Crop insurance

Reminder – Conservation Compliance Certification Due June 1

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As many of you likely know, the 2014 Farm Bill requires farmers to file a Highly Erodible Land Conservation and Wetland Conservation Certification form (AD-1026) by June 1 to become or remain eligible for crop insurance premium support.

If you already participate in USDA programs, such as marketing assistance loans, disaster programs, or the like, you more than likely already have the form on file.  However, it doesn’t hurt to ensure that the form is on file at your local USDA center or check in with your crop insurance agent if you have additional questions.

Conservation Compliance and Crop Insurance

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Pursuant to the 2014 Farm Bill, crop insurance premium subsidies are now linked to conservation compliance.  The Risk Management Agency has put together a good FAQ about conservation compliance but here are some highlights:

What type of compliance is required?

For production on highly erodible land, a producer of annually tilled crops or sugarcane is required to use a Natural Resources Conservation Service approved conservation plan.  If production occurs on a converted wetland, certain USDA benefits are not available.

Are there any deadlines?  If so, what is required to be done before the deadline?

Yes.  To be eligible for a crop insurance subsidy, a completed and signed form AD-1026 must be on file at the Farm Service Agency by June 1, 2015 for the 2016 reinsurance year (July 1, 2015 to June 30, 2016) and you, and any affiliated person, must be in compliance.

What is a form AD-1026?

Form AD-1026 is also called a “certificate of compliance” and is the form used to certify compliance with highly erodible land and wetlands conversion provisions.

Who determines if my farm has highly erodible land or wetland conservation?

The National Resource Conservation Service makes the determination.

How do I know if I am already in compliance?

If you are currently eligible for commodity, conservation, or disaster programs administered by FSA and the USDA, you are in compliance for crop insurance subsidy purposes.  If you are unsure if you are eligible for commodity, conservation, or disaster programs, you may contact your local USDA service center.

Can I obtain crop insurance if I do not file the proper documentation and/or am not in compliance?

Yes, although you will pay the full crop insurance premium.

I do not grow annual crops; I insure only livestock and pasture.  Must I still file a certificate of compliance?

Yes.  To be eligible for any crop insurance premium subsidy, you must have a completed and signed form AD-1026 on file with the Farm Service Agency by June 1, 2015.

There are more technical questions and answers posted on the RMA FAQ.  Feel free to take a look at the FAQs and if you have further questions, you are welcome to contact us!

Some Thoughts As We Begin the New Year

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As 2014 quickly fades into the rear-view mirror, now is a good time to reflect.  The past year saw a number of changes to the agricultural landscape for beginning farmers.  In no particular order:

  •  The Farm Bill passed early in the year with a number of provisions aimed at beginning farmers.  From increased lending limits on microloans to increased cost-sharing for EQIP contracts and revival of the Conservation Reserve Program’s Transition Incentive Program, beginning farmers have some new resources at their disposal.  As we enter 2015, and before the crop year begins, now is a good time to research how many of the updates in the Farm Bill can help with your operation.
  • The Nebraska Department of Agriculture launched new websites for the Nebraska Beginning Farmer Tax Credit.  The NextGen website contains all the information and forms you need to apply for the Nebraska Beginning Farmer Tax Credit.  The website also lists upcoming workshops and clinics for young and transitioning farmers and ranchers.
  • The 2014 crop year was one in which some beginning farmers and ranchers faced financial headwinds.  The 2015 crop year may intensify those headwinds.  However, one-on-one clinics to discuss financial concerns are available throughout the year.
  • New crop insurance products are rolling out, including changes in the Noninsured Crop Disaster Assistance Program.  These products will assist beginning farmers weather the headwinds identified above.  These products also address how beginning farmers are farming in today.
  • And last but certainly not least, ARC and PLC are coming down the pike.  ARC and PLC replace direct payments.  Now is the time to begin considering what product to enroll in for the best potential benefit to your operation.

The upcoming year has the potential to change your operation, in both positive and negative respects.  If you ever want to take some time to discuss your operation, your options, and what programs are available, feel free to contact us.

NAP Insurance Program Changes

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The Farm Service Administration (FSA) recently announced changes to the Noninsured Crop Disaster Assistance Program (NAP).  But before discussing those changes, lets first discuss what NAP is.

