Farmers in Northern Plains states and parts of the Corn Belt will lose the prospect of larger potential payouts under prevented planting claims following a crop-insurance change announced earlier this week by USDA's Risk Management Agency.
USDA has changed policies around prevented planting that likely will affect coverage and indemnities in the Northern Plains.
For years, the Obama administration repeatedly sought a $1.4-billion cost savings over 10 years by asking Congress to reform prevented planting coverage by eliminating the option of buying 10{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} higher coverage for prevented planting. Without calling on Congress, the Trump administration made multiple changes to prevented planting insurance this week in line with spending cuts proposed in the Obama era.
On Monday, in a memo sent out to insurers and USDA Risk Management Agency field offices, USDA eliminated the Prevented Planting +10 Percent Option for the 2018 crop year and future crop years. USDA kept the 5{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} option for farmers, though analysis shows very few farmers have taken the 5{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} option. The 10{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} option paid out more than $4 billion in indemnities from 1994-2013.
The move comes after USDA changed prevented planting coverage factors for some crops last spring, which included lowering the coverage factor for corn from 60{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} to 55{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614}. On Friday, USDA announced some other coverage factor changes, such as lowering the canola factor from 60{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} to 55{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614}. The coverage factor for hybrid seed corn was also lowered from 50{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} to 45{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614}.
The Obama administration had projected in a 2016 budget proposal that dropping the prevented planting buy-up and changing the coverage factor for prevented planting would save about $1.4 billion over 10 years.
USDA press staff did not reply to questions about projected cost savings or how Agriculture Secretary Sonny Perdue would use those savings.
A spokesman for USDA's Risk Management Agency pointed to the proposals in the past to eliminate the 10{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} option as a cost-savings measure. RMA also stated, “USDA's Office of Inspector General issued a report in 2013 and determined that RMA needs to improve the prevented planting provisions to be more cost effective; to encourage producers to plant a crop, where possible; and to make eligibility criteria more objective and clear.”
Multiple lobbyists told DTN that USDA's announcement on Monday came as a surprise and there was no advanced consultation with commodity organizations. One lobbyist said Perdue has been wanting to expand insurance options for livestock and dairy producers, and the move was possibly done as a way to free up money for those efforts.
The move on the buy-up option affects two states the most: North Dakota and South Dakota. Over a two-decade period from 1994-2013, the 10{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} prevented planting option led to more than $2 billion in indemnities for North Dakota from 1994-2013, or 59{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} of all prevented planting claims in the state. In South Dakota, the 10{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} option paid $680.4 million, accounting for 46{a169222e5c003bec48f63dd57bc39383f42c8e994ade26e015ce9d78e5f0b614} of claims over the two-decade stretch.
Source: DTN
Photo courtesy of USDA NRCS
