USDA Risk Management Tools March, 2015 Eric Fischer USDA Farm Service Agency (517) 324-5107 Dale Allen USDA Farm Service Agency (517) 324-5105 1
2014 Farm Bill Overview of the Non-Insured Crop Disaster Assistance Program (NAP) Reauthorized by the 2014 Farm Bill 2
NAP Provisions Provides financial assistance to producers of non-insurable crops to protect against natural disasters that result in lower yields or crop losses, or prevents crop planting. Similar to Crop Insurance in many ways NAP is only available to producers of non-insurable crops. 3
NAP / Risk Management Most lenders will have a discussion or want to hear your plan in the event of a crop loss and how the plan will help you manage through the event. 4
NAP / Risk Management Date sensitive. Coverage in place before the loss event Documented evidence of who, what when and where. Established data base to calculate an expected replacement value. NAP is Risk management for uninsured crops such as Grapes. 5
RMA Grape Crop Provisions Insured Crop All insurable varieties of grapes grown for wine, juice, raisins, or canning That have produced two tons per acre during one of the three last crop years (vinifera varieties have different qualifications) After being set out have reached the number of growing seasons specified in the Special Provisions Acreage that you have a share in 6
NAP Grape Crop Provisions NAP Crop eligible-most grapes (zone appropriate) if crop insurance is not available in the County. Loss calculated based on Transitional T yield or producer established Actual Production History APH. Acreage that you have a share in. 7
RMA Grape Crop Provisions Quality Adjustment Mature marketable grape production may be adjusted for quality deficiencies. Sales Closing - Nov 20 Acreage reporting - Jan 15 Report of all acreage by varietal group Production reporting - Jan 15 Report of previous year s yields used to calculate APH 8
NAP Grape Crop Provisions Quality adjustment-with NAP Buy-Up Sales Closing - Nov 20 Acreage reporting - Jan 15 Report of all acreage by varietal group Production reporting - Jan 15 Report of previous year s yields used to calculate APH 9
Prior NAP Provisions The prior Farm Bill NAP provisions only offered NAP at a level equal to FCIC CAT (Catastrophic) level coverage. 50% Loss 55% Price Only pays when its very evident catastrophe occurred. 10
Major Enhancements Two major enhancements to NAP are: Option to purchase Buy Up coverage. Expansion of incentives to applicable producer groups. 11
Major Enhancements Producers of crops not insured by the USDA s Risk Management Agency (RMA) policies, can purchase crop yield buy-up protection for the 2015 NAP crops at up to 65% of their approved yield with losses paid at 100% of the NAP established market price. Referred to as 65/100. 12
Cost of Basic NAP $250.00 per County, per selected Pay Group. $750.00 per County, for all selected Pay Groups. $1875.00 coverage cost ceiling per Applicant for selected Pay Groups. 13
NAP Buy Up The 2014 Farm Bill expanded the NAP coverage options from: Basic NAP: (50% Loss Coverage. 55% Mkt. Price Coverage) To include NAP Buy-Up 50/100 loss=/> 50% @ 100% Mkt.price 55/100 loss=/> 45% @ 100% Mkt.price 60/100 loss=/> 40% @ 100% Mkt.price 65/100 loss=/> 35% @ 100% Mkt.price 14
Buy Up Producers still have to pay the basic CAT level coverage application fee unless waived under SDA/LR/BF provisions. Cost has not changed to Non SDA/LR/BF s. (SDA-Socially Disadvantaged Applicant, LR-Limited Resource, BF-Beginning Farmer) 15
Buy Up Cost Cost of Buy-Up per acre is dependent on the crop insured, how good a grower you are, and your option selected. The more valuable the crop and/or the higher your APH, the higher the premium. 16
Cost of Buy Up Let s look at Michigan Concord grapes as an example. $250.00 cost of CAT Basic NAP. Separate Pay Groups. Ingham County Average Yield for Concord processed is 5.17 ton/a 17
Buy Up Loss Levels 5.17 ton/acre average yield (Ingham Co.) 50% Loss Coverage = 2.585 ton/a 55% Loss Coverage = 2.845 ton/a 60% Loss Coverage = 3.102 ton/a 65% Loss Coverage = 3.360 ton/a 18
NAP Grape Price NAP Price for Aurora (AUR) grapes processed is $630.00 ton with a 2015 T Yield County Estimate Yield (CEY) 5.17 tons per acre Concords (CON) processed $357.00 ton CEY 5.17 tons per acre Dolcetto (DOL) processed $1568.333 ton CEY 3.83 tons per acre Buy Up Factor is 5.25% 19
NAP Guarantee Eligible Acres 5.0 X producer share 1.0 X Approved yield 5.17 X Elected Yld. Coverage 0.65 (=prod. guar.) X Production Guarantee 16.80 ton/a X 100% of price $357.00 = NAP Guarantee $5997.00 20
