The U.S. Department of Agriculture is seeking comment by March 30 on recommendations that eventually could lead to changes in its prevented-planting insurance coverage levels. If approved, the changes would cut corn prevented-planting payment levels and increase rates for potatoes and green peas, among other things.
Prevented-planting insurance has been a key and often controversial factor in agriculture, especially in prairie pothole areas of North Dakota and South Dakota in recent years. Minnesota and Iowa also have prairie pothole country, but have more field tile drainage, so the policies are used less frequently.
Crop values have increased dramatically since 1995 when prevented-planting coverage was added to the policy and USDA's Risk Management Agency began insuring more highly valued, identity-preserved crops.
Tim Hoffmann, RMA director of product administration and standards division in Kansas City, Mo., tells Agweek he personally took the recommendations to national commodity organizations, but emphasizes RMA is officially in the study mode and hasn't yet proposed a rule. Any eventual rule would not go into effect in 2015, the agency says.
The entire report is available online at www.rma.usda.gov/pubs .
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Submit comments to rma.pp.lah@rma.usa.gov or mail them to Director, Product Administration and Standards Division, Risk Management Agency, U.S. Department of Agriculture, Box 419205, Kansas City, MO, 64133-6305.
Consultant's review
The RMA contracted for an independent evaluation of its prevented-planting provisions following a recent Office of Inspector General audit. The contractor, Agralytica, a food and agricultural consulting company in Alexandria, Va., reviewed the production costs for all crops eligible for prevented-planting coverage and estimated the share of costs incurred in a prevented-planting situation.
Some RMA critics say the agency has no prevented-planting loss adjustment procedures that are definitive, repeatable or scientific.
"No two adjusters will get the same answer," in part because of individual experience and understanding of the prevented-planting procedure, says one crop insurance industry consultant who talked to Agweek on condition of anonymity.
Tom Lilja, executive director of the North Dakota Corn Growers Association, says premiums need to be addressed in the report.
"Higher PP frequency is already reflected in our (premium) rates," he says. "Barnes and Stutsman County growers pay $26 to $27 an acre for 70 percent coverage (with payout values of ) $296 to $330. Growers in Boone and Carroll counties in Iowa pay $4 to $6.47 per acre for $508 in coverage."
Losing on corn
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Reed Ihry, an insurance agent with Ihry Insurance Agency in McVille, N.D., notes the policy study comment period comes at a time when farmers and insurance officials are busy with farm program and spring insurance sign-up.
On an initial reading, Ihry says it appears with the new, lower compensation formulas and at current prices, a hypothetical farmer in Steele County loses $40 to $50 an acre on corn, depending on the buy-up levels for both multi-peril and prevented-planting coverage.
Ihry says the prevented-planting program is often criticized for its potential abuse. The government should consider breaking completely away from the multi-peril base policy and making it a separate option, he says.
"That would be a benefit to the producer that doesn't need the coverage."
Ihry says prevented-planting has been a more important option in North Dakota and South Dakota because of the shorter cropping season and fewer crop options.
"When we end up with an insurable (weather) event, we might be very far away from our planting deadlines," Ihry says.
If the recommendation is followed in its current form, RMA could change the rules so prevented-planting doesn't reduce a farmer's Actual Production History. But if a farmer chooses to plant an insured crop in the late planting period, that yield would go into his cropping history, which could reduce APH.
Agralytica says corn, soybeans, wheat and cotton accounted for 80 percent of prevented-planting indemnity payments from 1994 to 2013.
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"We determined that the 60 percent coverage level for wheat and soybeans is still appropriate but that the level for corn should be reduced (from 60 percent) to 50 percent," the Agralytica report says.
