Crop Insurance Conservation Issues Loom as Spring Planting Proceeds
June 10th, 2011
The 2008 Farm Bill included a measure that would allow governors in states in the Prairie Pothole National Priority Area to opt into a limitation on federal crop insurance or Non Insured Disaster Assistance Program coverage that would help protect native prairie. If a governor opted in, USDA would not offer crop insurance or disaster assistance coverage for “native sod” for 5 years after the land was broken out for crop production.
The intent of the measure was to reduce publicly-funded incentives for farmers to cultivate remaining native prairie, which is a unique and fragile plant ecosystem that sustains many threatened and endangered grassland birds and other wildlife. Sadly, none of the governors in the Priority Area have exercised the option to end the subsidization of prairie destruction.
USDA’s Risk Management Agency (RMA) has nonetheless continued to consider administrative changes to the crop insurance program that could limit the use of crop insurance on newly broken native sod. On June 9, RMA issued a crop insurance program bulletin with new limitations on insurance for crops produced on newly broken native sod. These limitations will take effect for the 2012 crop year for all crops with a contract change date on or after June 30, 2011 that are the region affected by the bulletin.
The current basic crop insurance program provisions specify that land that has not been planted and harvested or insured in at least one of the three previous crop years is generally uninsurable. There are three exceptions to this provision:
- The land was planted to comply with another program, e.g. the Conservation Reserve Program (CRP);
- The land that has not been harvested or planted in at least one of the three previous crop years amounts to five percent or less of the insured planted acreage in the area to be insured; or
- A written agreement drafted by RMA staff, designated a New Breaking written agreement, specifically allows crop insurance for such acreage.
The RMA Bulletin announces actions that will provide some protections to native sod. For New Breaking written agreements where the producer cannot substantiate that the acreage has ever been broken out for crop production, the agreement will limit crop insurance coverage to a maximum of 65 percent of an estimated crop yield on the land, known as the T-yield. This limitation is the general limitation applied to crop insurance if there is no actual production history on the land. This is not a blanket prohibition on breaking out native sod but, depending upon the estimated yield and expected price for the crop, a farmer may conclude that with the limitation, a crop insurance payment may not be high enough to cover the costs for a lost crop.
For all “new breaking” acreage that has not been planted or insured in one out of the last three years, RMA is establishing new Special Provisions in written agreements that would apply in counties with significant native grasslands. The Special Provisions would:
- Disallow crop insurance coverage, unless there is a written agreement, on acreage the producer cannot substantiate was previously in crop production (e.g. native sod);
- Require that 75 percent or more of the acreage by field be composed of soil types defined as Capability Class I, II, III, or IV, as determined by the Natural Resources Conservation Service (NRCS);
- Require acreage to be broken out and prepared for planting prior to specified dates contained in the Special Provisions;
- Require that the total newly broken acreage be 160 acres or less for the insured entity (per each sales closing date);
- Require a NRCS conservation plan, when applicable (e.g. on highly erodible land); and
- Disallow prevented planting coverage the initial year the acreage is broken out for planting.
The Izaak Walton League of America, an NSAC member, has proposed a number of significant reforms in the next Farm Bill for the crop insurance program and other farm program subsidies, including a blanket prohibition on subsidies for crop production on native sod land that is broken out for cultivation.
New Prevented Planting Rule
As reported in an article by DTN Ag Policy Editor Chris Clayton, another crop insurance issue, has bubbled up in the Prairie Pothole region with this year’s Spring flooding. Crop insurance and disaster assistance have been flagged as federal subsidies that provide incentives for farmers in the region to drain and plow up wetlands.
The RMA has issued a rule change effective next year in Iowa, Minnesota, Montana and North and South Dakota that changes prevented planting insurance coverage. The rule provides that if a farmer has not been able to plant and harvest a crop in one of the past four crop years, the land is ineligible for prevented planted coverage. If the farmer plants and harvests a crop on the land, the land is again eligible for crop insurance as long as a crop be continues to planted and harvest in one of the four past years.
The RMA is concerned about the costs of persistent prevented planting insurance claims, with estimates that over 2,200 farmers have filed claims for over five consecutive years and another 1,300 farmers have filed claims for at least 10 consecutive year. In one case, a grower made claims on piece of land for 17 years. In addition to the impact on the federal budget, there is also concern that prevented planting insurance awards are being included in rental rates and land sales prices.