In a welcome surprise to farmers whose crops have been hit with natural disasters, the USDA has announced the Actual Production History (APH) Yield Exclusion will be available nationwide for many crops beginning in 2015. The news comes after many affected producers and their congressmen had pushed the USDA to quicken the implementation pace of the APH.
“One of the concerns that have been expressed through the (farm bill implementation) process is the impact that new crop insurance opportunities will have on those who’ve suffered through natural disasters,” said Agriculture Secretary Tom Vilsack during a Tuesday (October 21) press conference. “That’s particularly true of the drought in 2012 that covered a great part of the United States … and the need for information to be submitted in terms of crop insurance protection to look at 10-year historic production levels. (Do) those years in which Mother Nature didn’t cooperate skew the computation and make it more difficult for producers to obtain coverage and protection they need for their operations?”
Citing an overwhelming workload to implement the new farm bill, the USDA originally said the APH exclusion would not be available next year. However, “as a result of extraordinary work by (the Risk Management Agency) and (Farm Service Agency) we’ve found ourselves several months ahead of schedule in the implementation of a number safety net programs,” said Vilsack. “We’ve also been able to determine that much of the information established for the ARC and PLC programs can be introduced into this crop insurance issue.”
Crops eligible for APH yield exclusion for 2015 will include: corn, soybeans, spring wheat, cotton, grain sorghum, rice, barley, canola, sunflowers, peanuts and popcorn.
“These crops represent roughly 75 percent of the applicable acreage currently insured and 78 percent, or so, of what the applicable liability may be,” said Vilsack. “While it isn’t for all crops and applicable acres in liability, it is a significant percentage.”
Program details concerning the APH exclusion will be “more specifically outlined” in December.
How might the option affect crop insurance premiums?
“Until I had a recent briefing on APH, I didn’t appreciate and realize how many calculations and permutations that could potentially impact a producer’s ability to obtain adequate crop insurance protection at an affordable price.
“This election obviously depends on whether a particular county suffered losses below 50 percent of what they’d normally anticipate producing. And that not only impacts the county where that’s occurred but also contiguous counties.
“It will obviously have an impact on premiums. But, in my view, the important thing is it provides producers the ability to take out the year, or two, which simply skews the data to a point they aren’t able to adequately support and protect their crop investment.”
What about those hard-hit by drought?
“If you look at the production history over the last 10 years, there may be one year where they may have been wiped out or had very little (yield),” said Vilsack. “If you take that one year out your average yield will be significantly higher. That may prompt you to want and need additional coverage -- or to provide coverage consistent with what generally and usually happens.
“When the year is included (in production history) it brings the average down and reduces protection and increases risk. Producers will have to make that determination.”
Spring wheat will be covered while winter wheat will not. The reason for that, said Vilsack, is “just a fact of the calendar -- winter wheat election was made prior to September 30. We weren’t in a position to make this announcement soon enough to impact winter wheat.
“The reality is we can’t re-open that because it would create some serious actuarial concerns that would result in a bit of chaos in the market. Frankly, we don’t think that’s appropriate and isn’t a precedent we want to set.”
Each individual commodity will be treated separately.
“You’ll make different calculations. Say you’re a corn and soybean producer. You’ll have the option of including a year for corn and exclude a year for soybeans.
“You also may have different farms and make different elections for each. That’s what makes this so complex if you’re a farmer with multiple crops and multiple farms.”
With many farming constituents facing drought in recent years, Oklahoma Rep. Frank Lucas, chairman of the House Agriculture Committee, had pushed for the APH adjustment. "(It) means everything to farmers all across the country who have suffered through year after year of devastating drought conditions. It is the difference between having viable crop insurance for the coming year or not. It is for these reasons that I worked to include the APH adjustment in the farm bill and why I am pleased the (Vilsack) redoubled his efforts to get it done this year. I remain hopeful that USDA will also work to make the same relief available to winter wheat producers."
The National Cotton Council was equally happy with the USDA move. “Many producers across the Cotton Belt have incurred yield losses due to severe weather, particularly the past three years,” said Wally Darneille, NCC Chairman. “This will greatly assist our producer members who are already making plans for next season.”