There are instances where certain provisions of the federal crop insurance program (“FCIP”) policy make it difficult for certain agricultural producers to properly obtain crop insurance coverage. Sometimes, the Federal Crop Insurance Corporation (“FCIC”) revises the basic provisions of the FCIP, which are referred to as the “Common Crop Insurance Policy” (“CCIP”), to modify certain requirements of the policy so these producers can obtain insurance coverage for their crops. On June 30, 2022, FCIC published a final rule that implements changes to the CCIP. Specifically, this amendment revises existing definitions and incorporates new terminology and provisions to the policy. One reason for the amendments to the policy is to assist certain producers that are unable to produce the acceptable records and reports needed to obtain crop insurance coverage. The revisions to the CCIP under this final rule are applicable for the 2023 and subsequent crop years for crop insurance policies with a change date on or after June 30, 2022, and for all other crops, the final rule revisions are applicable for the 2024 and subsequent crop years.
In order to obtain crop insurance coverage under the FCIP, producers must submit certain forms and documents to FCIC, such as records that describe a producer’s production of a crop. Prior to FCIC’s final rule, producers were usually required to provide production records from disinterested third parties or have a pre-harvest appraisal conducted by their Approved Insurance Provider (“AIP”) that verifies a producer’s actual crop production. FCIC uses this crop production information to determine a producer’s insurance coverage for the crop year. A disinterested third party is a “person that does not have any familial relationship…with the [producer] or who will benefit financially from the sale of the insured crop.” 7 C.F.R. § 457.8, Section 1. Records from disinterested third parties, for example, included documents such as sales receipts, storage records, and settlement sheets.
However, not all producers have disinterested third-party records they can provide to FCIC to verify their actual production. For instance, some producers directly market their insured commodity to consumers through on-farm or roadside stands, farmer’s markets, or agritourism enterprises. Producers directly marketing their insured crops generally do not generate disinterested third-party production records because they do not use an intermediate party—such as a broker, retailer, wholesaler, packer, or processor—to sell their crops. Also, for example, producers that are vertically integrated do not have disinterested third-party records because these producers, or someone related to them, control all stages of the production of a crop. See USDA Crop Insurance Handbook, Part 14, § 4. Therefore, FCIC’s final rule amends the CCIP to expand the type of acceptable production records these types of producers may provide to FCIC in order to obtain insurance coverage, report their annual production, and file a claim under their policy.
According to FCIC, the final rule assists producers who do not have disinterested third-party records available to them by adopting new provisions and revising existing language in the CCIP to increase flexibility to the production reporting requirements that producers must satisfy under the policy. To provide flexibility with these requirements, the final rule modifies the existing definition of “production report”. A “production report” is a report created by a producer that contains planted acreage and production from previous crop years to establish their annual production. FCIC uses these reports to determine the amount of coverage, liability, premium, and the amount of indemnity if a loss claim is made by the insured producer.
Under the previous CCIP, producers were required to validate or support their production report with records from a warehouse, buyers of the insured crop, a measurement of any farm-stored crops, or records approved by FCIC on an individual case basis. The final rule, however, eliminates this requirement and only requires producers to support their reports with “acceptable production records”. For example, such records, depending on the type of crop and farming practice, may include certified scale weight records, pick records, machine harvest records, and daily sales records. To simplify this requirement, the final rule adopts a definition of “production record” in the CCIP, which is defined as a “written record that documents [a producer’s] actual production reported on the production report.” 7 C.F.R. § 457.8, Section 1.
Further, the final rule incorporates a new section to the CCIP titled “Direct Marketing and Verifiable Records”. This new section is intended to help producers satisfy the reporting requirements under the policy. Under this section, producers intending to direct market any portion of their crop, or do not have acceptable verifiable records available when required under the policy, must notify FCIC and complete a marketing certification. 7 C.F.R. § 457.8, Section 38(a). Producers must complete these two requirements by the acreage reporting date for their crop, and if a producer alters their marketing plans, they must provide FCIC notice of this change no later than 15 days prior to harvesting their crop. 7 C.F.R. § 457.8, Section 38(b)(1).
Producers that fail to provide FCIC timely notice, complete a marketing certification, and do not have acceptable production records to support their production report will receive an assigned yield. An assigned yield is 75% or less of a producer’s yield used by FCIC to determine a producer’s coverage for the previous crop year. 7 C.F.R. § 457.8, Section 3(f)(1). Thus, if a producer’s production is greater than the previous crop year and does not satisfy the requirements, they will have limited coverage and receive an indemnity that represents only a fraction of their loss if they make a claim on their policy. Also under this section, FCIC allows producers to request a pre-harvest appraisal for production reporting purposes, which is then used to support their production records. However, FCIC will not use this pre-harvest appraisal to establish a producer’s total production in calculating an indemnity if the appraisal is conducted before the producer submits a loss claim. 7 C.F.R. § 457.8, Section 38(b)(5). Overall, FCIC is increasing the flexibility of the reporting requirements to reduce the need for AIPs to conduct pre-harvest appraisals.
Additional Policy Amendments
Aside from the reporting requirement amendments to the CCIP, the final rule implements other changes to the policy in order to bring clarity on how certain provisions are intended to operate. For instance, one change to the policy indicates that a producer’s actual yields will be adjusted if the producer changes their method of production that will likely result in a lower yield. Another important revision to the CCIP is a 30-day deadline to appeal good farming practice determinations. Under the revised policy, producers must appeal an adverse determination within 30 days of their AIP sending notice of their determination regarding good farming practices. 7 C.F.R. § 457.8, Section 20(d)(1)(ii).
There are instances where FCIC revises the CCIP provisions when it lacks clarity or when policy provisions prevent certain producers from obtaining crop insurance coverage. Essentially, the revisions to the CCIP under FCIC’s recently published final rule provides flexibility to the production reporting requirements, clarifies when a change in production method will result in an adjustment, and establishes a 30-day appeal deadline for adverse good farming practice determinations. While these revisions to the policy are applicable for many crop insurance policies for the 2023 crop year, FCIC will continue to consider public comments until August 29, 2022.
To read FCIC’s final rule, click here.
To read the other articles of this series, click here.
To read NALC resources on crop insurance, click here.