other measurement applicable to the crop. Maximum dollar amount per acre or other measurement is established and published by RMA. Producer chooses a percentage of the maximum dollar amount to establish the guarantee. A loss occurs when the dollar to count per acre falls below the dollar amount of insurance.

7 Crop Insurance Basic Information Area Plans Area Plans insure against an area wide; usually county wide, loss of crop production Area Yield Protection Plan (AYP) provides coverage based on the experience of the county, rather than an individual farm. Loss may occur if the final county yield falls below the insured s expected (or trigger) yield. Plan is based on a county yield and not a producer s individual yield. Area Revenue Protection (ARP) provides yield protection of AYP, but provides against a loss of revenue due to production loss, price decline or a combination of both. Similar to the RP plan the initial guarantee is calculated using the projected price, but the revenue guarantee will increase if the harvest price is greater than the projected price If the harvest price is lower than the projected price, the policy guarantee remains the same. A loss occurs when the Final County Revenue falls below the Expected County Revenue (or Trigger) Guarantee. Area Revenue with Harvest Price Exclusion (ARP HPE) similar to the ARP plan except that the guarantee is not adjusted up by the Harvest Price. Guarantee is based on the projected price, but losses are calculated using the harvest price. Plan is similar to the RPE HPE plan except it is based on experience of the county, rather than the individual producer.

8 2014 Farm Bill Beginning Farmer Beginning farmers and ranchers are eligible for certain benefits. These benefits include: Exemption from paying the administrative fee for catastrophic and additional coverage policies; Additional ten percentage points of premium subsidy for additional coverage policies that have premium subsidy; Use of the production history of farming operations that they were previously involved in the decision making or physical activities; An increase in the substitute Yield Adjustment, which allows them to replace a low yield due to an insured cause of loss, from 60 to 80% of the applicable T yield.

9 Beginning Farmers and Ranchers (BFR) BFR Qualifications: Must not have operated farm/ranch for more than 5 years, excluding; BFR under age of 18, In post secondary studies, Or active in the U.S. military

10 New Producer Qualifications Producer must not have produced the insured crop in the county for more than two crop years. For Example: Steve purchased a farm and first time planting in Stevens Co. Steve would qualify for 100% of Stevens Co. RMA County T Yield. Steve purchased a farm in 2017 (Sullivan Co.) and planted wheat for the first time in Steve would qualify as a new producer as only grown wheat in Sullivan Co. for 1 year. However, Steve must provide the 2017 wheat production Database would include 1 actual and 3 T 100% T Yields.

11 The APH Yield Exclusion (APH YE) 2014 Farm Bill The provision allows farmers to exclude eligible yields which occur from exceptionally bad years (such as a year in which a natural disaster or other extreme weather occurs) from their production history when calculating yields used to establish their crop insurance coverage. The APH YE option and eligible crop years for exclusion are identified in the actuarial documents. Yield Exclusion by Commodity provides the overall summary by commodity for policies selecting the APH YE option and includes the total policies insured where APH YE is available.

12 Triticale Insurance Now Available in Select Counties in: California, Idaho, Kansas, Oklahoma, Oregon, Texas, and Washington and will be effective for the 2018 crop year. The plan provides coverage for damage resulting from naturally occurring events. It is similar to other individual yield based insurance plans and uses a producer s APH to establish the insurance guarantee.

13 Damage due to Unavoidable Uninsured Fire (UUF)/Third Party Eliminating negative impact on APH yields due to unavoidable, uninsured causes of loss.

14 Unavoidable Uninsured Fire Fires caused by an uninsured cause of loss by actions outside the control of the insured and are unavoidable. The insured must prove to the insurance company UUF Example: fires caused by drivers throwing lit cigarettes out of a car window are caused by Third (3rd) parties and are unavoidable Non Example: fires caused by an insured who sets a fire to burn brush which spreads and burns his crop was caused by the insured and avoidable

15 Third Party Damage Damage to a crop that results from the actions of a 3 rd party, outside of the control of the insured The insured must be able to document Example: a neighbor negligently applies chemicals and the resulting spray drift damages the insured's crop

