MAy 2014 VOL. 47, NO. 2. NCIS Celebrates Silver Anniversary PUBLICATION OF NATIONAL CROP INSURANCE SERVICES

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1 MAy 2014 VOL. 47, NO. 2 NCIS Celebrates Silver Anniversary PUBLICATION OF NATIONAL CROP INSURANCE SERVICES

2 Industry-leading tools to connect you and your customers this planting season Gain efficiencies with the Rcis precision farming tool Are your policyholders taking full advantage of the precision farming capabilities in their equipment investments? With RCIS, agents and producers can upload precision farming data for acreage reporting electronically. We pair precision farming data with mapping services to complete multi-peril acreage reports, putting your policyholders equipment and data logging monitors to work during the busy acreage reporting season. Our newly enhanced precision farming tool leverages both Ag Leader s SMS TM software and Trimble s Farm Works TM mapping software to streamline communication between you and your policyholders, decrease paperwork, and increase electronic data usage. This user-friendly technology is now available for RCIS agents and policyholders. To learn more, ask your field service representative or visit RCIS.com. We grow stronger every day together sm Rural Community Insurance Agency, Inc., D/B/A RCIS. RCIS is an equal opportunity provider Rural Community Insurance Agency, Inc. All rights reserved. WCS

3 TODAY PRESIDENT SMESSAGE...Where to now, St. Peter? Laurie Langstraat, Editor TODAY IS PROVIDED AS A SERVICE OF NATIONAL CROP INSURANCE SERVICES TO EDUCATE READERS ABOUT THE RISK MANAGEMENT TOOLS PRODUCERS USE TO PROTECT THEMSELVES FROM THE RISKS ASSOCIATED WITH PRODUCTION AGRICULTURE. TODAY is published quarterly February, May, August, and November by National Crop Insurance Services 8900 Indian Creek Parkway, Suite 600 Overland Park, Kansas If you move, or if your address is incorrect, please send old address label clipped from recent issue along with your new or corrected address to Donna Bryan, at the above address. This will be the first issue of TODAY magazine since the signing of the 2014 Farm Bill. For the past few years, many of us have spent countless hours speculating, articulating, triangulating, and in some cases hyper-ventilating about the coming of the Farm Bill. At a time when Congress has been criticized for doing nothing, the fact that Congress passed a comprehensive, five-year Farm Bill by an overwhelming bipartisan margin is significant. And the fact Congress chose crop insurance as the centerpiece for the farm safety net in the bill is humbling. Neither accomplishment would have been possible if not for the tireless work of Congressional leaders from the Senate and House Agriculture Committees Tom Zacharias, NCIS President who refused to take no for an answer; the numerous agricultural associations and the farmers they represent who made crop insurance a top priority; our partners at the USDA s Risk Management Agency (RMA); representatives from the AIPs who took countless trips to D.C.; the industry s government relations team; and, new friends like the conservation community. On behalf of the crop insurance industry, and the customers we serve, thank you. NCIS EXECUTIVE COMMITTEE Tim Weber, Chairman Mike Day, Vice Chairman Jim Korin, Second Vice Chairman NCIS MANAGEMENT Thomas P. Zacharias, President Charles Lee, General Counsel James M. Crist, CFO/COO Frank Schnapp, Senior Vice President Mike Sieben, Senior Vice President Creative Layout and Design by Graphic Arts of Topeka, Inc., Kansas So where to now, St. Peter? Well, now what? As we look to introduce new risk management tools, such as Supplemental Coverage Option (SCO) and Stacked Income Protection Plan (STAX), and the elimination of direct payments, SURE and ACRE, the lyrics of Elton John s song, Where to now, St. Peter? come to mind here:...i understand I m on the road where all that was is gone...show me which road I m on... First, we have to go (or is it get to go? ) through the process of implementing the new legislation. This process is currently underway as the Administration and the staffs of USDA and RMA draft the various policies, procedures, and regulations that will be required. As appropriate, the various stakeholders and partners in the delivery system are brought into the various stages of implementation. As the Carpenter s used to sing...we ve only just begun... As we reflect upon the passage of the Bill, those of us in crop insurance need to keep a few constructs in mind as we go forward. For the Farm Bill and industry to succeed, crop insurance must be: 1) Available; 2) Affordable; and, 3) Viable. Each of these elements are interdependent and key to the further sucess of crop insurance. With these ideas in mind, I will be starting a three part series in the President s Reports dealing with each of these topics. I will attempt to define each of them and put them into context with each other. In this issue we will deal with the subject of availability. If crop insurance is to remain successful, it is vital that the program be widely available to all farmers growing all different types of commodities. On a temporal scale, we can think of availability through the lens of Dickens Christmas Carol Printed on recycled paper. Continued on page 38 CropInsurance TODAY 1

4 VOL. 47, NO. 2 MAy 2014 Table of Contents 1...Where to now, St. Peter? Year In Review 20 NCIS Celebrates Silver Anniversary Annual Convention Draws Record Numbers 33 Four Industry Stalwarts Presented Lifetime Achievement Awards 36 Dan Carothers Receives Outstanding Service Award 41 Kenny Shock Receives NCIS Industry Leadership Award 42 Tom Vetter Receives NCIS Industry Leadership Award 44 Committee Chairs Ready for the Year Jo Anne Baker Retires Leaving NCIS Visit 33 Copyright Notice All material distributed by National Crop Insurance Services is protected by copyright and other laws. All rights reserved. Possession of this material does not confer the right to print, reprint, publish, copy, input, transform, distribute or use same in any manner without the prior written permission of NCIS. Permission is hereby granted to Members in good standing of NCIS whose Membership Class (and service area, if membership is limited by service area) entitles them to receive copies of the enclosed or attached material to reprint, copy or distribute such NCIS copyrighted material in its present form solely for their own business use and solely to employees, adjusters or agents who are under contract with them, and as a condition to receiving such copies, such employees, adjusters and agents agree that they will not reprint, copy or distribute, or permit use of any such NCIS copyrighted material to or by any other person and/or company, or transform into another work such NCIS copyrighted material, without prior written permission of NCIS National Crop Insurance Services, Inc.

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6 CropInsurance TODAY By Keith Collins and Harun Bulut, NCIS (Note: the data discussed in this article are as of April 21, 2014, unless indicated otherwise.) Overview After the devastating drought of 2012, U.S. producers and the crop insurance industry experienced a more routine year in 2013, but still one with atypical events. Drought was eliminated in many areas, growing conditions turned out much more favorable and yields were near trend for many major crops, enabling farmers to harvest large production levels. The year also saw the Federal Crop Insurance Program attain several significant milestones. Total insured liability of nearly $124 billion was the highest ever, while gross premium of $11.8 billion was the second highest ever and insured acres at 296 million was a record high. Strong insurance policy base prices for major crops and the continuing increase in coverage levels contributed to the high insured value. Despite large production levels, the program s gross loss ratio indemnities divided by premiums turned out 4 MAy2014 Year In Review to be 1.00 as of this writing, coming in behind 2012 as the second highest in the past decade. The loss ratio was pushed up by a sharp drop in market prices of major crops caused by the rebound in crop production. The price declines, along with adverse weather affecting certain regions and crops, caused many losses on both revenue and yield policies. The $11.8 billion paid in indemnities as of April 21, 2014 was the second highest ever. The highest indemnities by state were paid in Iowa, $2.0 billion; followed by Texas, $1.5 billion; and Minnesota, $1.3 billion. Corn had the highest level of claims at $5.7 billion, followed by wheat at $2.3 billion and soybeans at $1.2 billion. The high level of total claims has resulted in back-to-back subpar financial returns for crop insurance companies and the first back-to-back annual gross underwriting losses since 1999 and The drought of 2012 caused large underwriting losses both for the government and the companies, offsetting prior years of underwriting gains. The companies rate of return on retained premium is estimated as a negative 15 percent for 2012, and the losses incurred in 2013 will likely result in a rate of return on retained premium in the mid-single digit range. Companies need successive years of favorable returns to build surpluses to meet the losses that come with catastrophic years. With crop insurance providing financial support, farmers were able to plant 325 million acres in the spring of 2013, down slightly from a year earlier but four million above the previous five year average. The winter was warmer than average across the country, supporting winter wheat, and above-average precipitation in the Eastern half of the county finally eliminated drought in the Corn Belt and Southeast. The Southern Plains drought experienced some relief, but dryness on the West Coast and North Central areas was a continuing concern. A cold, wet spring caused significant planting delays in the Northern Plains, Midwest and Mississippi Delta. Planting progress was dramatically worse than in 2012 when the pace of plantings far exceeded the previous five year average for all the major spring planted crops. By the end of April

7 2013, only five percent of corn was planted, the lowest level for that date since By June 2, only 57 percent of the soybean crop was planted, the lowest since Similarly, other major crops lagged their five year averages throughout the spring. Yields and production recovered from 2012 with better growing season weather. Corn production was record high, while soybean production was the third highest on record. Rice and the all-wheat yields were each record highs, but production of each fell due to lower acreage. Winter wheat had its second highest yield on record and other spring wheat had its highest. With lower planted acreage, and drought in the Southwest hurting yields, upland cotton production contracted sharply. The improved weather made a big difference in the forage and hay crops, with production of all dry hay up 13 percent from Alfalfa production was generally up across the country, although Southwest producers still faced dry conditions limiting non-irrigated alfalfa hay. The National Agricultural Statistics Service s (NASS s) 18-state total for all forage production was 13 percent above the year earlier. The 2013 marketing year saw a strong increase in global use of grains and oilseeds, but the increase in global use fell short of the even larger increase in global production, thus increasing global stocks. While global grain and oilseed stocks are expected to be higher by the end of the 2013 marketing year, stock levels are expected to remain below levels reached in 2009, 2004 and the 1990s, suggesting that successive years of large production are needed to push stocks to burdensome levels and that large production problems in 2014 could once again drive market prices to high levels. Reflecting the increase in available supplies in 2013, harvest prices on crop insurance revenue policies were 22 percent below base prices for corn, 18 percent lower for winter wheat and 13 percent lower for spring wheat. Soybean harvest prices were unchanged, while those for cotton and rice exceeded base prices. The year s big news on the policy front was the completion of new Farm Bills by the Senate and House in late 2013, with the final bill the Agricultural Act of 2014 signed into law in February While Federal funding was reduced for the Farm Bill overall and for farm programs, funding for crop insurance was increased. The main new feature is the addition of two new area-based insurance programs Figure 1. Winter (Dec-Feb) Precipitation National Climatic Data Center/NESDIS.NOAA Precipitation 1=Driest 118=Wettest Record Driest Much Below Normal Below Normal designed to supplement a producer s revenue. The programs are the Stacked Income Protection Program (STAX) for upland cotton producers and the Supplemental Coverage Option (SCO) for all producers. These programs will go into effect for the 2015 crop year, with crop and county eligibility to be determined by the Risk Management Agency (RMA). This article begins with a review of weather and major crop production during the 2013 year. Commodity market developments are then reviewed, and the outcomes for insurance prices are presented. The implications for performance of the Federal crop insurance program and the U.S. and Canadian Crop- Hail programs are examined, and the article concludes with a brief discussion of the year s policy and program developments related to crop insurance. Near Normal Above Normal Much Above Normal Record Wettest Weather and Production The 2013/14 marketing years for major crops kicked off with planting of winter wheat in the fall of Planted area for harvest was million acres, up 1.87 million or 4.5 percent from 2012 and six percent more than The early harvest of spring crops and strong prices stimulated the area increase. Texas, Missouri and Oklahoma accounted for a total increase of over one million acres, while Illinois, Ohio, Tennessee and Indiana saw an increase of over 700,000 acres. A notable decline in planted area of over 800,000 acres occurred in North Dakota and Montana. There was little change in the white wheat areas of Oregon and Washington. As the crop headed toward winter dormancy, it was mostly rated fair to good, with 24 percent rated poor or very poor, somewhat worse than the 13 percent rating for the year-earlier crop. The winter was warmer than average for the contiguous United States and was the 20th warmest winter on record, mostly due to a very warm December. With vestiges of the 2012 drought pushing into 2013, precipitation helped by being above average, mainly east of the Rockies, producing the 26th wettest winter on record and ending drought in the eastern Corn Belt (Figure 1). Drought also ended in the Southeast, as Louisiana, Mississippi, Alabama and Georgia each had winters that were among their top ten wettest, as did Wisconsin, Illinois and Michigan. Pasture, range and winter wheat benefitted from precipitation in the Plains. However, precipitation was below average in the northwest and the West Coast, lessening water supply prospects for With numerous snow storms, snow cover was also above average, with the winter experiencing the 15th largest seasonal snow cover over the period of 1966 to present. In contrast to 2012, cold, wet weather disrupted spring planting in the Northern Plains and Midwest. U.S. spring temperatures were below average, resulting in the coldest spring since In the Central and Southeast re- CropInsurance TODAY 5

8 gions, 14 states had spring temperatures ranking among the ten coolest on record. The West and New England were warmer than average, with California having its seventh warmest spring. Spring precipitation was about average nationally, but above average in the Upper Midwest and below average in much of the West (Figure 2). Iowa had its wettest spring on record, with five nearby states having a top ten wet spring. Below-average spring precipitation was observed in the West and Mid-Atlantic. California had a top ten dry spring. Percent of previous 5-yr. avg. Figure 2. Spring 2013 (Mar-May) Percipitation National Climatic Data Center/NESDIS/NOAA Precipitation 1=Driest 119=Wettest Record Driest Much Below Normal Below Normal Near Normal Above Normal Much Above Normal Record Wettest Figure 3. Planting Progress: Share of Crop Planted in 2013 Compared with % 100% 80% 60% 40% 20% 0% Week in 2013 Corn Soybeans Spring Wheat Cotton The cold, wet spring caused significant planting delays in the Mississippi Delta. Midwestern precipitation in April and late May caused flooding in the middle Mississippi Valley. By the end of spring, drought was eliminated from areas bordering the Mississippi River to the Atlantic Ocean. However, drought persisted or worsened from California and parts of Oregon to the southern half of the High Plains. East of the Rockies, spring was slow to arrive, especially in the upper Midwest, with Minnesota and North Dakota recording their coldest springs. The heavy precipitation and cool weather impaired winter wheat condition, slowing heading, and reducing planting progress for spring crops. By the end of April, only five percent of corn was planted, the lowest level for that date since 1984 (Figure 3). By June 2, only 57 percent of the soybean crop was planted, the lowest since Planting progress was dramatically different than in 2012 when the pace of plantings far exceeded the previous five year average for all the major spring planted crops. A key market issue during 2013 was the number of acres that were prevented from planting due to the cold, wet spring. With the strong crop prices of 2012, slightly more acreage was expected to be planted but was not. In addition, there were 1.6 million fewer acres in the Conservation Reserve Program (CRP) in late 2012 than the year earlier, some of which could return to production. USDA s Farm Service Agency (FSA) reported 8.3 million prevented planted acres for major crops, including 3.6 million for corn, 1.7 million for soybeans and two million for wheat. However, actual planted area suggests smaller numbers. NASS reported that acreage planted to principal crops in 2013 was million, down only 1.5 million from the level planted in For corn, planted area was 95.4 million acres, down 1.8 million. In March 2013, farmers indicated plans to seed 97.3 million acres to corn, thus actual area seeded was only 1.9 million below stated intentions. For soybeans, farmers planted 76.5 million acres, down 0.7 million from In March, producers had expressed intentions to plant 77.1 million, thus actual area was only 0.6 million below intentions. Further analysis may help explain the relationship among planted area and FSA and crop insurance data on prevented planted acres. Other decreases in planted area included upland cotton with 2013 area at 10.2 million acres, down from 12.1 million in 2012; peanuts at 1.1 million acres, compared with over 1.6 million in 2012; and dry edible beans at 1.4 million acres, compared with over 1.7 million in Wheat saw a notable increase in planted area at 56.2 million acres, compared with 55.7 million in 2012, as more winter wheat acres offset fewer durum and other spring wheat plantings. The summer of 2013 had temperatures 6 MAy2014

