A NEW CROP INSURANCE PROVISION EXCLUDES QUALIFYING DATA FROM CALCULATIONS

Lindsay Mitchell

Sep, 11, 2014  |  Today's News

An important change to crop insurance was included in the 2014 Farm Bill.  The amendment permits farmers to elect to exclude yields from their APH if they are in a county (or contiguous to a county) where the county’s average yield is below 50 percent of the average county yields for the previous 10 consecutive crop years.

The provision is compared to car insurance provisions, where premium calculations exclude any collisions that were the result of winter weather as those are “not the driver’s fault.”  The overall goal with the provision is to not penalize farmer APH for a poor yield that is the result of a massive weather event.

The provision raises many questions about how it will operate and what impact it will have on producers who elect to drop a yield. It also raises questions about the impact this change could have on producers in the county where such an election can occur and for the actuarial soundness of the crop insurance system as a whole. These are not insignificant questions considering how many producers rely on crop insurance as the cornerstone of the farm safety net. At the very least, FCIC must adjust the premiums paid by producers making this election to reflect the increased risks associated with the change, but many other questions remain.

Notably, this section was not contained in either version of the 2014 Farm Bill as debated and passed in the House and Senate.  Instead, the provision was added during conference negotiations.  USDA noted in the hearing that it hadn't anticipated this change and was surprised by its inclusion. Both the legislative history and USDA comments suggest that this provision was a late revision with minimal opportunity for feedback from, and analysis by, those within the crop insurance program.

Read more on this issue from FarmDoc Daily authors Jonathan Coppess, Bruce Sherick, and Gary Schnitkey, as well as many other articles on Farm Bill implementation and options.