16 New Procedures for 2018 Production and acres with damage from UUF/3 rd party will not be included in the APH database No actual yield is reported for the damaged acreage Production from any undamaged acres will be included in the APH database Allows production lost for 2017 and subsequent crop years to not impact the 2018 and subsequent crop years APH databases Does not require a change in the APH regulation production lost due to an uninsured cause of loss will not be included in the actual production or the resulting actual yield

17 Criteria Losses due to UUF/3 rd Party will not impact approved APH yields when the following are met: Notice of loss filed in accordance with the policy and procedures as required by RMA if notice is not provided or not provided timely, the loss will be treated the same as any other uninsured cause of loss for APH purposes Insurance Company must determine if cause of loss is due to UUF/3 rd Party. The burden is on the insured to prove: each situation assessed on its individual merit and circumstances a total production loss on the damaged acreage is not required

18 Criteria Damage due to UUF/3 rd Party remains an uninsured cause of loss Insured s choice to report production from UUF/3 rd party damaged acreage and include it in the APH database Filing a notice of loss due to UUF/3 rd Party damage does not prohibit an insured from reporting production from the damaged acres and including such in the APH database. If insured chooses to include production and acreage from UUF/3 rd Party damaged acres: do not modify the acreage report to reflect damaged acreage if the acreage report already identifies the acreage damaged by UUF or a 3 rd party, it does not need to be modified; and insured must sign the impacted APH database to indicate their choice to opt out of excluding such acreage and production on or before the Production Reporting Date

19 Criteria The production and acreage from all acreage damaged by UUF or 3 rd party damage must be excluded from the APH database if any is excluded. Example: 50 acres were damaged by a 3 rd party with varying degrees of damage. An insured cannot include the 20 acres with the least damage in the APH database while not including the other 30 acres damaged. All 50 acres damaged by UUF or a 3 rd party must not be included or all 50 acres are included. The production and acreage from the remaining acreage not damaged by UUF or a 3 rd party is included in the APH database and is used to calculate the approved APH yield.

20 Acreage Report Separate line entries are required on the acreage report for the acreage not damaged by UUF/3 rd party and the acreage damaged by UUF/3 rd party if damaged before Acreage Reporting Date (ARD), then separate lines are reported if damaged after ARD, acreage report is modified to have separate lines requirement to modify the 2017 acreage report is waived Damage caused by UUF or a 3 rd party is an uninsurable cause of loss and therefore not eligible for an indemnity Premium adjustments will not be made for insured acreage damaged by UUF or a 3 rd party

21 Production Reporting When part of the acreage within an APH database was damaged: the UUF/3 rd Party damaged planted/insurable acres are reported separately from acreage not damaged by UUF or a 3 rd party on the production report cannot be commingled if the production was completely destroyed on the damaged acreage: report damaged acreage on the production report production reported as 0 if there is some production from the damaged acreage: report damaged acreage and production from such acreage, if any, on the production report if production from UUF/3 rd party damaged acreage is commingled with production from the acreage not damaged by UUF/3 rd party, and cannot be reported separately on the production report, the damaged acreage and production must be included in the APH database

22 Production Reporting 3 rd Party When all of the acreage within an APH database was damaged by UUF/3 rd party: Acreage if the production was completely destroyed: report total acres, and report production as null If there is some production from the damaged acreage: report total acres report production and identify it as from acreage damaged by UUF/3 rd party on the production report

23 APH Database When part of the acreage within an APH database was damaged: do not include the UUF/3 rd party damaged acreage and production from the damaged acres, and include the acreage and production from the remaining acreage.

24 Example Part of Acreage Damaged In 2017, Joe Farmer planted 150 acres of non irrigated wheat in unit (all contained within one APH database). In July, 50 acres were damaged by spray drift from a neighbor s field. Joe filed a Notice of Loss within 72 hours of initially discovering the damage which is a timely notice. Insurance Company determined the cause of loss was due to 3 rd party damage based on info provided by Joe.

25 Example 1 Part of Acreage Damaged Since the requirements for 3 rd party damage were met, only the production from the 100 acres undamaged by the spray drift is included in the 2018 and subsequent years APH database.