9 that were above average, tying with 1937 as the 15th warmest summer on record. Above-average temperatures occurred in the West and Northeast, while below-average temperatures were in the Midwest and Southeast. The summer was the eighth wettest on record and the wettest since 2004 (Figure 4). New York, South Carolina, Georgia, and Florida each had their wettest summer on record. Early summer drying in the western Corn Belt became more widespread as the summer went on, expanding to much of the Midwest. Late summer temperatures also increased, putting corn and soybeans under greater stress by summer s end. In the East, persistent rain adversely affected a variety of fruits, vegetables and other crops. The Southern Plains received rain, but not enough to end the three year drought. The U.S. drought monitor (Figure 5) and U.S. crop conditions by week (Figure 6), indicate the general growing conditions during the summer of The drought monitor is a snap shot of the state of drought in mid At the end of July 2012, 63 percent of the contiguous United States was in drought rated D1 to D4. By the end of July 2013, that share had dropped to 46 percent, concentrated in the Plains and Southwest. The delayed plantings due to the cold, wet spring continued to affect crop development as both corn and soybean maturation lagged the normal pace. Dry and very hot weather in July and August starting in the Western Corn belt and spreading eastward caused crop conditions to deteriorate in mid-summer, but periodic showers and more favorable temperatures helped maturity in late August and September. Despite lagging development, the spring wheat crop condition remained highly rated throughout the growing season. Although cotton crop conditions were rated below other major crops throughout the growing season, conditions were near their previous five year average. During the fall season, most of the United States had temperatures close to average, with California notable as it continued to see below-average precipitation. Five states from Colorado to North Dakota had one of their ten wettest autumns on record (Figure 7). By the end of November, the share of the contiguous United States in drought had fallen to 31 percent. Drought improved across the Figure 4. Summer 2013 (Jun-Aug) Precipitation National Climatic Data Center/NESDIS/NOAA Precipitation 1=Driest 119=Wettest Record Driest Much Below Normal Below Normal High Plains, Southern Plains, and parts of the Rockies but worsened in the Far West, with 98 percent of California in drought by the end of the fall season. While much of the west outside of California was experiencing wet weather, warmth in the Midwest spurred late-developing corn and soybeans, and Midwestern producers made excellent harvest progress during October. By October 27, 59 Near Normal Above Normal Much Above Normal Record Wettest percent of corn was harvested, 32 percentage points below the drought-affected 2012 crop, but only three points behind the five year average. In the South, cotton developed normally and harvesting was only slightly behind average. As autumn progressed, producers also made good progress planting winter wheat, with sowing ahead of the five year average at the start of November, although a major area Figure 5. U.S. Drought Monitor July 30, 2013 (Released Thursday, Aug. 1, 2013) Valid 7 a.m. EST Author: Brian Fuchs National Drought Mitigation Center Drought Impact Types: Delineates dominant impacts S=Short-Term, typically less than 6 months (e.g. agriculture, grasslands) L=Long-Term, typically greater than 6 months (e.g. hydrology, ecology) Intensity D0 Abnormally Dry D1 Moderate Drought D2 Severe Drought D3 Extreme Drought D4 Exceptional Drought The Dought Monitor focuses on broadscale conditions. Local conditions may vary. See accompanying text summary for forecast statements. CropInsurance TODAY 7

10 Figure 6. U.S. Crop Conditions, 2013: Share of Crop Rated Good to Excellent 80% 70% 60% 50% 40% of concern remained the lack of soil moisture on the southern High Plains. Water supply concerns continued to increase in California as it moved toward a third consecutive year of sub-par precipitation. The final production estimates for key major crops are summarized in Table 1. With much better growing season weather than in 2012, yield per harvested acre generally improved. A number of records or near records were set. Corn production was record high, with record-high yields in the Eastern Corn Belt and in many Southern and Southeastern Corn Soybeans Spring wheat Cotton 30% Week in 2012 Note: Data for weeks 40 and 41 are missing due to the Federal Government shutdown. Figure 7. Fall 2013 (Sept-Nov) Precipitation National Climatic Data Center/NESDIS/NOAA Precipitation 1=Driest 119=Wettest Record Driest Much Below Normal Below Normal Near Normal states. Despite the planting delays and slow development, U.S. soybean yield improved and production was the third highest on record. The U.S. rice yield and the all-wheat yield were each record high, but with lower planted acreage of each, production declined. The winter wheat yield turned out to be the second highest and the other spring wheat yield was the highest on record. With a sharp drop in acreage and the U.S. yield seven percent below its 2012 record high, upland cotton production fell 24 percent. The improved weather made a big difference in the forage Above Normal Much Above Normal Record Wettest and hay crops. Production of all dry hay for 2013 was up 13 percent from Alfalfa production was generally up across the country, although Southwest producers still faced dry conditions limiting non-irrigated alfalfa hay. NASS s 18-State total for all forage production was 13 percent above the year earlier. [Information sources for this section include: NOAA, National Climatic Data Center, State of the Climate: National Overview for Annual 2013, published online December 2013, available at www. ncdc.noaa.gov/sotc/national/2013/13; USDA, National Agricultural Statistics Service, Crop Production 2013 Summary, January 2014, and Prospective Plantings, March 2013; USDA Farm Service Agency, Changes in CRP Acreage from 2007 to October 2013 by State, available online at webapp?area=home&subject=copr&topic=rns-css and Crop Acreage Data available online at www. fsa.usda.gov/fsa/webapp?area=newsroom&subject=landing&topic=foi-er-fri-cad.] Commodity Markets and Prices With better weather in 2013 and a resulting rebound in yields per acre for key U.S. crops, the primary risk farmers faced was a large decrease in market prices. After declining in 2012, global grain and oilseed production increased by about 215,000 tons in 2013, the largest year-over-year gain since the 2004 marketing year (Figure 8). The United States led the increase with the record corn and large soybean harvests, however several foreign countries added to the supply increase. The European Union, Australia and Canada all had large increases in wheat production. Coarse grain production was up sharply in the Former Soviet Union, especially Ukraine, offsetting a decline in Brazil. Brazil and Argentina both had sizeable increases in soybean production. For other crops, world cotton production fell as both the United States and China contracted, while global rice production was about unchanged. The 2013 marketing year also saw a strong increase in global use of grains and oilseeds, but that gain fell short of the increase in global production, thus increasing global stocks. The resulting lower crop prices spurred consumption and imports, and the year-over-year increase of over 110,000 tons in global use of grains and oilseeds was the largest in over a decade. The increase was highlighted by large import increases in Asia and Mexico and con- 8 MAy2014

11 tinuing strong demand in China, especially for soybeans. While global grain and oilseed stocks are expected to be higher by the end of the 2013/14 marketing year, stock levels are expected to remain below levels reached in 2009, 2004 and the 1990s, suggesting that successive years of large production are needed to push stocks to burdensome levels and that large production problems in 2014 could once again drive market prices to high levels. Figure 9 summarizes the behavior of overall U.S. agricultural prices as global crop production rebounded. The chart depicts indexes of prices received by U.S. farmers for all crops and all livestock products on a monthly basis. After more than doubling from the mid- 2000s to 2012, crop prices declined sharply during Meanwhile, livestock prices reached record highs in With improving livestock profit margins, livestock supply rebuilding and stronger feed demand appears likely over the next several years. Figure 10 shows the supply/demand situation for U.S. soybeans and corn, which together accounted for 69 percent of insured liability and 61 percent of total program gross premium in Despite the large soybean production in 2013, very strong export demand is expected to reduce U.S. carryover stocks and keep prices from declining as much as corn prices. USDA expects a 2013/14 season-average farm price of $13.00 per bushel, down 13 percent from the prior year. The large increase in corn production is forecast to sharply increase U.S. corn carryover and result in a season-average corn farm price of $4.60 per bushel, down 33 percent from the 2012/13 average price. Although U.S. wheat stocks are expected to decline with lower production, increased global wheat stocks due to large foreign production and the large increase in feed supplies are expected to reduce the all-wheat farm price to $6.85 for the 2013 crop, down 12 percent. Southern crops show Table 1. Crop Yields and Production Figure 8. World Grain & Oilseeds Production, Use & Stocks Bil. Tons Crop 2012 Yield 2013 Yield a contrast in price prospects, with rice farm prices expected to average $16.90 per cwt, up 12 percent from the 2012-crop price, as lower U.S. production reduces carryover stock levels. Cotton, in the face of a 24 percent drop in U.S. production due to both acreage and yield declines, is expected to experience a large drop in U.S. carryover stocks and a season-average farm price for all cotton of % production Production Change Bu./Harv. Ac. Bu./Harv. Ac. Mil. Bu. Mil. Bu. Corn ,780 13, Barley Grain Sorghum Soybeans ,034 3, All Wheat ,266 2, Winter Wheat ,641 1, Other Spring Wheat , , Lbs./Harv. Ac. Lbs./Harv. Ac. 1,000 Bales 1,000 Bales Upland Cotton ,535 12, Lbs./Harv. Ac. Lbs./Harv. Ac. 1,000 Cwt. 1,000 Cwt. Rice 7,449 7, , , Source: NASS Crop Production Annual Summary Stks/Use 60% 40% 20% 0% cents per pound, up seven percent from the 2012-crop average price. Base prices for revenue policies for the current and prior recent years are shown in Table 2. As usual, base prices, which are futures prices during a discovery month, are heavily influenced by both the prior year s farm price and the current year s expected farm price. Although wheat expected farm Table 2. Major Revenue Policy Base Prices % Change Wheat, Winter ($/bu) Wheat, Spring ($/bu) Corn ($/bu) Soybeans ($/bu) Upland Cotton ($/lb) Rice ($/cwt) (AR, MS, TX ) Revenue Protection for and Revenue Assurance for prior years. Source: Various RMA Manager s Bulletins CropInsurance TODAY 9

12 Figure 9. U.S. Farm Prices for Crops & Livestock = prices were down for 2013/14, strong farm prices in 2012/13 affected wheat futures prices during the August-September 2011 base price discovery period, hence the 2013/14 base price is up slightly over the prior year. Similarly for spring wheat, stronger farm prices carried into early 2012 when the base price was established. Even though corn and soybean futures prices dropped sharply from the peaks reached during the 2012 drought, futures were still fairly strong during the 2013-crop base price discovery period resulting in base prices similar to those of the 2012 crops. Farm prices for corn, soybeans and wheat all dropped Index of Crop Prices Index of Livestock Prices sharply after the base price discovery period for the 2013 crops as the year s improved production levels became reality. The lower farm prices heavily influenced the 2014 crop insurance base prices which were down sharply from 2013: 12 percent for soybeans, 18 percent for corn and over 20 percent for wheat. Cotton was a different story from grains, as it was largely unaffected by the 2012 Midwest drought, had strong yields per acre and saw increased carryover stocks during the 2012 crop year. The result was a sharp drop in 2012-crop farm prices which heavily influenced the 2013 cotton base price. The lower Figure 10. U.S. Prices & Carryover Stocks as a Share of Total Use % of Use Soybeans $/Bu / /90 10 MAy / / /14E % of Use Corn $/Bu / / / / /14E price, and prospects for higher production in 2014, kept the 2014 base price slightly below the 2013 level. The rice market had strong demand and reduced carryover stocks during 2012/13, which pulled farm prices up and contributed to the increase in the crop rice base price. For 2014, the lower base price reflects two opposing forces, a high 2013-crop price and a large expected increase in long grain rice production in the mid- South. The mid-south production is expected to more than offset any negative impacts of the Western drought on medium-short grain production in California. With corn being the most valuable U.S. field crop produced and accounting for nearly one-third of U.S. planted acreage, corn prices heavily influence prices of other field crops and livestock. Figure 11 shows this important price, illustrating the pattern of the December futures contract prices on a weekly basis from 2006 through During 2011, futures prices increased as the U.S. corn crop appeared to be well below trend. Prices tailed off in the second half of the year as markets adjusted and foreign grain production was strong. Futures prices continued to trend down during the first half of 2012 with large corn planted acreage and favorable spring planting progress. A large crop was expected and a $4.60 per bushel average farm price was forecast by USDA in May 2012 for the 2012 crop. The story quickly changed as the onset of the drought and its rapidly mounting severity caused corn futures to spike from near $5.00 per bushel in mid-june to a peak of $8.49 by early August. As demand fell in the face of high prices, market prices began trending down but remained above $7.00 per bushel as the December contract expired. Finally, the story in 2013 was rather as expected. Coming out of a devastating drought, corn futures prices started the year around $6.00 per bushel and slid somewhat steadily throughout the year and ended at $4.31 per bushel, in tandem with the anticipation and then the realization of the record high corn production. Table 3 shows implied volatilities for major crops in the implied price volatility column. These volatilities, are calculated, or implied, from observed prices for futures market options contracts. As a forward-looking measure of the riskiness of prices expected for the year, the volatilities are used in rating the Revenue Protection (RP) plan of insurance. When base prices decline, as they have

