1 1 Copyright 2008, All Rights Reserved Dr. G. A. “Art” Barnaby, Jr Kansas State University...

1Copyright 2008, All Rights Reserved

Dr. G. A. “Art” Barnaby, JrDr. G. A. “Art” Barnaby, Jr

Kansas State University Kansas State University

Phone: (785) 5321515Phone: (785) 5321515

Email: Email: [email protected]

Check out our WEB at: Check out our WEB at:

AgManager.infoAgManager.info

Standing Disaster ProgramStanding Disaster Program


Supplemental Disaster ProgramSupplemental Disaster Program

Supplemental Revenue Assistance Payments (SURE)Supplemental Revenue Assistance Payments (SURE)

Farm Bill & administrative changes to crop insuranceFarm Bill & administrative changes to crop insurance

Livestock Forage Disaster Program (LFP)Livestock Forage Disaster Program (LFP)

Livestock Indemnity Program (LIP)Livestock Indemnity Program (LIP)

Tree Assistance Program (TAP)Tree Assistance Program (TAP)

Emergency Assistance for Livestock, Honey Bees & Emergency Assistance for Livestock, Honey Bees & Farm Raised Fish (EALHF) ProgramFarm Raised Fish (EALHF) Program


Supplemental Disaster ProgramSupplemental Disaster Program

The devil is in the details!The devil is in the details!

Many assumptions were made in this analysis Many assumptions were made in this analysis because a number of important details are not because a number of important details are not defined or left to the Secretary to define.defined or left to the Secretary to define.

No warranties are implied or given in this No warranties are implied or given in this analysis.analysis.

Use slides and analysis at your own peril!Use slides and analysis at your own peril!


Qualifying requires CAT or higher and NAP be Qualifying requires CAT or higher and NAP be purchased. purchased. For 2008 only,For 2008 only, farmers will have 90 farmers will have 90 days (August 20) to pay the CAT/NAP fees to days (August 20) to pay the CAT/NAP fees to qualify for SURE but there is no CAT/NAP qualify for SURE but there is no CAT/NAP payments.payments.

County requires a Secretary disaster County requires a Secretary disaster declaration (include contiguous counties) or the declaration (include contiguous counties) or the whole farm must have a 50% Loss.whole farm must have a 50% Loss.

Coverage is whole farm and includes all crops Coverage is whole farm and includes all crops in all counties (crosses state lines??).in all counties (crosses state lines??).

Supplemental Revenue Assistance Supplemental Revenue Assistance (SURE)(SURE)


SURE guarantee = planted acres x % crop SURE guarantee = planted acres x % crop insurance coverage x APH/program yield x CI insurance coverage x APH/program yield x CI price election x 115%price election x 115%

SURE cap = 90% of expected revenue for each SURE cap = 90% of expected revenue for each crop. Planted acres x APH/proven yield x crop. Planted acres x APH/proven yield x insurance price guaranteeinsurance price guarantee



Revenue to count = indemnities, prevented Revenue to count = indemnities, prevented planting, 15% of direct payments, CC, ACRE, planting, 15% of direct payments, CC, ACRE, marketing loan gains, crop values (harvested marketing loan gains, crop values (harvested acres x yield x MYA price)acres x yield x MYA price)

SURE Payment = SURE Guarantee less the SURE Payment = SURE Guarantee less the Revenue to count X 60%Revenue to count X 60%



Crop Insurance with a Price Decrease with Crop Insurance with a Price Decrease with Half of a CropHalf of a Crop

$5.00

aph Cov ProdCAT 143 50% 71 $2.61 $187 71 0 0 3.00 -3 100 -300APH 143 70% 100 $4.75 $475 71 29 136 13.80 122 100 12,191CRC 143 70% $5.40 $540 690 71 $5.00 $540 $357 $183 24.74 158 100 15,812

RA-HPO 143 70% $5.40 $540 No Limit 71 $5.00 $540 $357 $183 25.92 157 100 15,694RA 143 70% $5.40 $540 71 $5.00 $540 $357 $183 17.41 165 100 16,545

Min Rev

Guar

Net Indem Pymt

Total Indem Pymt

Bu. Gu.

