July 1, 2014
On Monday June 30, the United States Department of Agriculture’s (USDA) Risk Management Agency (RMA) released an interim rule outlining seven actions it is taking to modify crop insurance inline with the requirements of the 2014 Farm Bill, to increase access for beginning farmers and encourage natural resource conservation. NSAC supported the inclusion of several of the provisions RMA is implementing in the 2014 Farm Bill, which was signed into law earlier this year. Some of the changes announced today will go into effect in the fall of 2014 while others will not happen until 2015. Public comments on the rule will be accepted through September 2, 2014.
The crop insurance modifications announced by USDA today include the following beginning farmer provisions:
The conservation provisions include:
Beginning Farmer Provisions
For all the new beginning farmer insurance provisions, beginning farmer is defined by the new Farm Bill as someone who has not had an insurable interest in a crop or livestock for more than five years. USDA is proposing in the interim rule to exclude years during which the beginning farmer was under 18 years of age, enrolled in post-secondary studies (limited to 5 years), or on active duty with the US Military. NSAC believes those exclusions are important, but hopes Congress will act in the future to change the basic definition to make it consistent with the standard 10 years of farming that applies to all other USDA programs with beginning farmer provisions. Five years is not only too short, but in many cases will exclude the years when the discount and waiver could be of most use as new farmers slowly build their farming operations and enterprises.
Fee Wavier — For catastrophic crop insurance policies entered into after June 30, 2014, RMA will waive the $300 administrative fee for beginning farmers. The implementation of a parallel measure for the Non-Insured Crop Disaster Assistance Program (NAP), run by the Farm Service Agency rather than RMA, was previously announced by USDA.
Premium Support — For crop insurance policies entered into after June 30, 2014, federal premium support rates for new farmers will be increased 10 percentage points. Business entities can qualify for increased premium support but only if everyone with a 10 percent or greater interest in the entity qualifies as a beginning farmer.
Yield Adjustment — The interim rule will allow beginning farmers to increase the substitute yield from 60 percent of the applicable transitional yield to 80 percent. Transitional yield is an estimation of yield used in place of actual production history when less than four years of actual yields are available. It is calculated as an average yield by crop by county.
Production History — Beginning farmers will also be able to use the production history of a farming operation they were involved with prior to becoming the primary operator for determining their actual production history.
More on these three farm bill provisions can be found here.
Sodsaver — The interim rule includes details for how the new Sodsaver provision included in the 2014 Farm Bill will be implemented for crop insurance contracts that are signed after June 30, 2014. The Sodsaver policy became effective immediately upon signing of the new farm bill on February 7 and will be applied retroactively. This means that farmers who have broken native sod since February 7 — the day the 2014 Farm Bill was signed into law — will be subject to the new Sodsaver penalties on any new crop insurance policies.
This provision, which NSAC strongly advocated for in the farm bill, reduces a farmer’s crop insurance premium subsidy by fifty percentage points if they till under native sod to put it into crop production. The new policy applies in six Upper Midwest states –Iowa, Minnesota, Montana, Nebraska, North Dakota, and South Dakota. The new policy applies to insured plots greater than 5 acres that have never been tilled or cannot be proven that they have ever been tilled. More on the rules covering Sodsaver can be found here. NSAC supports the Sodsaver provision as a nationwide policy and hopes Congress extends it beyond the six states in the coming years.
Conservation Compliance — Finally, the interim rule directs Approved Insurance Providers to amend crop insurance policies to include a conservation compliance certification requirement. By June 1, 2015, farmers will have to certify that they are in compliance with the conservation requirement for receiving crop insurance premium subsidies if they have not already done so for another program.
RMA, the Farm Service Agency (FSA), and the Natural Resources Conservation Service (NRCS) are coordinating the substantive requirements of conservation compliance. Those are still under development.
Commodity, credit, conservation, and now crop insurance programs require conservation compliance. All the programs and agencies utilize the same compliance certification form.
NSAC is very concerned about one particular provision in the 2014 Farm Bill regarding this self-certification and evaluation process as it applies to crop insurance subsidies. The Farm Bill dictates that if USDA fails to evaluate the certification in a “timely manner” and the farmer is subsequently found to be in violation of compliance rules, the farmer will be exempt from compliance rules for the relevant violation in perpetuity. The Farm Bill does not define “timely manner.” We strongly urge USDA to define “timely manner” to be at least several reinsurance years.
Other Interim Rule Provisions
The new interim rule also allows farmers to have enterprise units for irrigated and non-irrigated crops, allows farmers to purchase different levels of insurance coverage for a variety of irrigation practices, and provides adjustments to historical yields following significant disasters.
RMA has published a FAQ on the interim rule.
USDA will be accepting public comment – including from farmers and organizations working with farmers – through September 2, 2014, under docket ID No. FCIC-14-0005.