13 for 2014, insured liability declines, provided other factors affecting liability are unchanged. When volatility factors decline as they have for 2013 and 2014, premium rates decline, provided other factors affecting the premium rates remain the same. Volatilities generally peaked in 2011 (even by historical standards, see the historical price volatility column in table 3) and have been declining since then, despite the uncertainty in markets created by the 2012 drought. The increase in production of most crops, first expected for 2013 and now again for 2014, apparently signals to market participants that greater stability of prices around their expected levels is in prospect. Figure 12 shows how the 2013 base insurance prices related to the harvest prices. The harvest prices are the daily prices of the futures contract used to establish the base prices averaged during the harvest price discovery month. The rebound in corn production in 2013 explains the decline in harvest price to $4.39 per bushel. The 22 percent drop in price combined with high coverage levels in corn was enough to trigger indemnities for revenue policies even with yields equal to the producer s production history. The wheat harvest prices reflect the corn price drop, the large increase in foreign wheat production and the expected increase in foreign wheat stocks. Soybean supplies remain tight, as seen in Figure 10, and the harvest price turned out the same as the base price. Harvest prices for cotton and rice were similar to base prices. [Information sources for this section include: USDA, Foreign Agricultural Service, P,S&D data base; USDA, Office of the Chief Economist, World Agricultural Supply and Demand Estimates Report (WASDE), various issues; USDA, NASS Quick Stats; RMA Manager s Bulletins and the Price Discovery Application.] Figure 11. Weekly Corn Futures Prices, Life of the December Contracts $/Bu Week Figure 12. Prices for 2013 RP and RP-HPE Plans of Insurance $/Bu Corn Soybeans Winter Wheat Base Harvest Spring Wheat $/Lb Up. Cotton Base Harvest Rice Table 3. Volatility Factors Historical Price Implied Price Volatility 2 Volatility % Change Wheat, Winter ($/bu) Wheat, Spring ($/bu) Corn ($/bu) Soybeans ($/bu) Cotton ($/lb) Rice ($/lb) Historical volatility values are obtained by fitting log-normal distribution to the time series of the ratio of the harvest price to the base price from 1968 to For each year in that time period, the harvest and base prices are calculated by using relevant futures prices in that year. Source: Barchart.com 2 Revenue Protection for and Revenue Assurance for prior years. Source: Various RMA Manger s Bulletins CropInsurance TODAY 11

14 Table 4. Federal Crop Insurance Program Performance, Gross Basis 1 Crop Year Policies with premium Units with Premium Liability Premium Farm-paid Premium Indemnity gross underwriting gain Insured acres Number Million Dollars Million ,229 3,076 46,602 4,186 1,709 3, ,191 3,022 44,259 3,949 1,605 2,367 1, ,148 2,942 49,919 4,580 1,898 3,504 1, ,138 2,966 67,340 6,562 2,739 3,548 3, ,149 3,023 89,897 9,851 4,160 8,680 1, ,172 2,729 79,548 8,951 3,524 5,222 3, ,140 2,572 78,082 7,595 2,883 4,252 3, ,152 3, ,207 11,971 4,509 10,864 1, ,174 3, ,148 11,114 4,137 17,433-6, ,223 3, ,537 11,779 4,499 11, Data as of 4/21/2014 Source: RMA Summary of Business Loss ratio Table 5. Insured Acres by Major Crop (1,000 Ac) 1 Crop Change % change Wheat 46,560 48,588 1, Corn 81,448 84,733 3, Sorghum 4,683 5,797 1, Soybeans 65,195 67,451 2, Upland Cotton 11,432 9,876-1, Pasture, Range and Forage 48,278 54,242 5, Total of above crops 257, ,687 12, Total of all crops 282, ,719 12, Data as of 4/21/2014 Source: RMA Summary of Business Federal Crop Insurance Program Experience The Federal Crop Insurance Program reached significant milestones in Total insured liability of nearly $124 billion was the highest ever, while gross premium of $11.8 billion was the second highest ever. The 296 million insured acres was a record high, while Figure 13. Share of Insured Acres Covered at 70% or Higher Share of Insured Acres, % MAy the $11.8 billion in indemnities was the second highest ever. As described in the prior section, the strong 2013 base prices for major crops contributed to their high insured value. Producers also continued to buy higher coverage levels in 2013, adding to total insured value (Figure 13). The program loss ratio on April 21, 2014 stood at 1.00 (Table 4), far below 2012 s 1.57, but still the second highest since Gross underwriting gains of the program are the gross premium less the total indemnities and these gains (or losses) are shared between FCIC and the insurance companies, as determined by the provisions of the Standard Reinsurance Agreement. For the business recorded to date, estimated total indemnities are very slightly above gross premiums resulting in a gross underwriting loss of $43.1 million. Thus 2013 and 2012 are first back-toback years of gross underwriting losses since 1999 and The 2013 loss will result in a second year in a row of very low returns for the crop insurance companies. After a rate of return on retained premium in 2012 of about a negative 15 percent, the companies rate of return on retained premium is expected to be in the mid-single digit range in Program costs can be calculated using program outlays and revenues and are equal to: gross indemnities less farmer-paid premiums plus administrative and operating (A&O) payments made on the producers behalf to the companies plus company underwriting gains. For the 2013 crop year thus far, net indemnities of $7.32 billion plus A&O payments of about $1.35 billion bring these two components of program costs to $8.67 billion. Adding expected underwriting gains would put the program cost in a range of $9.0 to $9.5 billion. Final costs will depend on final figures for indemnities, farmer-paid premiums and company underwriting gains, but the total cost is likely to wind up similar to the expected long-run levels shown in projections of the Congressional Budget Office (CBO). Table 5 provides some insight on how

15 insured acreage changed in The increase in wheat insured acres reflected the increase in wheat planted acres. While both corn and soybeans saw planted area decline in 2013 partly due to prevented planted acres, insured acres increased. With sharply more sorghum area planted, insured acres were up 24 percent. Cotton planted area declined and took insured acres down 14 percent. Following the trend of recent years, insured area of pasture, range and forage increased markedly and accounted for nearly half of the 12.7-million-acre increase in insured acres of all crops. The U.S. map in Figure 14 identifies states with similar loss ratios by color, and shading is used to identify states with similar premium volume. The data show 16 states with loss ratios over 1.0. Alaska and Vermont had the highest, at 2.55 and 2.16, respectively, followed by Iowa, at The top five states in premium and their loss ratios were: North Dakota, 1.00; Texas, 1.43; Iowa, 2.12; Kansas, 1.12; and Minnesota, Total indemnities in these states were $6.9 billion, 58 percent of the total U.S. payout. Many of the lowest loss ratios were in the Eastern Corn Belt, where drought had inflicted large losses a year earlier. Indemnities by the top states and crops are shown in Table 6. Figure 15 shows loss ratios by state for the revenue plans, RP and RPHPE, and the yield plan, YP. In the large premium states, particularly in the Corn Belt, the loss ratios for yield plans were much lower than for revenue plans, reflecting the large drop in harvest prices compared with base prices for corn and wheat. An exception is Texas where yield plan loss ratios were much higher than revenue, reflecting yield losses for cotton, rice and sorghum. Overall, the loss ratio for RP was 1.07; RPHPE, 1.25; and YP, The declines in prices with generally good yields resulted in a loss ratio of 0.91 for the Group Risk Income Protection (GRIP) area plan, while the Group Risk Plan (GRP) and Group Risk Income Protection with Harvest Price Option (GRIPHRO) had loss ratios of 0.64 and 0.12, respectively. The highest loss ratio among plans was 2.34 for the 4.7 million acres covered by the PRF Vegetation Index; in contrast, the loss ratio for the 49.6 million acres covered by the PRF Rainfall Index was [The information source for this section was the RMA Summary of Business.] Figure MPCI Premium and Loss Ratios All Plans Combined, as of April 21,2014 Total Loss Ratio (0-0.25) ( ) ( ) (0.75-1) (1-1.25) (1.25-3) PREM (0-10,000,000) (10,000, ,000,000) (100,000, ,000,000) (250,000, ,000,000) (750,000,000-1,200,000,000) Table 6. Top 10 Indemnities by State and Crop 1 State Indemnities ($) Crop indemnities ($) Iowa 2,005,176,659 Corn 5,704,579,232 Texas 1,529,840,519 Wheat 2,267,999,410 Minnesota 1,311,699,821 Soybeans 1,195,820,674 North Dakota 1,103,169,995 Cotton 973,838,633 Kansas 953,428,300 Grain Sorghum 362,107,099 Illinois 634,366,513 Pasture, Rangeland & Forage 176,958,463 Nebraska 534,323,938 Sunflowers 128,328,516 Wisconsin 440,009,820 Rice 119,794,341 Missouri 427,686,415 Canola 116,430,468 South Dakota 402,907,116 Flue-Cured Tobacco 78,715,010 Total of Above 9,342,609,096 Total of Above 11,124,571,846 Share of U.S. 79% Share of U.S. 94% 1 Data as of 4/21/2014 Source: RMA Summary of Business Figure 15. State Loss Ratios for 2013 Loss Ratio Revenue Plans (RP, RPHPE) Yield Plan (YP) AL AK AZ AR CA CO CT DE FL GA IDIL Data as of 4/21/2014 IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PARI SC SD TN TX UT VT VA WA WV WI WY US CropInsurance TODAY 13

16 Table 7. U.S. Crop-Hail Results, All Perils Crop Year Liability Premium losses Loss Ratio Mil. $ Mil. $ Mil. $ , , , , , , , , , , Data for 2013 are as of April 2, 2014 Source: Adjusted Verified Totals for NCIS member companies combined with the data from non-members. U.S. Crop-Hail Experience For the United States, crop-hail insurance generally refers to policies in which direct damage from hail is the primary cause of loss. In addition to hail damage, many policy forms carry endorsements for additional perils. For the most part, the added perils include wind and fire, although there are exceptions. For the purpose of this article, results will be reported for all losses on hail policies, including the experience of NCIS non-member companies not included in NCIS Annual Statistical Summary reports. Premium for 2013 as currently reported to NCIS was $959.9 million, up from $956.7 million in 2012, the largest in the history of the program. The premium amount in crophail has been steadily increasing since Crop hail provided $39.9 billion in privately insured crop-hail insurance protection to U.S. farmers in This coverage proved valuable in 2013 as it paid out $650.6 million in losses, the third highest amount in the last decade (Table 7), after 2011 and The program had the largest hail losses in its history in 2011 (influenced by extensive hail as well as losses in production plans), and 2011 became only the second year since 1948 in which the countrywide loss ratio, defined as paid losses divided by premium written, exceeded In 2012 and 2013, the program loss ratio reverted back to below 1.00 and is estimated at 0.73 and 0.68, respectively. The loss ratio for production plans was 0.88 in 2012 and 0.84 in 2013, with both levels exceeding each year s overall loss ratio. Large storms contributed importantly to losses for the year. In terms of statewide losses from storms on a particular day (for hail and wind perils), Nebraska took the top spot with 14 MAy2014 $34 million on August 1. That was followed by Minnesota with $24.8 million on August 6 and South Dakota with $19.5 million losses on June 21. The losses from the top ten storm days at a state level amounted to $156.7 million, which remained less than those in 2011 and 2009 ($259.9 million and $176.5 million, respectively) but was much more severe than those in 2012, 2010 and 2008 ($120.2 million, $78.2 million and $89.2 million, respectively). Regarding county level losses in 2013 from major storm events on a particular day (also for hail and wind perils), Clay County in Nebraska took the top spot, which occurred on August 1, resulting in $12.5 million paid out to farmers. The second highest one-day storm in 2013 occurred in Chouteau County, Montana, resulting in $7.4 million paid out to farmers. The third highest one-day storm in 2013 occurred in Spink County in South Dakota, resulting in $7.3 million paid out to farmers. The next two largest county losses occurred in North and South Dakota. The total of the top five county losses amounted to $38.6 million, which was above those in 2012 and 2010 by 57 percent and 92 percent, respectively but was less than those in 2011 and 2009 (the latter were above $50 million each). The next five largest county losses occurred in Washington, Minnesota, Montana, Minnesota and Nebraska (in descending order). Of the top 50 most damaging storms at the county level, 20 occurred in the month of August, 17 in June, 10 in July, two in May and one in September. Crop-hail loss ratios by state are shown in Figure 16. Colors identify states with similar loss ratios, and shading is used to identify states with similar premium volume. Crophail insurance was written in 43 states in Of these states, 10 had a loss ratio in excess of 1.00; they are shown in dark blue, light purple and red in the map. Particularly, New Jersey had the highest loss ratio of 3.65, albeit with a small premium of under $50,000. Georgia, with premium of $2.39 million, had the second highest loss ratio of Montana, with $35.24 million in premium, had a loss ratio of 2.08, while Kentucky, with $5.82 million in premium, had a loss ratio of Of the 43 states, 20 had loss ratios of 0.50 or less, shown in yellow and light green on the map, including Iowa with $118.9 million in premium, Illinois with $83.93 million in premium, Kansas with $59.31 million in premium and Indiana with over $25 million in premium. [Information sources for this section include: NCIS Insured Crop Summary and claim files.] Canadian Crop-Hail Experience Crop-hail business in Canada is primarily written in the prairie provinces of Alberta, Manitoba and Saskatchewan. Denoting Canadian dollars with C$, Table 8 presents the grand totals. Overall, 2013 was a good year for crop-hail business, with the loss ratio of 0.5, the second lowest since 2008, paying out C$172 million to farmers, while protecting nearly C$6 billion worth of liability. Crop hail premiums, increasing since 2009, were C$343 million in 2013, up slightly from 2012 and 19 percent above Crop-hail loss payouts and the number of claims in 2013 were both down from 2012, and were much smaller than record values set in Compared with 2012, the adjusters faced much better conditions in 2013, especially later in the season. Increasing size of farms over time has contributed to higher payouts per loss. Saskatchewan had C$209 million in premium 2013, 61 percent of the total; Alberta had C$85 million, 25 percent; and Manitoba had C$49 million, 14 percent. Compared with premiums in 2012, Alberta and Saskatchewan saw increases of seven and 1.4 percent, respectively; while Manitoba premium remained the same. Manitoba and Alberta experiences indicated average performance, while Saskatchewan saw a lower than the average loss ratio in For Manitoba, an August 31 storm caused the highest number of claims, while a July 13 storm was the costliest, albeit with a lower number of claims. The latter storm also af-