Simply, NAP provides an insurance option for farmers who grow crops that are not eligible for crop insurance.  In fact, if a farmer can obtain crop insurance, including the Risk Management Agency’s multi-peril crop insurance (MPCI), NAP is unavailable.  NAP only covers those crops that are non-insurable and is intended to help farmers farm another year in the event of a catastrophic event.

So what are the changes?

Coverage Levels:

Previously, NAP would cover only 50% of a crop and then pay out up to 55% of the crop’s value.  Now, NAP includes a buy-up provision to cover up to 65% of a crop and pay out up to 100% of the crop’s value.

The 50% coverage cost remains at $250.  Any coverage beyond 50% requires the farmer to pay an additional formula-based premium, or 5.25 times the level of coverage.  The premium is capped at $6,562.00 and it applies towards an individual or entity’s $125,000 NAP payment limitation.

Beginning, Socially Disadvantaged, and Limited Resource Farmers:

First, the $250 service fee is waived for beginning and socially disadvantaged farmers.  This is an expansion of the fee waiver; previously, it applied only to limited resource farmers.  If a beginning farmer has paid the service fee for the 2015 crop year, a refund will be issued.

Additionally, beginning, socially disadvantaged, and limited resource farmers are now eligible for a 50% premium reduction when purchasing buy-up coverage.

Organic and direct market prices:

The state FSA office can provide farmers with the option of insuring crops at the organic market price, rather than conventional or direct-to-consumer price.  However, sufficient data must be available for FSA to establish those separate price points.

Other issues of potential interest:

The NAP changes include a sodsaver provision that is relevant to Nebraska farmers.  If NAP coverage is sought for newly broken cropland, the farmer must pay 200% of the normal premium, not to exceed $6,562.00.

New Farm Bill Program for Farmers Affected by Severe Weather

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Pursuant to the 2014 Farm Bill, the USDA is implementing a new program for farmers affected by severe weather, including drought.  The Actual Production History (APH) Yield Exclusion, available in Spring 2015 for selected crops, allows eligible producers who have been hit with severe weather to receive a higher approved yield on their insurance policies through the federal crop insurance program.

Eligible spring crops are corn, soybeans, wheat, cotton, grain sorghum, rice, barley, canola, sunflowers, peanuts, and popcorn.

The APH Yield Exclusion allows farmers to exclude yields in exceptionally bad years (such as a year in which a natural disaster or other extreme weather occurs) from their production history when calculating yields used to establish their crop insurance coverage. The level of insurance coverage available to a farmer is based on the farmer’s average recent yields. In the past, a year of particularly low yields that occurred due to severe weather beyond the farmer’s control would reduce the level of insurance coverage available to the farmer in future years. By excluding unusually bad years, farmers will not have to worry that a natural disaster will reduce their insurance coverage for years to come.

Under the program, yields can be excluded from farm actual production history when the county average yield for that crop year is at least 50 percent below the 10 previous consecutive crop years’ average yield.

Crop Insurance for Tilling Native Sod

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For those readers in Nebraska, Iowa, Minnesota, Montana, North Dakota, and South Dakota, there is a change in crop insurance if you wish to till native sod and plant an annual crop.

The Risk Management Agency, pursuant to the 2014 Farm Bill, is limiting crop insurance benefits to producers who till native sod and plant an annual crop for the first four years of production.  Native sod is defined as acreage that has never been tilled or land which the producer cannot substantiate has ever been tilled for crop production.  The reduction in crop insurance benefits is for all counties in the states listed above and for production on five acres or more per crop insurance policy.

The above policy goes into effect in Fall 2014.  If you have plans to till native sod, now is a good time to touch base with your crop insurance agent and discuss this and other risk management strategies.

New Crop Insurance Policies for Beginning Farmers

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The USDA and Risk Management Agency (RMA) continue to move forward with implementing the crop insurance requirements for beginning farmers outlined in the 2014 Farm Bill.  The RMA has filed its interim final rule which provide the following:

  • New farmers are exempt from paying the $300 administrative fee for catastrophic crop insurance policies;
  • Premium support rates will increase 10% for a new farmers’ first five years of farming;
  • Beginning farmers receive a greater yield adjustment when yields fall below the 60% of the applicable transitional yield; and
  • Allowing the use of yield history from any previous involvement in a farm or ranch operation, including decision making or physical involvement in the production of the crop or livestock.