NAP Premium Eligible Acres 5.0 X yield 5.17 ton/a X share 1.0 X 65% Coverage Level X $357.00 NAP Price X 5.25 Premium Factor = $315 NAP Premium (plus $250.00 NAP service fee) 21
SDA/LR/BF Exceptions Under the 2014 Farm Bill, half of the cost of Buy Up is waived if an applicant qualifies as a SDA/LR/BF. Basic NAP application fee is also waived. SDA/LR/BF is subject to a $3,281.00 Buy Up cost ceiling. Therefore, SDA/LR/BF s get a 2 for 1 incentive. 22
SDA/LR/BF Exception Every year, a person or entity seeking SDA/LR/BF exception must certify eligibility on a Form CCC-860. This annual certification does not allow for Continuous Coverage. 23
SDA Definition Farmer who is a member of a group whose members have been subject to racial, ethnic, or gender prejudice because of their identity as members of a group without regard to their individual qualities. Groups include: American Indians or Alaskan Natives, Asians or Asian Americans, Blacks or African Americans, Native Hawaiians or other Pacific Islanders, Hispanics, and women. For legal entities requesting to be considered Historically Underserved, the majority interest must be held by Historically Underserved Applicants. 24
LR Definitions B. Limited Resource Farmer or Rancher: A limited resource farmer or rancher is a farmer or rancher that meets the criteria for both of the following: A producer whose direct or indirect gross farm sales do not exceed the amount in Table 1 below in each of the 2 calendar years that precede the complete taxable year before the relevant program year, adjusted upwards in later years for any general inflation, and Table 1: Direct and Indirect Gross Sales Program Year Corresponding Years Amount 2014 2011 and 2012 $176,800 2015 and subsequent years See http://www.lrftool.sc.egov.usd a.gov 1/ 1/ See tool for annual increase due to general inflation rate A producer whose total household income was at or below the national poverty level for a family of four in each of the same 2 previous years reference in paragraph (1) of this definition. A limited resource farmer or rancher status can be determined using the web site available through the Limited Resource Farmer and Rancher Online Self-Determination Tool through National Resource and Conservation Service at http://www.lrftool.sc.egov.usda.gov/. For legal entities requesting to be considered Limited Resource Farmer or Rancher, the sum of gross sales and household income must be considered for all members. Note: This definition is not applicable to FLP. 25
BF Definitions Beginning Farmer or Rancher: A beginning farmer or rancher is a person or legal entity for which both of the following are true for the farmer or rancher: Has not operated a farm or ranch for more than 10 years, and Materially and substantially participates in the operation. For legal entities to be considered a beginning farmer or rancher, all members must be related by blood or marriage; and all the members must be beginning farmers or ranchers. NOTE: This definition is not inclusive of all FLP requirements. 26
Additional NAP Coverage Changes The 2014 Farm Bill allows for yield and price options for Organic Crops. This option is dependent upon the availability of acceptable yield and price data. 27
Additional NAP Coverage Changes The 2014 Farm Bill also allows for price consideration for Direct Marketed Crops. Availability also dependent on price data. 28
Hand Harvested Crops Beginning with the 2015 crop, hand harvested crops must report claimed losses to their FSA Office within 72 hours. A completed Notice of Loss must also be completed within 15 days of the damage to the crop. 29
BioMass Crops Beginning in 2015, Biomass Crop coverage is available. Industrial crops grown expressly for the purpose of producing a feedstock for renewable biofuel, renewable electricity, or bio based products. 30
2014 Tree Assistance Program (TAP) March 2015
What is TAP? TAP: authorized by the Agricultural Act of 2014 (2014 Act) provides disaster assistance to eligible orchardists and nursery tree growers to replant or rehabilitate trees, bushes, and vines lost due to natural disaster, which occurred on or after Oct. 1, 2011. 32
Comparison of 2008/2014 TAP Provision 2008 FB 2014 FB Funding Source Disaster Trust Fund CCC RMPR Applicable Not applicable Period of Effectiveness Effective through 9/30/11 Cost Share Rate Replanting 70% Rehabilitation 50% AGI $500,000 non-farm $900,000 Payment Limitation $100,000 $125,000 Effective beginning Oct. 1, 2011, as permanent program Replanting 65% Rehabilitation 50% 33