17 fected Saskatchewan (discussed below). In 2013, C$30 million was paid out and the loss ratio was In 2012, payouts edged up to C$31 million, and given that the premium remained the same as the year earlier, the loss ratio turned out a bit higher at In Alberta, C$61 million was paid out and the loss ratio was 0.72 in 2013, about the average performance. In contrast, Alberta was hit hard in 2012, with C$90 million paid out and the loss ratio reached In 2013, crop-hail companies saw harsh and costly storms in early July yet the conditions improved later in the season. Meanwhile, insurers in other lines in Alberta paid nearly $2 billion in indemnities triggered by rain-induced floods in June, and that was globally insurers third biggest loss in 2013 (The Economist; March 29, 2014). Saskatchewan, the largest province for hail business, saw a 0.39 loss ratio in 2013, which was a break from rather high loss ratios three years in a row. In 2012, the loss ratio was 0.75 and crop hail companies paid C$159 million. In 2013, payouts were C$81 million, which accounted for major storm events on July 13th and July 19th. The July 13th storm made a marked difference in determining total losses for the year. The later months were quieter, generating a smaller volume of claims. Overall, the Canadian crop-hail industry remained healthy and confident in its capacity to meet Prairie farmers risk management needs. [The information source for this section was The Hail Report, a publication sponsored by the Canadian Crop Hail Association. The Hail Report is produced every two weeks during the hail season.] Program and Policy Developments The crop insurance industry faced notable issues in the policy arena during The dominant development was the effort to enact the 2014 Farm Bill. This section provides a brief recap of the Farm Bill activities and several other policy and program changes Farm Bill. As 2012 ended, Congress had not passed the Fiscal Year 2013 appropriations bill, had not agreed on how to deal with the pending sequester required by the Budget Control Act of 2011 and had not reached an agreement on longer term deficit reduction. The full Senate and the House Agriculture Committee had each passed versions of a Figure Crop Hail Premium and Loss Ratios All Crops, Perls, Plans Combined, as of April 2, 2014 Total Loss Ratio (0-0.25) ( ) ( ) (0.75-1) (1-1.25) (1.25-3) (3-4) PREM (0-1,000,000) (1,000,000-10,000,000) (10,000,000-50,000,000) (50,000, ,000,000) (100,000, ,000,000) Table 8. Canadian Crop-Hail Results, All Perils 2013 Farm Bill, but the House leadership decided not to bring their bill to the floor for a vote during the fall of 2012, concerned about the prospect of passing a large spending bill in the highly charged budget environment. With a new Congress and new agriculture committee composition in 2013, the farm bill process had to start anew. The Senate Committee on Agriculture, Nutrition and Forestry acted first, reporting out a Farm Bill on May 14, 2013, which reduced projected spending by $24 billion over 10 years. Nutrition programs accounted for most projected spending, but crop insurance was second. The full Senate passed the bill on June 10. The House Agriculture Committee passed its version of the Farm Bill on May 15, however, dairy, nutrition and overall spending were key issues that led to significant debate and delay in getting to full House approval. Republicans pursued cuts to the nutrition programs while Democrats countered with proposed cuts to crop insurance. To resolve the impasse, the House split nutrition programs from their bill and created two separate bills. The pared down version without nutrition passed the House in September 2013 but did not advance in the Senate without a nutrition title. In late September, the House passed a separate nutrition bill and then rejoined that with the rest of the bill to create a complete Farm Bill. Thus by late September, the Senate and House bills were ready to be reconciled. In October 2013, the Congressional Research Service reported updated cost estimates after accounting for some $6 billion in 10 year savings from sequestration, noting that the Senate bill would reduce spending by $18 billion over 10 years, while the combined House bill would reduce projected spend- Crop Year Premium Losses Number of Claims Loss Ratio 1 Mil. C$ Mil. C$ , , , , , , Loss ratios do not reflect loss adjustment costs. 2 Number of claims exceeded value indicated. Source: The Hail Report, a publication sponsored by The Canadian Hail Association, which represents companies that sell crop-hail insurance in Western Canada. CropInsurance TODAY 15

18 we re here for you, Go mobile with EASYmobility! QBE NAU prides itself on helping you grow your business. We offer the simplest and most reliable tools in the industry, including EASYmobility, our full service ipad app. Quote policies, submit applications and policy changes, and even report acreage when and where it s convenient. You ll love the simplicity and wealth of information available at your fingertips. Our technology is great in its own right, but we surpass the competition because we have one goal: First-Rate Service. Help producers make strong decisions with EASYquote. Meet producers at their convenience with EASYmobility, our full service mobile app. Then rest easy during claims season, when our experienced adjusters handle every claim accurately and quickly with EASYjusterPro. Show policyholders they can rely on you in every season with QBE NAU technology designed for service. At QBE NAU, we know that service is number one! Quote your way with EASYquote. EASYquote was just re-launched this fall to wide acceptance by our users. With an impressive array of options and an interface so flexible and intuitive, EASYquote fits all quoting styles. Log in or download your copy today! Apple and the Apple ipad tablet are registered trademarks of Apple Inc., registered in the U.S. and other countries NAU Country Insurance Company. All rights reserved. NAU Country Insurance Company is an equal opportunity provider. QBE and the links logo are registered service marks of QBE Insurance Group Limited. NAU is a registered service mark of NAU Country Insurance Company. 16 AUGUST2013 Call or visit naucountry.com to see a demo and learn more!

19 ing by $52 billion, with nutrition accounting for most of the discrepancy. The Conference Committee reconciled the bills and the Agricultural Act of 2014 was signed into law by the President on February 7, The Act was estimated to reduce projected spending by $16.6 billion over 10 years after accounting for sequestration. The new Act heralds a new era for crop insurance as the major component of the farm safety net. The Act increased public support for crop insurance, adding $5.7 billion to projected spending over the next decade, mainly through two new supplemental revenue crop insurance programs. The first major new supplemental program is the Stacked Income Protection Plan, or STAX, for upland cotton acreage only. STAX is an additional area revenue plan that may be used alone or in combination with a companion policy and is to be made available for sale no later than the 2015 crop year. STAX is to be available in all counties with cotton production or in a larger geographical area where counties lack sufficient data. STAX covers revenue losses of not less than 10 percent and not more than 30 percent of expected county revenue, and coverage may be purchased in five percentage point increments. An indemnity is paid when actual county revenue falls short of expected county revenue less a deductible. Producers receive a premium discount equal to 80 percent of the STAX premium, and on behalf of the producer, an administrative and operating expense payment is paid to the crop insurance companies to compensate for a portion of delivery expenses. Because STAX replaces major farm programs for upland cotton producers but will not be in place for the 2014 crop year, cotton producers will receive a transition payment for A smaller transition payment will be made for 2015 for areas where STAX is not available. The second program is the Supplemental Coverage Option, or SCO, which provides all crop producers with the option to purchase area coverage in combination with an underlying individual policy that would allow indemnities to be equal to a part of the deductible on the underlying the policy or plan of insurance. SCO is to be made available for sale beginning with the 2015 crop year on a county-wide level or on the basis of a larger area in counties that lack sufficient data. SCO indemnities are triggered if losses in the area exceed 14 percent of expected levels, with SCO coverage not to exceed the difference between 86 percent and the coverage level selected by the producer for the underlying policy. SCO coverage is available for crops enrolled in the Agriculture Risk Coverage program, a new supplemental revenue farm program also created by the farm bill. SCO is not available for acreage covered by STAX. Producers receive a premium discount equal to 65 percent of the SCO premium, and on behalf of the producer, an administrative and an operating expense payment is made to the crop insurance companies to compensate for a portion of delivery expenses. The 2014 Farm Bill may result in a number of other new crop insurance products coming to market. Margin protection is authorized and development of rice and catfish margin products is required. New product priorities are placed on policies for underserved commodities, including sweet sorghum, biomass sorghum, rice, peanuts, sugarcane, alfalfa, pennycress, dedicated energy crops, and specialty crops. Research and development of new products is required for peanut revenue, alfalfa, whole farm risk management, and biomass sorghum and sweet sorghum for use in renewable energy and bioproducts. The Farm Bill also requires several studies of the feasibility of insuring selected risks. The Agricultural Act of 2014 will result in many new features for crop insurance. The enterprise unit discount is made permanent. Separate enterprise units will become available for irrigated and non-irrigated acres. Producers will also be able to have separate coverage levels for irrigated and non-irrigated acres. A continuing issue has been the loss of insurable coverage a producer suffers as the result of low yields resulting from disaster. The new Act allows producers to exclude any year from their insurable production (APH) if the county s yield per planted acre for the crop in that year is at least 50 percent below the previous 10 year average of the yield per planted acre for the crop in the county. This provision also applies to contiguous counties and allows for the separation of irrigated and non-irrigated acres. Another provision enables price elections for all organic crops produced in compliance with USDA standards to reflect the actual retail or wholesale prices received by producers for their crops. Together, these and other changes in the Farm Bill will increase a producer s ability to custom tailor their crop insurance risk management solutions to more precisely fit the needs of their operation. Other key changes include restrictions on future Standard Reinsurance Agreement (SRA) negotiations. To ensure crop insurance s long-term workability and to protect the risk sharing arrangement now underpinning the crop insurance system, the Farm Bill also directs that terms of the next business contract between the insurers and the government be budget neutral. In addition, the conservation title of the new Act requires that in order to be eligible for a premium discount, producers must adhere to conservation compliance requirements, intended to conserve highly erodible land and wetlands. Another provision in the crop insurance title is an effort to protect native sod. If a producer breaks native sod and purchases crop insurance on that land, the yields used to calculate the insurance guarantee will be 65 percent of the county average yield, and the premium discount will be reduced by 50 percentage points. This provision only applies to native sod in the states of Minnesota, Iowa, North Dakota, South Dakota, Montana and Nebraska. Product Developments. Several insurance products were revised and others newly approved for sale during One example is release of the Area Risk Protection Insurance Plan (ARPI). The existing area-based insurance plans GRP, GRIP and GRIPHPO were combined into one policy offering both yield and revenue coverage on an area basis. The new policy is in place for the 2014 crop year. Other examples include the Downed Rice Endorsement which was approved for sale in 2012 for the 2013 crop year. The Actual Revenue History (ARH) Tart Cherry Program was made available for the 2014 crop year in select counties in New York, Wisconsin, Michigan, Utah, and Washington. Also, the Trend-Adjusted Actual Production History yield adjustment was expanded for 2013 to wheat, canola, cotton, grain sorghum and rice in certain areas. Program Developments. Several significant changes were made in programs during Interest has increased in recent years over the use of cover crops to improve soil quality, produce nitrogen, control weeds and erosion and retain soil moisture. However, this use has raised concerns over the effect of cover crops on yields of insured crops. USDA CropInsurance TODAY 17

20 worked with the crop insurance industry and other stakeholder groups to address the issue of cover crop practices and developed guidelines for crop insurance policies that reference the USDA s Natural Resources Conservation Service (NRCS) guidelines for cover crop practices. These guidelines will form what are considered good farming practices for a given crop production area and provide management practices and termination dates for each crop production area. The guidelines were released in June 2013 for non-irrigated crops for the 2014 crop year. Crop insurance was singled out by legislators during the development of the new Farm Bill as the primary program supporting production agriculture and was heralded as indispensable for successful farming today. Prevented planting procedures continued to be refined during New special provisions were added to clarify acreage that is physically available for planting in regions of Iowa, Minnesota, Montana, North Dakota and South Dakota (Prairie Pothole National Priority Area) for the 2014 crop and succeeding crop years. One requirement is that acreage must have been planted and harvested (or have incurred an insurable loss other than for excess moisture) in at least one out of the last four years, regardless of whether any of those years was abnormally dry, in order to be eligible for a prevented planting payment. If a producer has been unable to plant and harvest a crop in at least one of the four most recent crop years, the producer must demonstrate that the land is farmable before the land will be eligible for prevented planting coverage. This will require planting and harvesting a crop for two consecutive crop years. In a related activity, RMA awarded a research contract to determine if prevented planting payments are appropriate but not so excessive that producers benefit by not planting, as claimed by a report issued by USDA s Office of the Inspector General (OIG). The prevented planting guarantee for most crops is 60 percent of the production guarantee for acreage that is planted at the normal time. The research will evaluate existing policy provisions by crop and region to determine whether the payments provided are adequate or excessive. If payments are found to be inadequate or excessive, alternatives will be provided for consideration. Research. Many new research contracts were awarded by RMA covering new and existing products and rating issues in One example is irrigation. Irrigation issues have risen in prominence given continuing drought in the West and the pressure on irrigation water availability. In 2013, California experienced the driest January-June period in 90 years, resulting in sharp water supply reductions. This research is designed to address crop insurance irrigation policies in the face of reduced water supplies. The project is to assess whether current policies and procedures are appropriate for handling reduced irrigation practices and the feasibility of insuring limited irrigation using alternative models or approaches is being examined. With the increased expected use of area plans as a result of the 2014 Farm Bill and the revisions to ARPI, another research effort initiated in 2013 is to focus on data reported to RMA under the crop insurance program. The analysis will include a review of existing data standards for area-based programs and the effects of alternative standards on the ability to have actuarially sound expected yields and premium rates. Premium rates will also be examined. The Acreage and Crop Reporting Streamlining Initiative (ACRSI) started a pilot acreage reporting web application for 2013 spring crops. The application was made available in four central Kansas counties to provide a controlled test and evaluation of the application and underlying systems that share data across multiple USDA agencies. New AIPs. For the 2014 reinsurance year, starting July 1, 2013, RMA approved 19 insurance providers (AIP), one which sells livestock products only. A new AIP for 2014 is Atlantic Specialty Insurance Company, and its managing general agency Climate Crop Insurance Agency (CCIA). The Climate Corporation has marketed insurance products outside the Federal program for several years. They decided to enter the multiple peril crop insurance marketplace and CCIA will administer their multiple peril crop insurance business. Conclusion Again in 2013, crop insurance helped farmers deal with the year s weather and market risks. Crop insurance was singled out by legislators during the development of the new Farm Bill as the primary program supporting production agriculture and was heralded as indispensable for successful farming today. The public-private partnership worked as envisioned in Famers shared in the cost of the program by paying premiums of $4.5 billion and incurring losses through deductibles before any claims were paid. Insurance companies effectively sold and serviced over 1.2 million policies, accurately determined losses and paid claims on over 475,000 policies, although experiencing a second successive low return year. The Federal government provided premium support to ensure widespread coverage sufficient to avoid Congress needing to enact ad hoc disaster assistance. Looking to the future, the American public is assured that crop insurance will be in place to provide financial stability for the many small, family farms that comprise the core of U.S. production agriculture. Crop insurance will ensure that when the repeated disasters of recent years strike again, as they most assuredly will, U.S. farmers will be able to bounce back to produce again at high levels the food, feed, fiber and energy crops on which the U.S. and world population have come to expect and depend. [Information sources used for this section include: the Agricultural Act of 2014, Public Law ; Congressional Budget Office, Estimate of the Effects on Direct Spending and Revenues of the Conference Agreement on H.R. 2642, Letter to Chairman Lucas dated January 28, 2014; Congressional Research Service, The 2013 Farm Bill: A Comparison of the Senate-Passed (S. 954) and House-Passed (H.R. 2642, H.R. 3102) Bills with Current Law, Ralph M. Chite, Coordinator, October 18, 2013; and various RMA Managers Bulletins and Informational Memorandums] 18 MAy2014

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22 CropInsurance TODAY NCIS Celebrates Silver Anniversary By Laurie Langstraat and Tom Zacharias, NCIS Twenty-five years ago, in February 1989, crop insurance history was made as the Crop Hail Insurance Actuarial Association (CHIAA) and the National Crop Insurance Association (NCIA) united to form what we know today as National Crop Insurance Services (NCIS). The Beginning CHIAA and NCIA had been serving the crop insurance industry under other named associations since the early 1900s. CHIAA s focus was providing Crop-Hail premium rates and forms for the Crop-Hail industry while NCIA provided Crop-Hail loss adjustment procedures, conducted industry training and maintained the Crop- Hail industry s agronomic research program that has been in place since the early 1900s. Leaders of both associations were instrumen- NCIS first staff officers in Paul Horel, Gary Schmidt, Lloyd Lindstrom, Harry Souza, Al Walter and George Bender 20 MAy2014

