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USDA Rolls Out APH Exclusion
Tuesday, October 21, 2014 2:31PM CDT

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- A provision to exclude yields from Actual Production History for farmers affected by severe weather will go into effect for some select spring crops in 2015, USDA announced Tuesday.

USDA's rollout comes too late to boost insurance coverage for winter-wheat producers who have been some of the most vocal proponents of the provision. Some wheat growers could pursue litigation over the department's delayed implementation.

The provision for the 2014 farm bill essentially waives Actual Production History yields that collapsed due to extreme weather. The APH exclusion would adjust a farmer's actual yields for crop insurance in counties where the average planted-acre yield tumbled at least 50% below a 10-year county average. Under the provision, farmers could exclude yields for up to six years of crops. Growers in contiguous counties would also qualify.

"The fact that we are making this available is going to bring some relief to the concerns expressed out in the countryside," Vilsack said.

Winter wheat producers in states such as Oklahoma and Texas who have seen multiple disaster crops in recent years due largely to prolonged drought have been the most upset about the provision. They may still have to wait until least fall 2015 to see some relief on their declining insurance coverage.

Tim Bartram, executive director of the Oklahoma Wheat Growers Association, said his members are "very disappointed" that USDA waited until after the Sept. 30 sign-up deadline for winter wheat. Bartram also said wheat growers still feel like there is time to implement the provision for fall crops. His farmer members will continue to raise the issue with USDA and lawmakers. Some likely will look at litigation, particularly depending on how the 2014-15 crop progresses.

"It would not shock me, and I know some people are working on it, that there could be some legal challenges," Bartram said. He added, "I feel fairly comfortable that there will be some legal challenges launched."

Since drought began in 2010, farmers in Oklahoma and the Southern Plains have seen winter wheat production tumble to levels not seen since the drought of the 1950s. The 2013-14 wheat crop was the worst in Oklahoma since 1957. Harvest was cut in half with yield declining statewide from 31 bushels an acre in the 2013 harvest to 17 bushels per acre this past summer.

House Ag Committee Chairman Frank Lucas, R-Okla., commended Vilsack and USDA for implementing the provision, which Lucas said "means everything to farmers" who have faced multiple years of drought. Lucas said he is hopeful USDA will make the yield exclusion available for winter wheat.

"It is the difference between having viable crop insurance for the coming year or not. It is for these reasons that I worked to include the APH adjustment in the farm bill and why I am pleased the secretary redoubled his efforts to get it done this year," Lucas said.

Vilsack stressed in his news call that there was not enough time to make the announcement sooner for winter wheat producers. USDA could not reopen the fall crop-insurance sign-up because, "It would create some serious actuarial concerns that would result in a bit of chaos in the market."

The decision to exclude a year or two of horrific yields will translate into higher premiums for those farmers, but they would not face reductions in coverage levels available to them. In general, producers who take advantage of the exclusion will see higher protection levels, but also higher premiums. Farmers who opt to stand pat would likely see lower premiums, but lower coverage levels offered to them. Details on premium changes may not come until USDA's Risk Management Agency releases more details about the yield exclusion in December.

"This is going to provide some assistance for some producers," Vilsack said. "Some producers will take advantage of it, some won't. It's an individual decision."

The provision goes into effect for a select number of spring crops nationwide, including corn, soybeans, spring wheat, cotton, grain sorghum, rice, barley, canola, sunflowers, peanuts, and popcorn. USDA said nearly three-fourths of all acres and liability insured in the crop insurance program is included.

"While it is not all crops and all acres applicable for liability, it is a significant percentage of both acreage and liability," Vilsack said.

Vilsack had said in August that USDA would not be able to implement that provision this year. He also said updating APH is complex because it involves computations for each farmer based on each commodity, as well as factoring in county statistics. He said Tuesday that RMA and the Farm Service Agency are several months ahead of schedule, which allowed contractors and technology staff to focus on the yield exclusion.

"This implementation is obviously sooner than we anticipated," he said.

Vilsack reiterated a couple of times how complex the APH exclusion is to implement and the variables involved. Taking a shot at USDA's critics, he said it's easy for "folks sitting in the cheap seats" to second-guess USDA's implementation of the provision. As USDA rolls out the provision for more crops, it is important to protect the actuarial soundness of the crop-insurance program.

"Until I had a briefing by our team recently on the complexity of APH, I didn't fully appreciate and realize how many calculations and permeations there are to potentially impact a producer's ability to obtain adequate crop-insurance protection at an affordable price," Vilsack said.

Chris Clayton can be reached at Chris.Clayton@dtn.com.

Follow him on Twitter @ChrisClaytonDTN.


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