Approved Trees, Bushes, and Vines Eligible applicants shall qualify for assistance only if the tree, bush, or vine mortality in each stand, for each disaster event, as a result of damaging weather, exceeds the 15% loss threshold, plus normal mortality. Grapes 1% Cherries 5% Blueberries 3% Losses from different stands with the same crop type will not be averaged to determine loss eligibility 15% mortality (dead) adjusted for normal mortality must be met, before damaged trees are eligible. Also, damaged trees must meet the 15% damaged, adjusted for normal mortality, to be eligible. 34
Applying for TAP CCC-899, Application for Assistance, must be filed by crop, type, stand, and producer share, in the administrative county that maintains the applicant s farm records. 35
Applying for TAP (Continued) Applicants who suffer tree, bush, or vine losses: during the 2015 calendar year or later must provide an application for payment and supporting documentation within 90 calendar days of: the disaster event, or the date when the loss is apparent. 36
To be considered an eligible loss: Eligible Losses Eligible trees, bushes or vines must have been lost or damaged as a result of natural disaster. The individual stand must have sustained a mortality loss (dead above and below ground), in excess of 15% after adjustment for normal mortality, determined based on: each eligible disaster event, except for losses due to plant disease Note: Death of a plants graft or scion that necessitates removal and replacement of the plants rootstock may be counted toward the 15% mortality, adjusted for normal mortality. To be eligible for damage losses, the individual stand must have sustained both of the following: Mortality loss in excess of 15% after adjustment for normal mortality; and Damage losses of 15% adjusted for normal mortality. 37
Eligible Losses (Continued) To be considered an eligible loss: the loss could not have been prevented through reasonable/available measures; and the trees, bushes, or vines, in the absence of a natural disaster, would not normally have required rehab or replanting within the 12-month period following the loss. the damage/loss must be visible and obvious to COC representative. COC may require information from a qualified expert to determine extent of loss in cases of plant disease/insect infestation. 38
Eligible Cause of Loss Causes that are the result of natural disaster, such as: plant disease freeze Hurricane flood tornadoes earthquake insect infestation Lightening drought VOG fire other occurrences, as determined by DAFP for the Secretary. 39
Losses Due to Plant Disease Plant disease may not be apparent immediately upon infection due to the fact that the time between infection and symptom appearance can be from 1 to 6 months, to several years. Therefore, the 15% loss threshold and normal mortality calculation shall be cumulative based on the loss period. 40
Losses Due to Plant Disease (Continued) COF must retain the producer s initial CCC-899 on tree infestation and pathogen, and send CCC representative to complete Part D of CCC-899, when producer reports total mortality in subsequent years. 41
Ineligible losses: Ineligible Cause of Loss lack of irrigation systems, or other conditions not included in the definition of natural disaster. losses that could have been prevented through readily available horticultural measures. losses that would have normally been replanted within the 12-month period following loss, in absence of a natural disaster. 42
Qualifying for Payments To qualify for payments, eligible applicants must: be an eligible orchardist that produces annual crops from trees for commercial purposes, or a nursery tree grower who produces nursery, ornamental, fruit, nut, or Christmas trees for commercial sale. be an eligible orchardist or nursery tree grower that planted trees for commercial sale and own the stand where the claim for benefits is based, or be an eligible orchardist or nursery tree grower that has a production history for commercial purposes on planted or existing trees, bushes, or vines. 43
Qualifying for Payments (Continued) To qualify for payments, eligible applicants must: have timely filed FSA-578. have suffered losses of eligible trees on or after Oct. 1, 2011, as result of natural disaster. be in compliance with HELC and WC provisions according to 6-CP, Adjusted Gross Income Provisions, and completed the necessary Payment Limitation forms. replace and/or salvage eligible lost and damaged trees, bushes, or vines within 12 months from date the application is approved by COC. 44