23 NCIS first office, 7601 College Boulevard, Suite 100, Overland Park, Kansas. Some of the NCIS staff on Halloween Gordon Smith, Troy Brady and Tom Zacharias tal in the passage of the Federal Crop Insurance Act of 1980, which brought the private industry into the sale and servicing of Federal crop insurance policies. The two Associations had a good working relationship with FCIC, and crop insurance was growing said Rick Gibson, NAU Country Insurance and 1st Vice Chairman of NCIS at the time of the merger. It became apparent that to achieve the goals of the industry we would need to combine the two associations to simplify and better coordinate the policy and actuarial functions of both Crop-Hail and MPCI, as well as providing forms and adjusting procedures for member companies. Although rather slow to progress, the advent of the multiple peril crop insurance (MPCI) policy in 1981 changed private crop insurance dramatically, said George Bender, who worked for NCIA prior to the merger and remained with NCIS until With the establishment of CHIAA West in Overland Park, Kan., in 1984 and NCIA s move to Overland Park in 1986, I suspect the handwriting [for a union] may have been on the wall, said Bender. A great deal of credit [for combining the organizations] goes to Lloyd Lindstrom and George Bender for their support and efforts to better serve their members, said Gibson. The Boards of both associations worked very hard to accommodate the changes and to establish NCIS as we know it today. In its 25 years, NCIS has provided leadership as the industry has navigated through five Farm Bills, the Federal Crop Insurance Reform Act of 1994, the Agricultural Research, Extension and Education Reform Act of 1998, the Agriculture Risk Protection Act of 2000 and numerous weather and disaster events including historic floods, droughts, hurricanes, and hailstorms. There have been eight different secretaries of agriculture and seven FCIC managers/rma administrators since NCIS was formed in The Early Years In 1989, only 102 million acres were protected by crop insurance in the United States. Private crop insurance companies and their counterparts with FCIC, the master marketers, wrote $814 million in premium protecting $13.5 billion in liability. But the business was growing and NCIS was adjusting to the new CropInsurance TODAY 21

24 needs of its members. At the time, Crop-Hail premium was approximately $276 million. In the early 90s, NCIS functions focused primarily around processing MPCI data for its member companies, filing Crop- Hail forms and Crop-Hail premium rates with state insurance departments, utilizing the Regional/State Committee and Standing Committee structure to make improvements to the Crop-Hail and MPCI program and training companies on changes to the programs through conferences and educational seminars. At the time, NCIS relied on mainframe computers, housed in a large, climate-controlled room, to process the MPCI data. Large copy machines produced millions of impressions as actuarial documents, bulletins, policies and forms were distributed to agents and companies. NCIS also began providing hard-copy training units and videos for members on various MPCI and Crop-Hail topics. Throughout the early 1990s, NCIS began making the change from filing expense-loaded Crop-Hail premium rates with state insurance departments to filing loss cost statistics. Loss Adjustment and Insurance Products Division (Back row): Laurie (Thares) Langstraat, Dick Schwartzbeck, Chris Lindsay, Trevor Votruba, Debbie Larberg and Jerry Puppe. (Front row): Steve Monson, Loretta Sobba, Theresa Rainey and Steve Williams So much has changed in the crop insurance industry over the last 25 years. The number of insured acres, liability and premium have grown significantly since the late 1980s. Administrative Services Department early 1990s. June Cohen, Sherri Scharff, Donna Bryan, Jackie Anderson, Lyle Oeltjen, Jim Crist, Richard Whitmore and Howard Higgins As the industry became more of a partner with the Federal government in selling and servicing crop insurance policies, greater scrutiny was placed on the private sector companies as the industry became greater stewards of taxpayer dollars. Because of that, NCIS led an effort to identify and promote a Standards of Professional Conduct that all who worked in the crop insurance industry agreed to follow. This set of ethics is still in place today as part of all NCIS training materials. In 1993, the Midwest was hit by devastating floods, followed by excessive rainfall throughout the growing season. Eight months of heavy snow and hard rains re- 22 MAy2014 NCIS staff circa (Back row) Robin Williams, Derek Bruggeman, Linda Kovelan, Therese Stom, Dana Ford, Bryan Baggett, Janet Straley, Mark Zarnstorff, Jon Chowning, Shawn Hou, Jim Phillips, Shane Weaver and Dave Hall. (Front row): Don Hutsell, Jim Crist, Laurence Crane, Troy Brady, Dean Strasser, Mike Sieben and Dave Snider

25 Visitor from Japan and NCIS staff Phil Gose, Tom Zacharias, Dan Shelden and Frank Schnapp. NCIS led an effort to identify and promote a Standards of Professional Conduct that all who worked in the crop insurance industry agreed to follow. And you can continue it with the last sentence if there is room... This set of ethics is still in place today as part of all NCIS training materials. NCIS staff Rich Byrne, Lisa Laberge, Dick Schwartzbeck and Mark Bean. NCIS Board, Program Development Committee and members of the NCIS staff circa (Back row): Bob Haney, Michael Smith, Mike Sieben, Greg Burger, Dave Hall, Ben Latham, Laurence Crane, Frank Schnapp, Tim Weber, Gene Grimsley, Ted Etheredge, Rod Clark, Jim Crist, Dallas Smith, John Owen, Ron Brichler and Greg Meek (Front row): Tom Zacharias, Steve Rutledge, Randy Tronnes, Bob Parkerson, Steve Harms, Jim Aldeman, Keith Collins and Troy Brady sulted in 21.6 million acres of farmland flooded causing more than $4 billion in damages. The Midwest flood, and subsequent flooding in the Southeast in early 1994, led Congress to pass the Federal Crop Insurance Reform Act. This Act combined the crop insurance program and the various ad hoc disaster relief bills into a single unified program. Catastrophic coverage was introduced, as well as prevented planting and a greater reliance on individual farmer yields for determining coverage. In 1994, NCIS introduced its first issue of the quarterly Crop Insurance TODAY publication and formed a new standing committee to provide direction on industry public relations activities. Technology was also changing and NCIS began providing members with electronic versions of the 760 Manual (now the Crop Insurance Handbook) and the Loss Adjustment Manual. The Internet was just becoming popular and NCIS was continually search for avenues to apply new technology to improve service to its members. NCIS made the transition from mainframe computers to client-server PC-based computing in 1995 when it moved to new office space. The NCIS client-server transition was one of the first in the Kansas City area, particularly for a smaller company. The mid-90s brought the 1995 Farm Bill and the introduction of revenue products to the portfolio of risk management tools available to farmers. This successful line of products CropInsurance TODAY 23

26 is today the most popular type of crop insurance coverage. The Federal Crop Insurance Corporation also discontinued selling policies to farmers and crop insurance delivery was transferred solely to the private-sector companies. The transition to exclusive private-sector sales and delivery has been a major milestone in the evolution of crop insurance. It is probably safe to say that the advent of revenue products and the total transition to private-sector delivery marked the true beginning of the public-private partnership that is today the hallmark of the Federal crop insurance program. This partnership has combined the financial resources and backing of the federal government with the sales, service and delivery of the private sector featuring some 20,000 participating company employees, agents and adjusters to bring about an array of risk management tools that today protects more than 90 percent of planted cropland. During this same time frame, NCIS began an emphasis of working with limited-resource and socially disadvantaged farmers and this effort continues today. Under the leadership of Laurence Crane, Vice President, Program Outreach and Risk Management Education, NCIS has sought to provide these farmers, and the organizations that represent them, with information, not only about crop insurance products, but risk management tools in general. NCIS also began its sponsorship of the National FFA Organization and the Agriculture Future of America (AFA). These two student organizations are committed to educating and providing leadership skills to the brightest and best agricultural students. In the late 1990s, the Board of Directors, under the leadership of John Joyce, Rain and Hail Insurance Services, introduced a new layer in the NCIS standing committee process with the addition of the Program Development Committee (PDC). The PDC was established to review the recommendations from each NCIS standing committee before going on to the Board of Directors for final action. The PDC also serves as a training ground for future Board members and is comprised of the chair of each standing committee. This approach helps provide the PDC members with first-hand insight into discussions that occurred at the standing committee level with regards to each proposed recommendation and helped Some of the NCIS staff celebrating the birth of a co-worker s baby. Donna Bryan, Janet Straley, Linda Kovelan, Therese Stom, Dana Ford, Robin Williams, Lynnette Dillon, Adenir Belshe, Ida Barnes, Jo Anne Baker, Anna Williams and Roxanne Wise Susan Penix and Lisa (Pulst) Cain Ron Miiller (center) at the 1992 NCIS National Claims Managers Conference. John Owen 24 MAy2014

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28 Marlene Lamar Gail Florio and Bryan Baggett George Tang and Dave Snider Kevin Wilson and Imran Bhuiyan serve as another set of eyes before final Board approval. The New Millenium With the start of the new year in 2000, so too began the expansion of crop insurance, providing more products and more crops insured. New pilot programs including Adjusted Gross Revenue (AGR), Group Risk Income Protection (GRIP), cherry, blueberry, cabbage, cultivated clams and several others, were introduced or expanded to include more states and counties. NCIS and its members were very actively learning these new products and training agents how to sell them and adjusters how to adjust the claims. Education and training was becoming a more important component of the services NCIS provides to its members. Additional training units were developed, update conferences became critical to disseminate changes and introduce new products to companies and their employees, and professional development for company trainers became a reoccurring theme in articles published in the TODAY magazine. Today NCIS conducts three major training conferences, two train-the-trainer and one national claims managers, training more than 700 company claims supervisors, underwriters and training staff. One of the most significant pieces of crop insurance legislation was signed into law by President Clinton on June 20, Among other things, the Agricultural Risk Protection Act of 2000 (ARPA) provided increased premium subsidies for farmers, encouraging them to obtain higher and more meaningful levels of protection. An increased emphasis on reducing program fraud, waste and abuse was also enacted under this legislation giving the FCIC, the Farm Service Agency (FSA) and private-sector companies additional checks and balances as claims are reviewed and indemnities paid. These entities, and NCIS, continue to work together today through Data Mining efforts, claims reviews, and presentations on program integrity at every industry loss adjuster school or conference. The legislation also introduced the first national livestock program for swine. In 2001, NCIS earned its status as a Federal contractor and expert reviewer and throughout the years and has participated in more than a dozen Federal contracts or expert 26 MAy2014

29 reviews. This was significant because ARPA significantly changed the way that new crop insurance products or programs are developed and approved by introducing the 508H submission process. Another step in the professional development at NCIS was the establishment of the role of General Counsel for NCIS, which dates to February 2002 when P. John Owen assumed that role after a distinguished career in private practice. Over his 11 years with NCIS, John was instrumental in shepherding important industry legal issues and served a central role in SRA negotiations during his tenure. Including his time in private practice, John participated in the negotiation of every SRA from 1996 through and John was succeeded as General Counsel by Chuck Lee who joined NCIS in As the position of General Counsel is presently structured and defined, Chuck is tasked in three broadly defined areas. First he serves as a resource and offers legal guidance in relation to business and crop insurance issues for NCIS and its constituent members. Second, analysis and legal advice in relation to SRA interpretation and compliance and Farm Bill issues are fundamental responsibilities. Finally, and critically important, General Counsel at NCIS serves a vital role in developing antitrust compliance policies and in presenting programs to industry participants that convey those policies and emphasize the importance of antitrust compliance. In 2005, NCIS renewed its commitment to working with organizations selling crop insurance in the Canadian Prairie Provinces of Alberta, Manitoba and Saskatchewan, a relationship that ultimately dates back to the early 1900s. Representatives from the Canadian Crop-Hail Association and NCIS began working on needed revisions to a loss adjustment manual that is a requirement for licensing Canadian Crop-Hail loss adjusters, as well as the establishment of a loss adjustment committee and research program for the Canadian Crop-Hail industry. While NCIS transitioned from filing Crop-Hail premium rates to filing Final Average Loss Costs (FALCs) throughout the 90s, it was not until 2006 when NCIS began transitioning to filing all loss costs, policies and forms electronically through SERFF System for Electronic Rate and Form Filing. SERFF streamlined the filing process as it includes all of the current filing requirements by state, including copies of state required forms. SERFF was vastly more efficient than hard copy paper filing, convenient and allows for faster turnaround time for state approvals. The east of transition to the SERFF environment for NCIS and its members was in large part due to the efforts of Therese Stom, who currently serves as Vice President, Crop-Hail Actuarial and Statistics. In late 2007, the NCIS Board of Directors approved the development of the Crop Adjuster Proficiency Program (CAPP) to ensure that all loss adjusters of Federally insured crops have demonstrated an approved level of proficiency in adjusting claims. With CAPP, individual adjusters must first satisfy all company level training required under the Standard Reinsurance Agreement (SRA), then complete three required timed exams to obtain their CAPP certification, and lastly maintain their CAPP accreditation by completing SRA continuing education requirements. To date, more than 5,000 adjusters have completed these requirements and currently hold the CAPP certification. The CAPP program is a perfect illustration of the benefits of the public-private partnership. In the development of the CAPP program, NCIS worked with RMA and the National Association of Insurance Commissioners (NAIC) to bring together both state and Federal regulators to improve the integrity and delivery of the crop insurance program. In 2008, with the 2007 Farm Bill still being negotiated and extended by Congress, and proposed funding reductions to the crop insurance program becoming more and more likely, NCIS, under the direction of its Board of Directors, began a concentrated effort to improve the image of the industry by providing accurate information about how crop insurance works, why it is important to protecting American agriculture, and why the general public should care about agriculture and crop insurance. Critics had become more vocal and the news headlines were filled with misinformation and misrepresentation of the crop insurance program. NCIS created a brand, Crop Insurance Keeps America Growing, and a website, America.org, to demonstrate how successful the public/private partnership is in providing critical risk management tools for farmers and ranchers. During 2009 and 2010, NCIS and its members were consumed with the renegotiation of the Standard Reinsurance Agreement (SRA). Throughout the renegotiation, NCIS held countless meetings and conference calls with its members and RMA. Integral to the process was the actuarial and financial analysis performed by Frank Schnapp, Senior Vice President, Actuarial Statistics and Information Services. Admittedly, it was a difficult renegotiation. In the face of tremendous political headwinds, preceded by several years of favorable returns, the industry sustained significant reductions in funding and the basic economic structure of the SRA was permanently altered. However, with the signing of the 2011 SRA, NCIS and its members began efforts to meet the challenges of the upcoming Farm Bill. Although the scope of NCIS activities has expanded greatly over the past 25 years, it is still the case that NCIS continues to focus on the fundamentals of the business. NCIS Today As we began 2010, RMA introduced the COMBO Policy, effective for the 2011 crop year. The COMBO policy combined the Actual Production History (APH), Crop Revenue Coverage (CRC), Revenue Assurance (RA), Income Protection (IP) and Indexed Income Protection (IIP) policies into a single policy, simplifying the policy for farmers while maintaining the most popular features of each. NCIS organized a thorough training conference for approximately 300 individuals who needed to know how the COMBO policy would work and how it affected farmers. When the attendees left this session, they took with them the valuable training materials they would need to successfully train agents who would soon be meeting with farmers to secure their insurance coverage for fall planted crops. Throughout the extreme weather events of 2011 and 2012, Congress began debating what CropInsurance TODAY 27