Price Elect

Max Rev Guar.

Lost Bu.

Havst Price

Final Guar

Rev Count

Indem Pymt

Prem Ac.

Plant Ac.


SURE Payments with a Price Decrease SURE Payments with a Price Decrease with Half of a Cropwith Half of a Crop

CAT 147 $38,441 $21,460 56% 21,460 $4.50 32,143 0 319 0.0APH 147 $69,893 $54,625 78% 54,625 $4.50 32,143 12,191 319 0.0CRC 147 $79,457 $62,100 78% 62,100 $4.50 32,143 15,812 319 0.0

RA-HPO 147 $79,457 $62,100 78% 62,100 $4.50 32,143 15,694 319 0.0RA 147 $79,457 $62,100 78% 62,100 $4.50 32,143 16,545 319 0.0

115% of Ins. Cov

Adj. aph Exp. Rev

15% of Direct

Crop Value

Indem Pymt

CC & Loans

Max Cov

Sure Guar. MYA


SURE Payments with a Price Decrease SURE Payments with a Price Decrease with Half of a Cropwith Half of a Crop

CAT 21,460 32,462 0 32,462 0 32,462APH 54,625 44,653 5,983 50,636 5,155 49,808CRC 62,100 48,273 8,296 56,569 6,812 55,085

RA-HPO 62,100 48,155 8,367 56,522 6,812 54,967RA 62,100 49,006 7,856 56,863 6,812 55,818

Net Premium Gross PremiumTotal

Rev + SURE

Total Rev + SURE

Sure Pymt

Sure Pymt

Sure Guar.

Total Rev to Count


Summary of SURE Payments with a Summary of SURE Payments with a $5$5 Price & Half of CropPrice & Half of Crop

70% 75% 80% 85% 70% 75% 80% 85%CAT 0 0 0 0 0 0 0 0APH 5,983 6,622 7,461 6,544 5,155 5,461 5,766 4,015CRC 8,296 9,277 10,656 10,304 6,812 7,159 7,506 5,516

RA-HPO 8,367 9,421 10,904 10,693 6,812 7,159 7,506 5,516RA 7,856 8,694 9,837 9,110 6,812 7,159 7,506 5,516

Net Premium Gross Premium


Summary of SURE Payments with a Summary of SURE Payments with a $8$8 Price & Half of CropPrice & Half of Crop

70% 75% 80% 85% 70% 75% 80% 85%CAT 0 0 0 0 0 0 0 0APH 0 0 0 0 0 0 0 0CRC 0 0 0 0 0 0 0 0

RA-HPO 0 0 0 0 0 0 0 0RA 5,970 8,694 9,837 9,110 4,926 7,159 7,506 5,516



Summary of SURE Payments with a Summary of SURE Payments with a $8$8 Price, Half of Crop & Harvest Price Sets Price, Half of Crop & Harvest Price Sets

SURE Guarantees and Cap SURE Guarantees and Cap

70% 75% 80% 85% 70% 75% 80% 85%CAT 0 0 0 0 0 0 0 0APH 0 0 0 0 0 0 0 0CRC 12,147 9,824 7,898 6,580 10,663 7,706 4,748 1,791

RA-HPO 19,073 16,351 14,059 12,409 17,517 14,089 10,660 7,232RA 5,970 8,694 9,837 9,110 4,926 7,159 7,506 5,516



Summary of SURE Payments with a Summary of SURE Payments with a $5$5 Price & Price & Zero YieldZero Yield

70% 75% 80% 85% 70% 75% 80% 85%CAT 1,668 1,668 1,668 1,668 1,488 1,488 1,488 1,488APH 4,912 5,551 6,390 5,473 4,084 4,389 4,694 2,944CRC 6,153 7,134 8,513 8,161 4,669 5,016 5,363 3,373

