WAWG
By Lori Williams
WAWG Outreach Coordinator
One issue currently being discussed by the Washington Association of Wheat Growers’ (WAWG) leadership team is submitting a formal request to the Risk Management Agency (RMA) to recognize hard red wheat (HRW) as a separate class for crop insurance purposes.
Crop insurance is a critical risk management tool for wheat producers. According to the RMA, 90 percent of Washington planted wheat acres were enrolled in 2015 crop insurance programs. The agency currently has three methods of calculating crop insurance payments on wheat: winter, spring and organic.
Some of our county wheat grower associations increasingly support separating soft white wheat (SWW) and HRW in RMA’s crop insurance pricing structure. On average, hard red winter makes up approximately 10 percent of Washington’s planted wheat acres. See chart for the full breakout of wheat percentages by class.
Analysis by WAWG, with data provided by U.S. Wheat Associates, shows that over the past 10 years, HRW wheat has averaged a higher price than SWW. When looking at Portland prices over the course of a marketing year, HRW averages about $.53 higher. This is based on data comparing unspecified SWW and 11.5 protein for HRW.
Rick Williams and Ben Thiel from RMA’s Spokane office called in to talk to growers at WAWG’s June board meeting. They explained that HRW is a publicly traded commodity and a structure is in place for it to be priced off of the Kansas City Exchange. However, a request could be put forth to include a Portland basis adjustment, similar to the SWW structure. SWW would continue to be priced off of the Chicago Board of Trade with a basis adjustment. If implemented, there would be no opt-out option.
It is important to note that our analysis was for a full marketing year based on Portland prices, and RMA has not completed a full analysis of a potential HRW structure. This process would begin with a formal request with intent to implement a new program.
Some of the potential impacts of this are:
• Risk Pool. If classes are separated, the risk profile may change, affecting premium costs. The county t-yield may need to reflect the difference in actuary tables. As per RMA, the coverage would remain at up to 85 percent.
• Recertification of acres and production. Insurance agents would need to recode SWW growers in the system. Growers who grow both SWW and HRW would need to split out SWW/HRW 10-year acre and production history.
Based on conversations with RMA, if these classes are separated, impacts to SWW growers are minimal. The impacts on HRW growers are a potential change in the risk profile, but could result in more accurately priced wheat as long as HRW maintains a price advantage over SWW.
WAWG leadership has asked board members to take this issue back to their counties and solicit feedback. Growers can also contact the WAWG office at (509) 659-0610 to leave feedback. This issue is expected to be voted on at the Sept. 13 board meeting. If WAWG decides to pursue this, the next step would be to submit a formal request to RMA.