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With crop insurance now the basis of loss protection, the lower yield history presents a financial hardship to many produces.
As farmers plan for 2015 planting season many are concerned that low yield history will limit insurance coverage and ability to secure financing.
As farmers prepare to plant winter wheat in a few weeks and begin making plans for spring crops they also begin adjusting to a farm law that’s radically different from any program they’ve ever used.
The Agriculture Act of 2014 replaces direct and counter cyclical payments that have been the warp and weave of farm safety nets for decades with a new program that relies on crop insurance to cover losses.
Farmers sacrificed a lot of security to achieve the best program they could get in an environment of budget cutting and reluctance to compromise in Congress.
Farmers also come into the 2015 planting season still struggling to recover from devastating drought, floods and cold injury over the past few years. Southwest farmers, particularly, prepare for spring planting after suffering through almost four years of the worst drought most had ever witnessed.
Those disasters had the immediate effect of limiting farm revenue, for several years in many cases. Countless producers would not have survived without crop insurance. A longer-term impact, however, may be equally debilitating to farm stability. Those disaster years eroded farmers’ yield history, on which insurance coverage and premiums are based.
With crop insurance now the basis of loss protection, the lower yield history presents a financial hardship to many produces. A provision, the actual production history (APH) adjustment included in the farm bill, addresses this issue by allowing 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 also applies to contiguous counties and allows for the separation of irrigated and non-irrigated acres.”
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Farmers say this provision, especially with lingering drought, could be crucial to producers for 2015 crop claims.
And then the other shoe drops. RMA insists they cannot find the time for the necessary accrual studies and software updates to facilitate these changes until the 2016 crop year.
RMA explains their reasoning in a Q&A section on their webpage.
“RMA will have the Supplemental Coverage Option (SCO), Stacked Income Protection (STAX), beginning farmer and rancher provisions, coverage level by practice, enterprise units by irrigation practice, conservation compliance, whole farm revenue insurance, and native sod provisions implemented for the 2015 crop year. “
“APH adjustment will require significant modifications to RMA's business support systems and will require RMA staff to evaluate the impact this change will have on program actuarial soundness and the existing premium rating methodology. In sum, while RMA desires to have APH adjustment ready for the 2015 crop year, RMA is unable to implement this provision given the current time and resource constraints.” (Bold print added by editor.)