30 should have been the 2012 Farm Bill, and that ultimately became law in early During this period, NCIS recognized the need to respond to critics of crop insurance and better inform the public. NCIS stepped up its public relations efforts and in the process promoted Laurie Langstraat to Vice President of Public Relations. During the drought of 2012 and the Farm Bill debates, NCIS provided weekly radio broadcasts and numerous media interviews explaining the benefits of the crop insurance program and the need for an effective farm safety net. In 2011, NCIS commitment to continually improving communications with its members was strengthened when it promoted Sherri Scharff to Vice President of Member Services. With routine meetings and conference calls of the membership Sherri s role has become essential to ensure that members are provided with the information and tools they need to be successful in the crop insurance industry. With the passage of the 2014 Farm Bill, NCIS role as the focal point for industry communications has never been more important especially as crop insurance has become the primary safety net for U.S. agriculture. Although the scope of NCIS activities has expanded greatly over the past 25 years, it is still the case that NCIS continues to focus on the fundamentals of the business. Under the direction of Dr. Mark Zarnstorff, Director of Agricultural Research and Technology, NCIS conducts a nationwide agronomic research program, including research in Canada. Results from the research program then form the basis of the loss adjustment procedures used by the industry. To complement our Crop-Hail research, NCIS annually conducts approximately 15 Crop-Hail and MPCI loss adjuster schools for more than 1,000 adjusters. Leading these efforts is Mike Sieben, Senior Vice President of Loss Adjustment and Insurance Products, who started with NCIS in 2006 but has been in the crop insurance industry for more than 30 years. Much appreciation is given to Mike and his entire team. NCIS Staff Celebrating our 25th anniversary would be remiss without acknowledging our most valuable asset our staff. Through the years, NCIS and the industry have been blessed with a wonderful, dedicated and talented staff who Marie Hummel Mark Splettstaszer have spent countless hours analyzing new policies, products, handbooks, legislative language, answering questions, and providing leadership and expertise to the industry. There are several staff that began with CHIAA who are still here today, including Jim Crist, Richard Whitmore, Chris Lindsay, Loretta Sobba, Jon Chowning, Sherri Scharff, Therese Stom, Rich Byrne and Robin Hill. Jim Marx Mannberger Pat Gaul Crist, Chief Financial Officer, said that the biggest change he has seen in his more than 32-year career with CHIAA and NCIS is the advancement in technology. In 1989, NCIS had a large, climate-controlled computer room, Crist said. We had mainframe computers, each the size of a large refrigerator. Today, you can hold the same computing power or more in your hand or even put it in your pocket. Even though the crop insurance program has grown significantly over the last 25 years 28 MAy2014

31 Therese Stom, Rich Byrne and Frank Schnapp and technology has helped increase the speed of delivery of the products and services of the industry, one thing has not changed The dedication of NCIS staff to provide our members with the best service possible, and the effort of NCIS as a company to provide its employees with a pleasant working environment and competitive salary and benefits hasn t changed, said Crist. There s a reason our tenure is higher than most companies: NCIS is a great place to work! The key to NCIS s success has always been attributable to the quality of its staff. We have always been able to support and maintain a highly talented and committed staff here at NCIS, said Tom Zacharias, President of NCIS. We believe the blending of our analytical and subject matter expertise in agriculture and crop insurance has paid huge dividends to our members throughout the years. In addition to the staff at NCIS it is important to recognize the contribution of Dr. Keith J. Collins. Under the leadership of then NCIS President, Bob Parkerson, Dr. Collins joined NCIS in 2008 as an industry consultant. During his time at NCIS, Dr. Collins has actively participated in Board of Directors meetings, industry conferences and served as the primary policy analyst for the crop insurance industry during the course of the 2014 Farm Bill debates. His role in the 2014 Farm Bill debate cannot be overstated. In conjunction with Keith s efforts, Dr. Harun Bulut, Senior Economist (Ph.D. Iowa State University), joined NCIS in The work of Drs. Collins and Bulut has been published in peer-reviewed professional journals and presented at meetings of the American Agricultural and Applied Economics Association. Drs. Collins and Bulut, along with Senior Actuary, Frank Schnapp, have published a variety of articles in TODAY magazine ranging from the SRA to the popular Year in Review series. The Next 25 Years The strength of NCIS is its membership and committee structure. Membership involvement and engagement are fundamental to the organization. Currently, all 19 AIPs that hold an SRA are NCIS members. Recently, under the direction of the NCIS Board of Directors, the Program Development Committee (PDC) was expanded to include representatives from any AIP that has company employees serving on at least four of the NCIS standing committees. This change will serve to better enhance the communication among NCIS and its members and provide for better understanding of the issues facing the industry. The NCIS Board of Directors has also established the newly formed Underwriting and Operations Committee, which focuses on the changing operational and financial aspects of the program. This new committee also has representatives from all AIPs serving as committee members. Again, the ability of the organization to meet the demands of the future rests on the commitment of the membership. Under the initial leadership of Lloyd Lindstrom, and through the tenure of Al Walter, Richard Whitmore providing beautiful entertainment at an NCIS holiday party. Bob Parkerson and now Tom Zacharias, the roles and responsibilities of NCIS have grown right along with the success of crop insurance. Member companies rely on NCIS for the analysis and critical thinking required to tackle the complex set of issues facing the industry. From industry training to our agronomic research program; from our economic and actuarial analysis to our committee structure and information distribution services, NCIS and its members stand poised to meet the challenges of agricultural risk management in the future. Don Fraley, who served as the first Chairman of NCIS in 1989 said one can only imagine what the next 25 years will bring. With climate change there will be different crops in different geographic locations, not only in the United States but in other parts of the world, which will probably require NCIS involvement, Fraley said. Methods of raising crops will dramatically change and whatever the challenges may be, I know the NCIS staff will be ready. The resource and knowledge base at NCIS today is solely a function of the support and leadership of the NCIS members and its Board of Directors. The staff of NCIS would like to express its appreciation for the support of the membership these past 25 years and we look forward to the challenges and opportunities of the next 25 years. VisitWebsite ag-risk.org CropInsurance TODAY 29

32 CropInsurance TODAY 2014 VisitWebsite ag-risk.org Annual Convention Draws Record Numbers The 2014 Crop Insurance Industry Annual Convention, sponsored by the American Association of Crop Insurers (AACI) and the National Crop Insurance Services (NCIS), was a huge success again this year. Record attendance of over 500 company representatives, reinsurers and agents was only part of the reason. The educational sessions were excellent and included well-known speakers including Orion Samuelson, Paul Begala and Tucker Carlson. The meeting also provided attendees an opportunity to meet with reinsurers and network with other crop insurance professionals. Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) addressed the convention attendees and noted that crop insurance is now the centerpiece of U.S. farm policy. Today, crop insurance is the foundation of this Farm Bill and the farm safety net, Stabenow said. AACI and NCIS Chairman, Tim Weber, Great American Insurance Company 30 MAy2014 Stabenow noted that during the Farm Bill debate that farmers stressed their support for crop insurance and asked Congress to strengthen it. By making crop insurance more readily available, including to specialty crop growers, she said, the policy s coalition of support has been strengthened. Tim Weber, Chairman of both AACI and Crop insurance companies NCIS, was the opening speaker at the convention and agents worked closely Monday morning. with Ducks Unlimited and There can be no question that when it other conservation groups comes to managing the risks posed by Mother during the Farm Bill debate Nature or volatile world to establish common-sense markets, Federal crop insurance has no equal, he conservation compliance said, adding this success was achieved all the while requirements for crop overall federal spending insurance participation. on farm programs has trended down. When speaking about the recent passage of the 2014 Farm Bill, Weber said, we applaud our congressional leaders for overwhelmingly passing a Farm Bill that strengthens, not weakens, our commitment to crop insurance. I truly believe that 10 years down the road, when we look back at the 2014 Farm Bill, it will be elevated to one of the major legislative initiatives that established landmark developments for crop insurance and production agriculture. Crop insurance companies and agents worked closely with Ducks Unlimited and other conservation groups during the Farm Bill debate

33 Farm Rescue Chosen as 2014 Charitable Organization Dan Wrinn, Ducks Unlimited to establish common-sense conservation compliance requirements for crop insurance participation. Dan Wrinn, with Ducks Unlimited, addressed the convention saying, our coalition drew a lot of attention because people saw what the potential was. We put the coalition together but it doesn t end here. Brandon Willis, Administrator for the USDA s Risk Management Agency (RMA) told attendees that now that a Farm Bill was approved, RMA is focused on quickly implementing the new law and cooperation between the agency and crop insurers would be essential. There is not an agency that I would rather implement a Farm Bill with than the team that we have at the Risk Management Agency, Willis said. I have a high degree of confidence that the staff we have there will get this done right. Throughout the process we will work with our [private sector] partners, because I know you bring valuable experience and a perspective that we don t have. Constantly improving crop insurance availability, program integrity and communicating with farmers and the general public should be top goals of both the industry and RMA moving forward, Willis said. Each year during the Annual Convention, AACI and NCIS selects a charitable organization involved in agriculture to highlight and encourages attendees to support financially through donations made during the convention. This year s charity was Farm Rescue. Farm Rescue provides planting and harvesting assistance to farm families that have experienced a major injury, illness or natural disaster. Our mission is to help family farmers bridge crises so they have an opportunity to continue viable operations. One of the biggest financial drains on a family is an unexpected medical injury or illness and, of course, a natural disaster. It is even more pronounced on a farm where a family s livelihood depends on the ability to plant or harvest a crop. Farm Rescue gives families a chance to continue their livelihood by providing the necessary equipment and manpower to plant or harvest their crop, free of charge. Farm Rescue was founded by Bill Gross, a native North Dakotan and fulltime pilot for UPS Airlines. Like so many farm boys before him, Bill s heart never left his family s farm and ranch at Cleveland, ND. And like so many other farm families, his parents encouraged him to leave that farm in pursuit of a better life. But from a bird s eye view, flying back and forth across our nation at 40,000 feet, Bill kept looking at the farms below. The changing demographics of rural America fewer farms, less children per family, fewer neighbors troubled him. And always in the back of his mind, he remembered his father s concern about what would happen to their farm should anything debilitating happen. So, on a long flight over the Pacific Ocean one day, when one of Bill s copilots asked him what he was going to do when he retired, Bill didn t hesitate: I m going to be this Good Samaritan that buys a tractor and goes around and helps farm families plant their crops. That generated some laughter until his coworker realized Bill was serious. Well, why wait until you retire? he challenged. Bill Gross launched Farm Rescue in 2005 and provides assistance to farm families in North Dakota, South Dakota, western Minnesota and eastern Montana. Farm Rescue has assisted more than 155 farm families in crisis since The industry raised $7500 for Farm Rescue during the convention. If you would like to make a donation, or learn what other ways you can help Farm Rescue, please visit their website at CropInsurance TODAY 31

34 Constantly improving crop insurance availability, program integrity and communicating with farmers and the general public should be top goals of both the industry and RMA moving forward, he said. There is one simple reason why crop insurance has lasted for over 75 years while other programs have come and gone, he stated. It s because it makes sense for consumers, for taxpayers and for farmers. Respected agricultural economists also presented at the convention on a panel moderated by Sara Wyant with Agri-Pulse Communications. Dr. Keith Collins, NCIS, Dr. Joe Outlaw, Texas A&M University, and Dr. Mechel Paggi, California State University-Fresno, discussed various topics related to the recently passed Farm Bill, world trade markets and changes to the crop insurance program with the introduction of STAX, SCO, PLC and ARC. Senator Debbie Stabenow Later in the week, former co-hosts of CNN s Crossfire, Paul Begala and Tucker Carlson provided a lively discussion on several political hot topics. In the last 50 years only four Democrats have been elected to the White House, and Paul Begala helped two of them former President Clinton and President Obama. Begala, who is now a commentator for CNN, joked that he is a liberal who was raised in the very conservative town of Sugarland, Texas, and Tucker [Carlson] is a conservative who was raised in the very liberal town of San Diego, California. This comes as a bit of a surprise to those who meet us for the first time! Carlson is a political commentator for Fox News and serves as a co-host of Fox and Friends Weekend. You can see why their conversation and banter back and forth was so enjoyable for those who were listening. Orion Samuelson, National Farm Report, WGN Radio-Chicago Errors and Omission Insurance For Your Agency Full lines of coverage including MPCI Crop Insurance Brandon Willis, Administrator, Risk Management Agency Convention attendees were entertained with an inspiring presentation by well-known farm broadcaster and the Voice of Agriculture, Orion Samuelson. Samuelson has been with WGN Radio in Chicago since Orion presents 18 agricultural reports daily on the station and is also heard daily on radio stations with his syndicated National Farm Report and syndicated Samuelson Sez commentary programs. In addition, Orion and Max Armstrong host the one-hour Saturday Morning Show on WGN Radio and are seen weekly on RFD-TV as co-hosts of This Week in Agri-Business. We will work diligently to offer you quotes with reputable companies at competitive prices To obtain a quote for your agency call American Insurance Services, LLC. Premium financing is available We have over 35 years experience in all lines of insurance 32 MAy2014

35 CropInsurance TODAY VisitWebsite ag-risk.org Four Industry Stalwarts Presented Lifetime Achievement Awards Kent Petersen, Hudson Crop Insurance, Robert Parkerson, ProAg Insurance, Russell Slade, Diversified Crop Insurance Services, and Charles Chuck Lassey, retired, were presented with a Crop Insurance Industry Lifetime Achievement Award at the 2014 Crop Insurance Industry Annual Convention. Tim Weber, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the awards. In 2008, Hudson Insurance Company purchased the assets of CropUSA and the employment contracts of many employees. Kent supported that transition and was named senior vice president of Hudson Insurance Company and President of Hudson Crop. He remained in that position until his retirement in September Kent was a member of many industry organizations including serving on the NCIS Board of Directors from He was also an active member of the Ameri- Kent Petersen Kent Petersen began his career in the crop insurance industry almost 40 years ago. From 1973 to 1990, Kent worked for Crop Hail Management, starting as a crop insurance adjuster and working up through the ranks to become the chief operations officer. From 1990 to 1992, Kent assisted with the transition and in 1992 was named manager of underwriting and reinsurance for Rural Community Insurance Services. He served in that position until After a brief retirement from the industry, Kent returned to the industry as president of CropUSA in January of Kent Petersen was unable to attend the convention so accepting the award on his behalf was Dan Gasser (center), Hudson Crop Insurance. Tim Weber (left), Chairman of the NCIS Board of Directors and Tom Zacharias (right), President, NCIS, presented the award. CropInsurance TODAY 33