26 Acceptable Production Reports

27 On Farm Grain Storage Common Scenarios

28 Grain Stored On Farm then Delivered to Market Harvested in Field Origin identity (unit) must be maintained when stored on Farm. On Farm Storage Summary sheet from elevator will not detail what production originated from which unit. Commercial Facility When grain is placed in on farm storage, bin markings or load records must be kept to confirm grain origination by optional unit.

29 Grain Delivered Directly to Market When grain is delivered directly to the marketing outlet, load slips can be used to identify the production as to which unit it was harvest from.

30 Grain Stored On Farm then Fed On Farm Harvest Stored On farm Must have detailed fed records when grain is stored and fed on farm. * RMA may be issuing new requirements. Grain Fed On farm

31 Producers 2017 Production & Yield Report Example of Production & Yield (P&Y)report completed by insured and how production should be reported

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33 Working with Commingled Production

34 Commingled Production What is commingled production? When production from two or more units is not kept separate by truck load or other conveyance record. No soft records exist to separate out production. Penalties for commingled production are more severe since 2017 changes.

35 Commingled Production (Cont) Commingled production between two or more basic units (BU) If the insured certifies production on the production report at a level below the BU, they must have acceptable records at the level reported or assigned yields will apply. Example: Insured commingled production and does not have any soft records between unit BU and BU. This is not allowed and would result in an assigned yield procedures.

36 Commingled Production (Cont) Commingled production between two or more optional units (OU). Producers are no longer allowed to prorate production based upon acres, unless that is how the insured originally reported their production on the P&Y. Assigned yields would apply if no supporting records are provided

37 Load Records (Soft Records)

38 Soft Records Allocating Production Examples of Soft Records Soft records (load log) can be used to allocate grain back to OU structure Truck load log records Grain cart load log records Bin measurement by producer Farm stored weight records Combine monitor records

39 Hard Records Allocating Production Examples of Hard Records Will be needed when grain is commingled and farm stored Will require 3 rd party verification to support total production: Insurance Company Employee bin measurement Farm Service Agency (FSA)/RMA RO bin measurement Settlement/delivery sheets from 3 rd party vendor Feeding records

40 Production Saved for Seed

41 Production Saved for Seed Grain used as seed for the insured s own use shall be included in the APH database. The insured must furnish scale tickets or weight slips showing date of weighing, name of insured and commodity. The insured must also certify the amount of seed which was used for planting by: 1) Certifying to amount of the seed planted per acre; and 2) Certifying to and identifying the acreage on an aerial photo.

42 Feeding Records

43 Feeding Records Acceptable Types: Must be contemporaneous Must be maintained on a daily basis, accounting for production fed to livestock and have been generated during the time period production was fed. If producer knows he is going to feed production a measurement or appraisal can be taken prior to feeding and used as hard copy documentation if selected for APH Audit.

44 Feeding Records Feeding records should include the following: Amount of grain/insured crop or commodity fed each day Bin/Storage facility ID from which the production was taken Number and kind of livestock Estimated average weight (to the nearest 100 pounds), number of livestock per head and location or pen number The unit number from which production was taken (soft record) Fed Production whether from previous years or fed directly from the field or truck

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46 Combine Monitor Records

47 Combine Monitor Records (Cont) Starting in 2011 these can be used as hard copy records if certain criteria are met Three critical requirements must be met: 1. Printed report from yield monitoring system, 2. Completed annual calibration report, and 3. Calibration error rate must be less than 3%.

48 Combine Monitor Records (Cont) Print out must include the following: Insured s name Unit number FSA FSN/Tract/Field Legal Description Crop name Acres harvested Total weight Total yield (unadjusted for moisture) Average moisture; and Total dry weight

49 Combine Monitor Records (Cont)

50 Grain Carts w/ Bluetooth

51 Grain Carts w/ Bluetooth Acceptable Scale Tickets for APH purpose: Grain cart load sensor is equipped with Bluetooth technology* System electronically records and stores weight information Reported separately on a field by field basis Producer must provide a printout of ALL scale tickets Scale ticket records must include the following: Insured s name Crop Gross weight with production and gross weight without production Date weighed Load number (ticket ID number) Unit and/or field identification Identification and location of farm stored facility where grain is stored *or other wireless technology