TAP Financial Benefits For lost trees/bushes/vines for replanting and the cost of seedlings or cuttings, for tree, bush, or vine replacement the lesser of: 65% of the actual total cost of the practice, or the total amount, calculated using the following rates: Fruit and nut tree replacement $8 p/tree Cranberry and grape replacement $4 p/vine Planting cost per eligible tree, bushes, and vines $2 each Site preparation $500 p/acre 45
TAP Financial Benefits Damaged Trees/bushes/vines For the cost of pruning, removal, and other costs incurred for salvaging existing trees, bushes, or vines, or in the case of mortality, to prepare the land to replant trees, bushes, or vines, the lesser of: 50% of the actual cost of the practice, or the total amount, calculated using rate: Fruit and nut tree rehabilitation $15 p/ tree Cranberry and grape rehabilitation $3 p/vine 46
Eligible Stands An eligible stand is a contiguous acreage of the same type of trees, bushes, or vines. Eligible stands must: have been impacted by an eligible cause of loss. be grown for commercial purposes for annual production of a crop. sustain qualifying tree, bush, or vine deaths of 15% due to natural disaster after adjustment for normal mortality. 47
Individual Stand Eligibility Trees, bushes, or vines of the same crop type in a stand, but not in the same field or similar area, may be considered separate individual stands if the COC determines there are significantly differing levels of loss susceptibility. Trees, bushes, or vines of different crop types interplanted within a stand may be considered separate individual stands, if COC determines there are significantly differing levels of loss susceptibility. 48
Ineligible Trees, Bushes, or Vines The following trees, bushes, and vines are not eligible for TAP: trees grown for pulp or timber trees, bushes, or vines not grown for commercial production of an annual crop trees covered by a current CRP, ECP, or WRP contract tomatoes, pumpkins, watermelons, and pineapple 49
Completing CCC-899 Complete CCC-899 according to the following: Parts A, B, and C are to be completed at time of application. Part D is to be completed following the COC s or authorized FSA official s field visit to verify cause of loss and determine trees/acres in stand. COC or designated representative shall then approve or disapprove the information entered in Part D, by signing and dating Part E. Part F is to be completed, and signed by applicant, once the applicant completes all practices and submits cost documentation for all components of the completed practices. COC or designated representative shall then approve or disapprove application for payment, and sign Part G. 50
Required Field Visits Before COC approves CCC-899, Part E for loss, FSA representative shall perform a field visit and document, in Part D, the following: total determined number of trees in stand. total determined number of trees lost/damaged for payment. total determined number of acres in stand. total determined number of acres in the stand for payment. 51
Practice Completion Participants are required to replant/rehabilitate only the qualifying trees for which they seek payment. All approved replacement/rehabilitation practices must be completed within 12 months from date application is approved for payment by COC or designee. All practices must be completed and actual cost receipts provided before payments can be issued. 52
Replanting Different Trees, Bushes, or Vines When trees, bushes, or vines are replanted: the new tree, bush, or vine types planted may be different than those lost as long as the new trees, bushes, or vines have the same general end use (assuming zone appropriate selections). NOTE: Payments for replanting different trees, bushes, or vines cannot exceed the initially approved maximum payment rates to re-establish the trees, bushes, or vines actually lost. 53
Replanting Different Trees, Bushes, or Vines (Continued) When trees, bushes, or vines are replanted: the trees, bushes, or vines may be replanted on a field that is not the field where the losses originally occurred on the same farm. payments for producers who replant in a different field shall not exceed the cost to replant in the field where the loss actually occurred. applicants may choose to replace damaged trees in cases where the rehabilitation expense exceeds the cost of tree replacement. 54
Acreage Limitations Limited to a cumulative total of 500 acres annually 55
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57 Questions?