36 can Association of Crop Insurers, serving as a strong advocate for the crop insurance industry. Robert Parkerson Robert Bob Parkerson has been dedicated to the crop insurance industry for many years, and in a leadership position since the early 1990s. Bob worked with Old Republic in the 1980s, at a time when they were the largest industry company in the MPCI program. He became president of National Crop Insurance Services (NCIS) at a time when the industry was in need of a true leader, which Bob filled with class and dignity. As president of NCIS for 17 years, Bob was instrumental in the industry growing from a group that was struggling to reach $1 billion in premium to a powerhouse industry that exceeds $12 billion in premiums. Each step forward along this path included Bob representing the industry with patient guidance, leadership and respect from other crop insurance stakeholders. Bob was more often than not the first person reached out to on critical issues with USDA, Congress, reinsurance companies and the press. Thanks to Bob s leadership there is utmost respect for NCIS as an educational resource, providing detailed analytical input when change inevitably occurs in this industry. Bob is also recognized in the international crop insurance arena, due to his long time and positive profile in the U.S. crop insurance program. Many foreign operations seeking to learn from the best have consulted with Bob through the years. Russell Slade Russell Slade has spent the better part of the last three decades making his mark on the crop insurance industry landscape. Prior to starting in crop insurance, he farmed in Georgia and also sidelined as a crop duster. In 1983, Russell began his career with the Cotton States crop division as a claim and marketing manager and was later promoted to vice president of the crop insurance operation. Subsequently, Russell joined Blakley Crop Insurance as vice president of their south/east region. In 2005, Russell joined Diversified Crop Insurance Services as general manager and played an instrumental role as DCIS transitioned to a full service crop insurance company. Tim Weber (left), Chairman of the NCIS Board of Directors, Bob Parkerson (center), and Tom Zacharias (right), President, NCIS Russell s efforts and passion for the industry could be found on both the crop-hail and MPCI programs and he has gained the respect and goodwill from all those who worked with him, not only in the field but as a member of many of the NCIS standing committees. Russell s leadership, knowledge, influence, values and people skills made a mark on all those within Diversified Crop Insurance Services but also those in the crop insurance industry who have had the privilege of working with him. A long-time advocate of NCIS and its committees, Russell has spent a significant amount of time championing the importance of a unified industry. His expertise on such crops as cotton, peanuts and tobacco proved to be invaluable to the industry in both the MPCI and crop-hail programs. He has served on many NCIS committees over the years including, but not limited to: the MPCI Policies and Forms Committee; Loss Adjustment and Insurance Products Committee; Crop-Hail Policy, Procedure and Loss Adjustment Com- Tim Weber (left), Chairman of the NCIS Board of Directors, Russell Slade (center), and Tom Zacharias (right), President, NCIS 34 MAy2014

37 mittee; the NCIS Board of Directors; and, the NCIS South/East, Gulf States and Kentucky/ Tennessee Regional/State Committees. Tim Weber (left), Chairman of the NCIS Board of Directors, Chuck Lassey (center), and Tom Zacharias (right), President, NCIS Charles Chuck Lassey Charles Chuck Lassey began his crop insurance career working for Rain and Hail in North Dakota. In the mid 1960 s, he went to work for the Insurance Company of America. Later, Chuck joined American Ag, and later worked for Agro National. Chuck spent most of his career as a field representative, a supervisor and a branch manager in the Northwestern states of Idaho, Montana, Oregon and Washington, with some duties in North Dakota. Chuck earned the respect and admiration of his agents and his fellow competitors for his honesty and work ethic. Chuck was always active in the industry, serving on many of the committees, from the old loss adjusting committees to more recent when he served on the NCIS Northwest Regional/State Committee. Still today when speaking with the many of the agents he worked with over his tenure, he is well respected and thought of often. Through the years Chuck recruited a large number of adjusters and field representatives to the crop insurance industry, many of whom still work in it. His son, Paul Lassey, also works in the industry, traveling the same states as his father. Chuck is well known and highly respected for his expertise in specialty crops produced in the Northwest states. He was always willing to take on the most difficult tasks, including supervising and adjusting apples on a project in Mexico for an international reinsurer. An IMPORTANT Question! Who Stands Behind Your Crop Insurance Protection? If It s Heartland Crop Insurance, Inc.,?Have the peace of mind knowing your company is... n Leading the way in technology and agriculture mapping n Founded on providing superior service n Proven to be there when it counts n Supported by the strength and stability of the Everest Re Group Rated A+XV A.M. Best Heartland Crop Insurance, Inc. Gain the Advantage a member of the Everest Re Group, Ltd For information visit Heartland Crop Insurance, Inc. is an equal opportunity provider. CropInsurance TODAY 35

38 CropInsurance TODAY Dan Carothers Receives Outstanding Service Award Dan Carothers was the recipient of the 2014 National Crop Insurance Services Outstanding Service Award in recognition for outstanding service and outreach to small, limited resource, and socially disadvantaged farmers. Tim Weber, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the award at the 2014 Crop Insurance Industry Annual Convention. Mr. Carothers served in the U.S. Army from 1970 to1975, and then obtained a Bachelor of Science degree in Agriculture from California State University Chico. He was a County Executive Director for the Farm Service Agency from 1980 until In 1988 he formed Personal Ag Management Services in order to assist farmers in dealing with the USDA. In 1998 Mr. Carothers saw a need for professional crop insurance representation in Kern County, California, and started his career in crop insurance. With his expertise in farm programs he was in a unique position to provide comprehensive guidance for his farmer clients in all aspects of USDA farm programs. Mr. Carothers has served on the American Association of Crop Insurers (AACI) PAC Committee, the AACI Agent Advisory Committee, and as the Affiliate Representative on the AACI Board of Directors. During his many trips to Washington D. C. Dan has met with members of the House and Senate Ag Committees as well as with members of Congress from California. Narinder Dosanjh, Ron Cruz, Kathy Medina, and Todd Snider are all California-based crop insurance agents who are employed by Personal Ag Management. These agents were originally recruited, in part, to Tim Weber, Chairman of the NCIS Board of Directors, Dan Carothers, and Tom Zacharias, President, NCIS effectively reach out and provide service to the diverse farming community in California. Narinder Dosanjh and Ron Cruz are both bilingual. Mr. Dosanjh is fluent in Punjabi and specializes in reaching out and servicing the Indian farming community. Mr. Cruz is fluent in Spanish and is able to reach out and communicate with the Mexican farming community. Kathy Medina is able to relate to and provide service for women in California agriculture. Todd Snider provides service to limited resource and underserved growers and all four agents routinely attend the various RMA-sponsored outreach seminars for underserved and minority growers. In addition, Personal Ag Management has customer service representatives that are fluent in Spanish and Punjabi. Congratulations to Dan Carothers on receiving the NCIS Outstanding Service Award. Congratulations! 36 MAy2014

39 C O M P L E T E F A R M I N S U R A N C E S O L U T I O N S THE PERSONAL SERVICE Your agency and policyholders deserve Our agents are the reason we re in business. That s why we treat them with the honesty, integrity and professionalism they deserve. With our knowledgeable sales staff, highly-trained adjusters, and dedicated underwriters and claims staff, we strive to give our agents and policyholders the best and most personal service in the industry. When you do business with FMH, you feel like your agency matters. You call, and you immediately talk to a person. You re not just a number. Kim Ryan, Blair, NE, writing with FMH since 1996

40 Continued from page 1 Availability Past, Availability Present, and Availability Future. Availability Past...What a long strange trip it s been... (The Grateful Dead). (Somehow I just cannot avoid the lyrics and the metaphors this time around.) In 1980, the Federal Crop Insurance Act expanded the crop insurance program that began in 1938 by increasing the number of commodities insured and bringing in the private sector delivery system. However, participation remained lower than Congress had hoped for and even as late as the early 1990 s, crop insurance participation rates hovered in the 30 percent range and Congress was often spending considerably more money each year in disaster relief expenditures than it was on crop insurance. The Federal Crop Insurance Reform Act of 1994 dramatically restructured the program and through discounts built into the new program guidelines, participation increased dramatically. By 1998, more than 180 million acres of farmland were insured under the program, representing a three-fold increase over In May of 2000, Congress approved another important piece of legislation: the Agricultural Risk Protection Act (ARPA). The provisions of ARPA made it easier for farmers to access different types of insurance products including revenue insurance and protection based on historical yields. During this period, availability expanded in a number of ways. First, successive Farm Bills have continued to expand the number of crops covered by crop insurance. In the beginning, it was largely confined to major commodity grains. Today, crop insurance covers all major commodities and a long list of specialty crops including apricots, blueberries, cherries, olives and tangerines, just to name a few. Crop insurance is also available for different levels of coverage. Just like other forms of insurance, different farmers are comfortable with varying levels of risk. Some farmers might want to shoulder a twenty-five percent loss of crop before their crop insurance protection can be evoked, others can only afford to lose a much lower percentage of the crop. In short, individual farmers purchase policies based on their own risk management needs. The other aspect of availability that must be 38 MAy2014 mentioned is that unlike most other forms of insurance, crop insurance must be sold to any farmer, regardless of their risk profile, at a rate set by the USDA/RMA. This ensures that the most vulnerable farmers, who may be smallscale operators and underserved farmers, can purchase the coverage they need. To this end, the crop insurance industry, in conjunction with the Risk Management Administration (RMA), holds seminars across the country focused on presenting risk management tools to socially and economically disadvantaged farmers. NCIS has been instrumental in providing risk management and crop insurance education to these farmers through a series of Cooperative Agreements funded by the Risk Management Agency. Availability Present In 2013, 1.2 million polices were sold protecting more than 128 different crops covering 296 million acres with an insured value of $124 billion. Coverage is available on many crops including everything from blueberries to wheat, grain sorghum to mint. Today, more than 70 percent of specialty crops grown in the United States are protected by crop insurance. Also, margin products are available to livestock producers, including dairy cattle, swine and lambs. One of the ongoing strengths of the crop insurance program remains the fact that coverage is tailored to each individual s risk tolerance. There is a range of deductibles available and a variety of products so producers can choose what works best for them. Without question, the 2014 Farm Bill expanded the availability of crop insurance on several levels. With the introduction of price decline and margin coverage, and the introduction of whole farm coverage, crop insurance continues to be at the forefront of a farmer s risk management toolbox and in many cases, the only safety net they have available to them. Additionally, Congress expanded coverage to beginning farmers, ensuring that the next generation of this nation s farmers have the risk management tools in hand they need to manage the volatile markets and weather conditions they face. The 2008 Farm Bill s direct and countercyclical payment programs and the state-based revenue program known as ACRE (Average Crop Revenue Enhancement Program) were eliminated in the new Farm Bill. In their place, a farmer may choose one of two new farm programs: 1) Price Loss Coverage (PLC) or 2) Agriculture Risk Coverage (ARC). These programs are designed to supplement crop insurance by providing support in periods of multiyear price declines and helping producers cover the crop insurance policy s deductible. The major enhancement to crop insurance is the addition of two supplemental policies that will help producers expand their protection against losses due to natural disasters or price declines. The first program, the Stacked Income Protection Plan, or STAX is an additional area revenue plan that a cotton producer may use alone or in combination with an underlying policy or plan of insurance. The second program, the Supplemental Coverage Option, or SCO, provides all crop producers with the option to purchase area coverage in combination with an underlying individual policy or plan of insurance that would allow indemnities to be equal to a part of the deductible on the underlying the policy or plan of insurance. Availability Future Just like the ghost of Christmas Future explained in the movie the The Scrooge, the future is what we make it because it has yet to be written. But the future starts today, and with that in mind, we must all work together to ensure a smooth and successful implementation of the 2014 Farm Bill. This will require both cooperation and coordination between and among all participants in the public private partnership that constitute

41 the current crop insurance infrastructure. When talking about our future, we must recognize that there is still work to be done on providing insurance for new and specialty crops that are without any form of crop insurance protection. Thankfully, language in the Farm Bill may result in a number of new crop insurance products including rice and catfish margin insurance, policies for sweet sorghum, biomass sorghum, sugarcane, pennycress and other energy and specialty crops. Nothing speaks louder than success, and the success of crop insurance is largely based on its widespread availability. In 2012, when the greatest drought the nation had seen since the Dust Bowl days hit the nation, some 84 percent of planted cropland was protected by crop insurance. This availability, in essence, planted the seed for future growth of the program, as farmers purchased even more coverage in 2013, with coverage for planted cropland increasing to 90 percent. As an industry we take seriously our responsibility to effectively deliver crop insurance to all eligible producers. In practice this includes educating producers, at their level of understanding, about risk identification and how crop insurance can be integrated into their personal risk management plans. With industry and RMA support, current NCIS outreach activities place special emphasis on helping small-scale, limited resource, socially disadvantaged farmers, and producers of underserved commodities that are covered by crop insurance but have participation rates lower than the national average. Many of these producers have limited historical knowledge and/ or personal experience with crop insurance programs. It is imperative that all farmers and ranchers are fully informed of available insurance tools, their merits, and learn how they can be used in concert with the other risk management and cost control strategies they employ. Availability Why? It is easy for us to fall into crop insurance industry-farmer speak when we talk about issues like availability, affordability, and viability. But beyond our world, why are these ideas important? What is the broader perspective? For this, we go back to first principles. Most people in this country, and it is probably safe to say even globally, believe that a viable and thriving agriculture is in the public interest and that there is public benefit to a healthy agricultural sector. Given such a public interest, public support can be justified. How is this public support for agriculture manifested? Look to the New Farm Bill, where we have transitioned from direct income support for farmers to an insurance-based risk management system, in which farmers share in the cost of the program and only receive an indemnity in the event of an insurable loss. Yes, farmer premiums are discounted to make crop insurance affordable. By making the insurance more affordable to farmers, we have experienced broader participation in crop insurance and greater availability of new and improved coverage. In turn, there is less reliance on the need for costly ad hoc disaster programs, which are off budget. So why is crop insurance availability important? Because crop insurance availability is a necessary condition for an effective farm safety net. An effective farm safety net is important for stability of the agricultural sector, which is fundamental to a modern society....so where to now, St. Peter? Show me which road I m on... (thanks, Elton) With the signing of the 2014 Farm Bill and implementation underway, we are definitely on a new road. And no doubt we will need a little divine intervention to stay on the right path. In our next issue we will talk about the importance of crop insurance affordability, stay tuned. In this issue, we feature some of the events from our Industry Annual Convention, which took place in Scottsdale, Ariz., in early February. We also have our Year in Review article, which has become a regular feature in this publication. It is a look back at the 2013 crop season weather events, data from both the Federal crop insurance program and Crop- Hail, including a look at the Canadian hail program, and commodity markets and prices. Another highlight in this issue is the 25th Anniversary of National Crop Insurance Services. NCIS has seen a lot of changes and growth in the industry the last 25 years, and has been a pillar of support for our members through it all. Many people have worked at NCIS over the years and we thank them all for their leadership, work ethic and dedication to NCIS and the industry. Several of these dedicated individuals have been working here since the beginning and include: Jim Crist, Loretta Sobba, Richard Whitmore, Therese Stom, Rich Byrne, Chris Lindsay, Sherri Scharff, Robin Hill and Jon Chowning. They, along with the other NCIS staff, will continue to provide the best service and technical expertise to our members and the industry. We look forward to another 25+ years! (I would like to personally thank Laurie Langstraat, Dave Ray and Phillip Hayes for their contributions to this piece and our ongoing public relations efforts.) It s an Exciting Time to Join The Climate Corporation I m very positive about Climate.com. It s amazing, the amount of data they ve collected and how remarkably accurate it is. It takes the guess work out of farming. Never thought I d see a day where we could click a couple buttons on the mouse and bring up this much weather data. John Jackle, Indiana Farmer For more information on opportunities in our Sales and MP Divisions go to climate.com/careers CropInsurance TODAY 39