52 Grain Storage Bags

53 Grain Storage Bags (Cont)

54 Rainfall Index

55 Rainfall Index Overview Rainfall Index (RI) Programs Area Based Plan Approximately 0.25 degree grid vs. county area Utilizes National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center (CPC) data Utilizes multiple point data, not a single point system Deviation from Normal 1948 to present Review of Historical Indices is critical 55

56 Rainfall Index Overview Index Intervals Multiple Intervals offered PRF and API have 11, 2 month intervals AF 2 month intervals are based on growing seasons Producers must select appropriate timing risks Correlate to individual growth patterns and production seasons and practices The 2 month intervals provide for greater reaction to precipitation events vs. a yearly average 56

57 Grid Overview Area of insurance = 0.25 o grids 57

58 SUBSIDY Premium subsidy based on Coverage Level Coverage Level of 70% Government Subsidy = 59% Coverage Level of 75% Government Subsidy = 59% Coverage Level of 80% Government Subsidy = 55% Coverage Level of 85% Government Subsidy = 55% Coverage Level of 90% Government Subsidy = 51%

59 Pasture, Rangeland, Forage (PRF) Intended Use: Grazing Established acreage of perennial forage Acreage must be suitable for grazing Haying Established acreage of perennial forage Acreage must be suitable for haying Interval Selection: Should be based on when precipitation is important for forage growth 59

60 Pasture, Rangeland, Forage (PRF) Insurable Interest Grazing: Interest in the livestock grazing the insured acres e.g. cash leased or own land/livestock Percentage of the value gained of the livestock being grazed on the insured acres, if the acres are share leased Percentage of the value obtained from the pounds gained by the livestock or a percentage of the offspring from the livestock

61 Apiculture Apiculture (API) No intended use or practices to report Interval selection should be based on when precipitation is important for blooms that will be pollinated not when colonies are there 61

62 Annual Forage Annual Forage (AF) No intended use or practices to report Interval selection should be based on when precipitation is important for planting and plant growth 62

63 Annual Forage Annual Forage are annual plants seeded on planted acreage for forage or fodder Grazing Haying Silage Green Chop Hay/Grazing Any other method that results in livestock feed 63

64 NOAA CPC Website Daily Reporting Stations nitoring/figures/nams/nams_curr.p.gnum.gif

65 NOAA CPC Weighted Averaging Method Four Passes with each successive pass, the scan radius is decreased, the weight of the closest station has higher effect on the target grid A minimum of 4 stations (4 passes) insures that distant stations influence rainfall prediction in target grid, but weighting with distance decreases the influence 65

66 Will this work for me? RI does not protect against long term weather such as drought ONLY reduced precipitation during an expected interval Precipitation is interpolated to the grid NOT measured within a grid IF there is a weather station that reports daily to NOAA CPC inside your grid, the results will not equal that weather station Similar to National Agricultural Statistics Service (NASS) data used for area crop policies Producers reporting to NASS unknown Surveys NASS eliminates in their quality control unknown 66

67 RI Is Not Drought Insurance RI PRF is not drought insurance and does not insure against any other weather event such as high temperatures A drought declaration in a state, county or area does not, trigger an indemnity payment under the RI program Possible to be in a drought and not trigger RI RI will trigger going into a drought but may not coming out of a drought

68 Key Points: Rainfall PRF Program Critical that the Historical and Decision Support Tools are understood and used Spend time reviewing the historical information and compare to past production The basis of decision to purchase must be based on an analysis between the historical results compared to producer s results. As with any area plan results may not track 100% of the time to the individual producer results within the area Critical that appropriate Index Intervals are selected 68

69 SE Kansas Information % of Growth Native Brome Fescue Alf/Brome March April May June July August Sept Oct Nov

70 SE KS Information/Example (Cont) 50% of producer s hay land is fescue & 50% native grass 30% of fescue s growth occurs between Sept and Nov July/Aug, Aug/Sept, Sept/Oct, Oct/Nov, Nov/Dec should likely have 30% of the value of the forage applied between those selections Review historical indexes tool at: Compare to production records

