In 2019, Federal Crop Insurance Policies provided coverage for more than 370 million acres of cropland, with 1.1 million individual policies, written by 14 insurance underwriters. Federal Multiple Peril Crop Insurance (MPCI) Policies are administered by the Risk Management Agency (RMA), which is a branch of the USDA, and written through private-sector insurance companies. Yearly, the RMA makes a multitude of changes to their policies, which help keep the policies actuarially sound and relevant in order to provide solid risk management options for producers.
The RMA makes decisions on which policy modifications will be made through a variety of means, from grower meetings, to summaries of data mining of actuaries, to pre-planned policy audits spaced out over time. Since the 2014 farm bill, there has been an initiative of both the USDA and RMA to provide enhanced products to serve the specialty crop industry, as well as bolster the entire program. In many aspects, they have been succeeding.
As time moves forward, the agricultural climate continues to change. With changes to markets, consumer use, and weather perils, it is important to remain on the leading edge of recommending changes that would provide management to new, and continued risks posed to producers. There are some issues that are unknown to RMA, that unless presented may go unnoticed. I believe it is part of our duty as insurance industry professionals, producers, and agricultural experts to bring some of these issues to light and provide recommendations to modify the existing policies.
We have been preparing for the 2021 crop year by submitting recommendations for certain issues that are not currently being adequately covered by crop insurance policies. Examples of some of recommendation are below. Note that these examples were included in formal requests submitted through multiple channels.
Whole Farm Revenue Protection - Revenue to Count for Crop Insurance Indemnities: We strongly recommend that any Crop Insurance indemnities paid during the Whole Farm History period be considered allowable revenue when calculating growers Whole Farm Historic Average. Indemnities due to growers are considered crop revenue and are taxable revenue. It is understood that there is concern, as there is potential for double subsidization.
To mitigate this, we recommend action be taken to offset that, and allow the revenue to be used. This could be done through a number of ways, such as having an Option, “Use of Loss Revenue“ (UL), which would increase the grower’s premium rate, but allow the grower to utilize the indemnities as allowable revenue in their whole farm history period.
Whole Farm Revenue Protection - Direct Marketing: Establish blanket direct market crop category that does not require actual grower records. This would replace the need to break out the vast variety of commodities in the Farm Operation Report (FOR) and simplify the application for the grower, agent and Authorized Insurance Providers (AIP).
For all growers, including direct market with less than $1M revenue, create a simplified method of qualification using the schedule F to establish coverage.
Sweet Cherry ARH Policy: Allow Processing Sweet Cherries, type 112, to qualify for separate insurable units by three new types, Canners, Briners, and Balatons (also establish fresh type 111 for Balatons). We request that growers be able to establish optional units by these types, along with the existing optional unit qualifications.
These three types of Processing Sweet Cherries carry not only different market risks but are also subject to different pests and diseases which require different management practices. Currently, they are all insured under Processing Sweet Cherries as one type. The planting pattern is always separated by type, and production is kept separate by the Cherry Marketing Institute.
Growers will be able to provide separate Actual Revenue History (ARH) databases to establish accurate approved yields and revenues by these types.
Organic Enterprise Units be Practice: Multiple Farm Credit Associations collaborated to request that RMA consider organic (certified or transitional) to be eligible for Enterprise Units by practice. As demand for organics continues to increase, we need to offer coverage that is specific for this and not have it comingled with conventional commodities for production and claims. This would also allow producers to choose different coverage levels for their organic versus conventional, similar to the option they have today with irrigated and non-irrigated ground.
Note that these request examples are part of larger submissions that are put together solely by GreenStone or in cooperation with Farm Credit Services nationwide. If you, as a producer or industry professional notice any shortfalls in the current policies, we encourage you to bring those to light to either your insurance company or to your agent.
We understand the limitations that RMA may have in approving some of these requests, as the RMA has more information that may deem them to be not actuarially sound. This will not prevent us from requesting, as we want producers to have a quality, subsidized, risk management program available to them.
By GreenStone Senior Crop Insurance Specialist Cory Blumerick