42 Cutting-edge technology. Designed for your bottom line. At ADM Crop Risk Services, we re constantly investing in new, leading-edge technology to help you work faster and smarter, with innovations like: Mobile crop insurance quotes available online and off. Stronger, better infrastructure for faster (up to 10x) claims processing. New streamlined frames for consistent, effi cient batch printing of mapping booklets. And so much more. At ADM CRS, we re not just committed to technology. We re committed to your bottom line. To learn more about the benefi ts of working with ADM CRS, visit admcrs.com today. ADM Crop Risk Services 888-5ADMCRS Archer Daniels Midland Company ADM Crop Risk Services is an Equal Opportunity Employer. The products and services described here are written by ADM Insurance Company (not licensed in AK, CA, CO, FL, HI, ID, MN, NH, NM, NY, RI, VT, WA or WY) Home Offi ces Princeton, NJ and reinsured to Agrinational Insurance Company. The insurance products described here are subject to availability and qualifi cations. Other terms, conditions and exclusions may apply. Not all products are available in all states. This does not constitute an offer of any product in any jurisdiction. 40 MAy2014

43 CropInsurance TODAY Kenny Shock Receives NCIS Industry Leadership Award Kenny Shock, Great American Insurance Company, was presented with the 2014 National Crop Insurance Services (NCIS) Industry Leadership Award at the 2014 Crop Insurance Industry Annual Convention. This award is given to individuals who are directly involved in the crop insurance industry and who consistently serve the industry by providing outstanding leadership through NCIS committees. Tim Weber, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the award at the 2014 Crop Insurance Industry Annual Convention. Mr. Shock began his career in crop insurance as an adjuster with FCIC in the 1970s. Since those early days, he has been quick to sign the industry s praises. Mr. Shock works hard to keep himself up-to-date with the constant change in our industry. As a result, he has developed a comprehensive knowledge of policy and procedure that serves him well in his current role as Claim Supervisor with Great American Insurance Company. One of his responsibilities in this position is the training and development of a team of adjusters, a duty that he enjoys and takes very seriously. During training sessions, Mr. Shock is quick to point out that policy and procedure is in place and to be followed for a reason. That reason, he adds, is so that the claim adjustment is fair to the insurance company writing the policy and to the insured that has placed his or her trust in the company. His efforts to spread this message within Great American, and within the industry as a whole, have served the industry well. Mr. Shock has always been extremely active within the NCIS Indiana/Ohio/Michigan Regional/State Committee. Looking back over the past 15 years, he has been elected to Tim Weber, Chairman of the NCIS Board of Directors, Kenny Shock, and Tom Zacharias, President, NCIS serve as Chairman three separate times and procedure changes, RMA bulletins and FAD has also served as the committee vice chairman. This means that he has served in a lead- and other ag related organizations, etc. He issuances, pertinent information from FSA ership role for this committee eight out of works hard to make sure that the meetings are the last 15 years. The fact that others on the informative and worthwhile. He has also been committee ask him to serve so consistently is instrumental in the training activities, whether it is crop training apple/dry bean/sugarbeet a testament to the effort he gives and the leadership he provides in this role. training in Michigan or hybrid seed corn Mr. Shock s quality of service within the training in Indiana, Kenny has consistently committee is even more impressive than his volunteered to help lead the effort by giving length of service. He goes out of his way to classroom presentations or field training. ensure that the committee s monthly meetings Congratulations to Kenny Shock, recipient contain the most up-to-date information affecting the industry by including policy and of the NCIS Industry Leadership Award. Congratulations! CropInsurance TODAY 41

44 CropInsurance TODAY Tom Vetter Receives NCIS Industry Leadership Award Tom Vetter, ProAg Insurance, was presented with the 2014 National Crop Insurance Services (NCIS) Industry Leadership Award at the 2014 Crop Insurance Industry Annual Convention. This award is given to individuals who are directly involved in the crop insurance industry and who consistently serve the industry by providing outstanding leadership through NCIS committees. Tim Weber, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the award at the 2014 Crop Insurance Industry Annual Convention. Mr. Vetter has been working tirelessly in the crop insurance industry for three decades. His knowledge on crop hail policy development, adjustment processes and risk management needs are well known and acknowledged across the industry. He participates extensively in NCIS committees, rarely missing meetings (if ever) and is always thinking of what is best for the industry and not just the company he s representing. Mr. Vetter first began serving on standing committees through CHIAA and NCIA (predecessors to NCIS), which included developing policies and loss procedures, analyzing loss costs, and helping with many aspects of agronomic research for the private crop-hail program. He was a member of the Arizona Regional/State Committee, serving as chairman in and again in , and currently serves on the NCIS Southwest Regional/State Committee. He also served as a member of the Chairman s Select Committee on Programs and Services in 1993 and He was a member of the industry committee who worked with the Congressional Tim Weber, Chairman of the NCIS Board of Directors, Tom Vetter, and Tom Zacharias, President, NCIS delegates in developing and writing the legislation that introduced the private sector into the Federal Crop Insurance Program. He also helped develop many of the first MPCI loss procedures (re-writes of the original Federal handbooks) and conducted some of the first train-the-trainer sessions of these procedures for the industry. Mr. Vetter has always been very involved in the NCIS research programs and writing hail loss procedures, including Chile Peppers and Cotton. His hard work and dedication to the crop insurance industry has always lead to better products for the industry and better protection for farmers. Congratulations to Tom Vetter, recipient of the NCIS Industry Leadership Award. Congratulations! 42 MAy2014

45 After 175 years of better equipment, we ve set our sights on better crop insurance. Innovation is at the heart of John Deere Insurance Company. The financial stability of John Deere helps us invest in agent training and simplified business processes. Advances in technology help lower your operating costs so your business can grow faster. All of it adds up to more profits for you and your customers. What Color Is Your Crop Insurance? To become a John Deere crop insurance agent today, call or visit John Deere Insurance Company of Johnston, Iowa, issues crop insurance products through its Managing General Agent and affiliate, John Deere Risk Protection, Inc. (DBA in California as JDRP Crop Insurance Services). John Deere Insurance Company and John Deere Risk Protection are equal opportunity providers. Coverage is subject to availability, terms and conditions. John Deere Insurance Company is not licensed or does not do any insurance business in AK, CT, D.C., HI, MA, ME, NH, NV, NY, RI, and VT. John Deere Financial is not an insurance company. CR Litho in U.S.A. (13-12)

46 CropInsurance TODAY Committee Chairs Ready for the Year By Mike Sieben, NCIS How do you find out what is going on out in the country about crop insurance? You ask the people that have the boots on the ground that work out in the country. National Crop Insurance Services (NCIS) recently held the Regional/State Committee Chairmen s Training meeting in Overland Park, KS, with chairmen from all corners of the United States. The chairmen are volunteers who have recently been elected by the various committees to lead their committee in the upcoming year. The training is an annual event that helps prepare the chairmen for official duties. Specific instruction was provided on: Anti-trust overview; NCIS regional/state bylaws; Planning and conducting effective meetings and summer schools and field days; How to make recommendations about policies, procedures or research; How to use the Interactive Actuarial Map (IMAP) on line; Crop adjuster licensing update; and Website training on crop sites. A considerable amount of time was spent on letting the chairmen Back row, (left to right): Don Hutsell, NCIS, IN/OH/MI and Southwest Committees liaison; Michael Smith, Rain and Hail, vice chairman, Southeast Committee; Brad Veenstra; Scott Altfillisch; Chad Groen; Chad Mixdorf; Dave Hall, NCIS, NE and SD Committees liaison; Bruce Van Loenen; and, Mark Askerooth. Center row, (left to right): Ed Gribben; Chris Lindsay, NCIS, KY/TN Committee liaison; Loretta Sobba, NCIS, KS/OK Committee liaison; Lynnette Dillon, NCIS, Gulf States and Southeast Committees liaison; Mike Sieben, NCIS, IL/WI and Iowa Committees liaison; Mollie Dvorak, NCIS, East and Missouri Committees liaison; Cheryl Richmond-Witwer; Jamie Wells, ProAg, vice chairman, Missouri Committee; and, Kyle Sisk, NAU Country, vice chairman, Southwest Committee. Front row, (left to right): James Houx, NCIS; Mark Flohr, NCIS, CA/NV and CO/WY Committees liaison; Jordan Atkinson; Spencar Diedrich; and, Dean Strasser, NCIS, MT and Northwest Committees liaison. 44 MAy2014

47 NCIS Regional/State Committees talk about what is going on in their various regions. Sometimes we get concerned about our own little piece of the world and forget that crop insurance is written in all 50 states. Issues that show up in California are not the same issues that are showing up in Florida. How many knew that the oil boom in North Dakota has created a problem finding motel rooms for adjusters in western North Dakota? Also the oil boom has reduced the number of rail cars to deliver grain in South Dakota. The drought in California could have an impact on much you pay for a can of almonds in Some of the regional/state committees meet on a monthly basis, some quarterly and some as needed. All member companies are notified of the meetings and strongly encouraged to attend, listen and discuss issues that may have happened or that could potentially be a concern for all companies. Each regional/ state committee has an NCIS liaison that they work with and is the contact point to ensure that all member companies receive notices and minutes of the meetings. If an issue needs to be forwarded on to an NCIS standing committee, the NCIS liaison is the person to do that. Not only do the chairmen gain knowledge from the training session but so does the NCIS staff in realizing what is happening out in the field. California/Nevada Ed Gribben, Rain and Hail Minnesota Chad Groen, Farmers Mutual Hail Colorado/Wyoming Pat Milford, NAU Country Missouri Jeff Dexter, Rain and Hail East Region Jordan Atkinson, NAU Country Montana Kurt Laubach, Heartland Gulf States Scott Altfillisch, Rain and Hail Nebraska Chad Mixdorf, Farmers Mutual Hail Illinois/ Wisconsin Jon James, Rain and Hail North Dakota Mark Askerooth, ADM Crop Indiana/Ohio/Michigan Sharon Shock, Great American Northwest Cheryl Richmond-Witwer, RCIS Iowa Brad Veenstra, Great American South Dakota Spencar Diedrich, John Deere Kansas/Oklahoma Bruce VanLoenen, Farmers Mutual Hail Southeast Region Andy Stanley, ARMtech Kentucky/Tennessee Zach Alexander, Rain and Hail Southwest Region Steve Fortenberry, ARMtech It is a personal and professional honor to be elected to be chairman of an NCIS regional/state committee. The expectations and responsibilities are great but so are the rewards for being selected by your peers to serve in this important leadership position. NCIS Regional/State Committee Chairmen VisitWebsite2014 ag-risk.org CropInsurance TODAY 45

48 NCIS VisitWebsite ag-risk.org Expands INDUSTRY AWARDS The NCIS industry awards were established in 2001 to honor those individuals who provide exemplary service to the industry as a whole and/or to producers. The award criteria has been changed slightly and a new award category has been added. Outstanding Service Award This award is presented to a crop insurance agent or individual outside of the industry who provides exceptional service industry-wide and outstanding outreach efforts to all farmers, especially limited-resource and/or socially disadvantaged farmers. Industry Leadership Award This award, targeted primarily to members of the NCIS regional/state cop insurance and/or NCIS standing committees recognizes individuals who are directly involved in the crop insurance industry and who consistently serve the industry by providing outstanding leadership. One award may be given to a member of a regional/state crop insurance committee and/or a member of a standing committee. Lifetime Achievement Award This new category of award will be given to those people who have served or are currently serving in leadership capacities within the industry who exhibit(ed) outstanding leadership, guidance and knowledge to and of the crop insurance industry. Criteria for all awards are: 1. Unyielding personal and business ethics. 2. Demonstrated service above and beyond the crop insurance industry. 3. Represents themselves, their company and the crop insurance industry well. The winners will be presented with their awards at the crop insurance industry annual convention held in February of each year. All nominations must be submitted in writing to NCIS by October 15, 2014, for awards to be presented at the 2015 Annual Convention. For nomination information and forms to be submitted, please visit the NCIS website at to download. If you have any questions regarding the criteria or whom is eligible for the awards, please contact Laurie Langstraat at NCIS at lauriel@ag-risk.org or HUDSON CROP NEW PRODUCT ALERT: Hudson Crop Releases the Nursery Line-Out Stock Endorsement We are THE Nursery Industry Experts - Writing and Supporting Nursery Business in 20 States Policy Summary Check Claim Status Toll Free: 866/ Hudson Insurance Group is an equal opportunity provider. 46 MAy2014

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50 CropInsurance TODAY Jo Anne Baker Retires Leaving NCIS Jo Anne Baker, the voice of NCIS, retired from Novitex Enterprise Solutions the end of February, and leaves NCIS as our main receptionist. Novitex, Jo Anne s employer, has a contract with NCIS to run the mail, copy and receptionist services. If you have called NCIS almost anytime over the last 10 years, you most likely have spoken to Jo Anne. The most important, as well as most enjoyable, part of my job here at NCIS is greeting callers, she said. I know many by name or voice; and when members visit NCIS for meetings, it s always fun putting a face with that name or voice. Jo Anne started working for Novitex (formerly Pitney Bowes Management Services) in 1998 and came to NCIS in October of Along with answering the phones, Jo Anne had many responsibilities many of us on staff took for granted. She distributed the morning papers, ordered meeting room and break room supplies and always made sure conference rooms were fully stocked and ready for the many meetings held in the office. It was a pleasure having Jo Anne with us for the past several years, said Jim Crist, NCIS. She gave new callers and visitors an excellent first impression of NCIS, and provided excellent service to NCIS staff and our members. We ll all miss Jo Anne and wish her the very best. Jo Anne and her husband Charles, who is also retired, plan to fix up their home to sell to relocate closer to their children. They have two grandsons, Nolan, 9, and Liam, 3, who they hope to spend even more time with, as well as traveling. Charles and I are excited and ready for the next chapter, Jo Anne said. NCIS it s the best job ever! I will miss everyone and visiting with the members I ve gotten to know over the years. Congratulations, best wishes to Jo Anne! 48 MAy2014

51 Never underestimate the power of flexibility. Scientific evidence suggests that flexibility decreases the risk of injury. To stay healthy, ask us about Priceflex TM, a crop insurance product that allows greater flexibility in marketing crops by poviding added protection from fluctuating prices. Crop Insurance Division Coverage is underwritten in by Great American Insurance Company. Great American is an equal opportunity provider Great American Insurance Company. Great American Insurance Group, 301 E. Fourth Street, Cincinnati, CropInsurance OH TODAY 49 Price Flex is a trademark of Watts & Associates, Inc.

52 8900 Indian Creek Parkway, Suite 600 Overland Park, Kansas PRSRT. STD. U.S. POSTAGE PAID Permit No. 116 LAWRENCE, KS Rain and Hail Agricultural Insurance The ACE Group of Companies Our policyholders filed over 165,000 claims in 2013, almost 10,000 more than By March 1st, we completed over 98% of our claims. THANK YOU to our agents for your hard work and commitment to provide the best service to our customers.