WAWG
Producers can help protect APH with new crop insurance rule
By Trista Crossley
Wheat farmers now have another tool in their arsenal when it comes to utilizing crop insurance to safeguard their livelihoods.
Beginning with the 2021 crop year, growers will be able to elect a quality loss option that protects their 10-year actual production history (APH), especially in cases where the loss wasn’t big enough to trigger an indemnity payment.
According to Ben Thiel, director of RMA’s Spokane Regional Office, the option allows producers to replace a postquality adjustment production amount in their APH with a prequality adjustment amount for any year in their database.
“The key is, for any one of those years you used, a notice of loss has to be on record,” Thiel said. “That means for a year that maybe you had a quality loss but it didn’t rise to the level of meeting your coverage level and you weren’t paid an indemnity, you can still use this option for those years, but you had to have a notice of loss filed. Once you elect the quality loss option, you still select how you want it to apply. You can have any number of databases depending on how much you farm and how your unit structure is. It can also be used in combination with other yield adjustment options. There’s no limit on how far back you can go. Some APHs, depending on crop rotation, could go back a number of years.”
There is a cost associated with the quality loss option. Thiel said it is based on the degree to which it increases a producer’s coverage and will depend on the unique parameters of what and how it is adjusting. He added that one way to think about the option is it’s a way of increasing the overall coverage level without reducing the premium subsidy.
“Some producers may want to maximize coverage and elect 85 percent every year. They can’t go higher than that, but if they’ve had some quality losses, this is just another option to sort of plug yields that maybe made their APH go down over time,” he explained. “Its framework is somewhat similar to the yield exclusion option, just a different trigger. Yield exclusion is only eligible in years where the county yield for the crop had a significant loss as opposed to an individual loss. This has nothing to do with the county. Producers have the freedom to elect this as long as they have that notice of loss.”
The new quality loss option was mandated in the 2018 Farm Bill, a direct result, Thiel said, of lobbying done by the wheat industry, especially the stakeholders in Washington, Oregon and Idaho.
“I know, based on feedback from tri-state meetings and board meetings, that this has been raised as concern about how quality adjustments impact producers’ overall APH. As I see it, WAWG (the Washington Association of Wheat Growers) working through NAWG (the National Association of Wheat Growers) was instrumental in putting this provision in the farm bill.”
That effort started in 2016 when a large percentage of the Pacific Northwest wheat crop was hit with low falling numbers, a measurement of starch damage caused either by too much moisture at harvest and/or extreme temperature swings during the growing season. Growers were hit not only with millions of dollars’ worth of quality discount fees at the elevator, but a better-than-average yield meant most of them didn’t qualify for a crop insurance indemnity, even though the discounts were being used by RMA to calculate their APH.
At that time, industry organizations from Washington, Oregon and Idaho asked RMA to waive their rule that takes into account quality adjustments even when no claim is filed. The agency was unable to grant the request due to existing policies and procedures, and discussion turned to the 2018 Farm Bill as a way to address these types of situations. The wheat stakeholder groups of the three states, NAWG and members of Congress all worked to get a provision included in the farm bill that required the Federal Crop Insurance Corporation to establish an alternative to quality loss adjustments that didn’t impact APHs.
“This is a culmination of a years-long effort to get RMA to give producers a means of protecting their actual production history in cases where a quality loss may not trigger a crop insurance payment,” said Michelle Hennings, executive director of WAWG. “We appreciate all the work done by NAWG and members of our federal delegation to keep this issue at the forefront of crop insurance discussions and to get it addressed in the 2018 Farm Bill.”
Wheat producers who are interested in the quality loss option have until the crop insurance sales closing date of Sept. 30 to elect it for the 2021 crop year. Producers should contact their crop insurance agent with any questions.