71 SE KS Information/Example (Cont) Review of producer records Native Hay only 2006 and 2012 were below average years PRF is a replacement feed policy Producer should consider hay carry over and other feed on hand Selection of productive factor, coverage level, and number of acres to insure depends on producer s risk May need to adjust yearly based on carry over feed supply

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75 Rainfall Index Indemnity Indemnity Only insurable cause of loss is when the final grid index value is less than the coverage level (deductible) selected by the producer Indexes are based on normal/historical and deviation from normal/historical 75

76 Rainfall Index Indemnity Indemnity SE Kansas Producer 160 acres hay 50 acres Native Grass and 50 Fescue Reviewed the historical for the native hay Best option is for producer s native hay 25% in May/June and 25% in July/August Correlates well with records 50% balance should reflect months that correlate to fescue growth If a percentage of the loss includes a month for native, then the percentage of native would be increased 76

77 Will this work for me? Focus must be on the Historical Indices Review your records against the Historical Indices Tool Did past results track with observed results? How did it perform in a spotty dry year? How did it perform in a regional dry year? Do production trends follow historical indices results? As with any area plan results may not track 100% of the time to the individual producer results within the area Critical that the appropriate Index Intervals are selected 77

78 LIVESTOCK!!

79 Federal Crop Insurance Act limits the amount expended on livestock plans to $20 million Livestock Risk Protection (LRP) Cattle both Fed and Feeder Lamb Swine Livestock Gross Margin (LGM) Cattle Dairy Swine Whole Farm Revenue Plan

80 LIP provides benefits to livestock producers for livestock deaths in excess of normal mortality caused by adverse weather or by attacks by animals reintroduced into the wild by the Federal Government LIP payments are equal to 75 percent of the average fair market value of the livestock. Public/usdafiles/FactSheets/2017/lip_fact_sheet_oct 2017.pdf

81 Livestock Forage Disaster Program (LFP) Provides compensation to eligible livestock producers who have suffered grazing losses for covered livestock on land that is native or improved pastureland for grazing The grazing losses must be due to a qualifying drought condition during the normal grazing period for the county A map of eligible counties for LFP drought may be found at and services/disasterassistance program/livestock forage/index FSA Public/usdafiles/FactSheets/2017/livestock_forage_disaster_p rogram_oct2017.pdf

82 Noninsured Crop Disaster Assistance Program (NAP) Provides financial assistance to producers of noninsurable crops to protect against natural disasters that result in lower yields or crop losses, or prevents crop planting Provides coverage when low yields, loss of inventory, or prevented planting occurs due to natural disasters Eligible producer is a landowner, tenant or sharecropper who shares in the risk of producing an eligible crop and entitled to an ownership share of that crop Insurable interest of NAP and PRF may not be the same FSA Public/usdafiles/FactSheets/2017/nap_for_2015_and_subsequent_years_oct2 017.pdf

83 Organic Farming Practices Fastest growing segment of U.S. Agriculture RMA recognizes organic farming as a good farming practice RMA continues improving the crop insurance program for organic producers and for producers transitioning to organic. 83

84 Whole Farm Revenue Protection (WFRP) WFRP is a new product offered through Federal crop insurance that covers farm revenue produced for the whole farm for the insured year. A portion of the producer s premium amount is subsidized by USDA depending on farm diversification.

85 Fact Sheets!! Visit the RMA link below for additional information on a variety of topics!

86 Livestock Insurance Fact Sheet and Other Useful Links feedercattle.pdf fedcattle.pdf lamb3.pdf swine.pdf lgm swine qa.pdf

87 PRF and API Fact Sheets and Other Useful Information Links df prf.html df Tutorial%20 %20PRF%20Decision%20Support%20Tool.pdf

88 Questions To see the RMA Crop Policies and Tools for these programs visit Contact your crop insurance agent or html to find an agent Contact your local FSA office for questions regarding the FSA Livestock Programs or visit sheets/index

89 Questions Contact your crop insurance agent or to find an agent. Contact your local FSA office for questions regarding the FSA/NAP Programs