Crop insurance is a well-honed risk management strategy and one that beginning farmers in particular should seriously consider.  Given the RMA has now increased incentives for beginning farmers to include crop insurance in their risk management plan, now is a good time to seriously explore the options.

Where are we with the Farm Bill?

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This blog doesn’t pretend to be a policy analysis blog but the Farm Bill negotiations and status are important to its audience.  But this much we do know: the conference committee announced a deal for a new five-year Farm Bill and the House of Representatives will vote on Wednesday.  As of this writing, it is not clear when the Senate will vote.  The following links, in no particular order, delve into the proposed new Farm Bill:

  • Per DTN, the bill eliminates direct payments and the average crop revenue election program.  Additionally, “farmers will make a one-time decision to enroll in a revenue program known as Agriculture Risk Coverage (ARC) or a target price program called Price Loss Coverage (PLC).”  More information is at the link about the ARC and PLC programs.
  • The New York Times also has a write-up concerning the legislation.  The Times indicates the bill will provide for a new milk insurance subsidy program and place a cap on farm subsidy payments.  The Times also reports that some savings from eliminating direct payments will go towards crop insurance.
  • If you want a comprehensive run-down, FarmPolicy.com is your go-to source.
  • This Reuters article looks at the numbers — total cost, total savings, number of individuals employed in agriculture.
  • The American Soybean Association supports the bill as does the American Farm Bureau.

Cover Crops and Crop Insurance — What do you need to know?

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It is no secret that, year after year, more farmers are considering the possible benefits of cover crops for their cash crops.  But the question for many farmers is whether they can terminate the cover crops without sacrificing crop insurance coverage.

To help answer that question, USDA personnel who helped craft the new cover crop termination policy will be speaking at a webinar on January 23, 2014 from 2:00 to 3:30 p.m. E.S.T..  The webinar, hosted by the National Center for Appropriate Technology and the National Sustainable Agriculture Coalition, looks to be a valuable resource for farmers trying to determine the best path forward for their operation.

However, if attending the webinar is not your cup of tea, the cover crop termination policy is also available.  What are the highlights?

  • The linked policy is applicable only to non-irrigated land.  If the land is irrigated, the cover crop must be terminated prior to the cash/insured crop emerging.
  • The policy uses zones to determine when cover crops may be terminated.  Roughly speaking, western Nebraska is in zone 2 and eastern Nebraska in zone 3.  Most of South Dakota is in zone 2, with the exception of a small sliver of eastern South Dakota in zone 3.
  • For zone 2, late spring to fall seeded crops require cover crop termination 15 days or earlier prior to planting the cash crop.  Early spring seeded crops require termination of the cover crop as soon as practicable prior to planting the cash crop.
  • For zone 3, the cover crop must be terminated at or before planting the cash crop.
  • An early spring seeded crop are crops planted as early as possible after the spring thaw.  Examples would be spring wheat, spring barely, sugar beets, and corn.  Later spring planted crops are crops such as soybeans and dry beans.

The policy statement covers frequently asked questions, as well as some technical details.  You are also welcome to contact your resources at the USDA if you have questions about the new policy.  You are also welcome to contact us if you have any questions.

A government shutdown and no Farm Bill

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It is easy to conflate the government shutdown with the lack of passage of the Farm Bill.  However, while the expiration of the Farm Bill and government shutdown occurred on the same date (October 1), they are, in fact, two separate albeit related issues.  Lets go through the status of each:

Government Shutdown:

There is not much more to say other than it continues.  As of this writing, the Senate is hammering out a potential deal to re-open the government and extend the debt ceiling.  The government shutdown continues to delay direct payments and other programs, as discussed previously.

Farm Bill:

The Farm Bill actually expired two years ago and, until October 1, a continuing resolution was in place.  As of today, the House has named its conferees, in response to the Senate’s naming of conferees.  There is some speculation that the Farm Bill could be part of a larger package to reopen the government.  One of the few areas of agreement between the Senate-passed bill and House-passed bill is the reduction of crop insurance subsidies for high-income earners.  Otherwise, for a complete run-down of the Farm Bill status, click here.