RA-HPO 6,224 7,278 8,761 8,550 4,669 5,016 5,363 3,373RA 5,713 6,551 7,695 6,967 4,669 5,016 5,363 3,373



Summary of SURE Payments with a Summary of SURE Payments with a $8$8 Price & Price & Zero YieldZero Yield

70% 75% 80% 85% 70% 75% 80% 85%CAT 1,668 1,668 1,668 1,668 1,488 1,488 1,488 1,488APH 4,912 5,551 6,390 5,473 4,084 4,389 4,694 2,944CRC 0 0 0 0 0 0 0 0

RA-HPO 0 0 0 0 0 0 0 0RA 5,713 6,551 7,695 6,967 4,669 5,016 5,363 3,373



Summary of SURE Payments with a Summary of SURE Payments with a $8$8 Price, Price, Zero YieldZero Yield & Harvest Price Sets & Harvest Price Sets

SURE Guarantees and CapSURE Guarantees and Cap

70% 75% 80% 85% 70% 75% 80% 85%CAT 1,668 1,668 1,668 1,668 1,488 1,488 1,488 1,488APH 4,912 5,551 6,390 5,473 4,084 4,389 4,694 2,944CRC 14,719 12,396 10,470 9,151 13,234 10,277 7,320 4,363

RA-HPO 16,930 14,208 11,916 10,266 15,374 11,946 8,517 5,089RA 5,713 6,551 7,695 6,967 4,669 5,016 5,363 3,373



No payments on 2008 Iowa flood losses until No payments on 2008 Iowa flood losses until after September 1, 2009, i.e. end of marketing after September 1, 2009, i.e. end of marketing year.year.

SURE favors high risk single emprise farms.SURE favors high risk single emprise farms.

SURE reduces value of CRC and HPO.SURE reduces value of CRC and HPO.

$100,000 payment limit reduces the value of $100,000 payment limit reduces the value of SURE versus unlimited CI payments for “large” SURE versus unlimited CI payments for “large” farms.farms.




SURE discourage crop insurance coverage above SURE discourage crop insurance coverage above 80%.80%.

Unclear how GRIP/GRP would be used to set SURE Unclear how GRIP/GRP would be used to set SURE guarantee.guarantee.

Unclear if it is net or gross indemnity that counts Unclear if it is net or gross indemnity that counts against the SURE guarantee.against the SURE guarantee.


(2) ADJUSTED ACTUAL PRODUCTION HISTORY (2) ADJUSTED ACTUAL PRODUCTION HISTORY YIELD.—The term ‘adjusted actual production YIELD.—The term ‘adjusted actual production history yield’ means— history yield’ means—

(A) in the case of an eligible producer on a farm (A) in the case of an eligible producer on a farm that has at least 4 years of actual production that has at least 4 years of actual production history yields for an insurable commodity that history yields for an insurable commodity that are established other than pursuant to section are established other than pursuant to section 508(g) (4) (B) , the actual production history for 508(g) (4) (B) , the actual production history for the eligible producer without regard to any the eligible producer without regard to any yields established under that section; yields established under that section;

What adjustment to the aph will USDA What adjustment to the aph will USDA make for SURE?make for SURE?


- ““(B) in the case of an eligible producer on a (B) in the case of an eligible producer on a farm that has less than 4 years of actual farm that has less than 4 years of actual production history yields for an insurable production history yields for an insurable commodity, of which 1 or more were commodity, of which 1 or more were established pursuant to section 508(g) (4) (B), established pursuant to section 508(g) (4) (B), the actual production history for the eligible the actual production history for the eligible producer as calculated without including the producer as calculated without including the lowest of the yields established pursuant to lowest of the yields established pursuant to section 508(g) (4) (B)section 508(g) (4) (B)

- If less than 4 years of history, farmers can drop If less than 4 years of history, farmers can drop one “plugged” yield. If more than 4 years, all one “plugged” yield. If more than 4 years, all “plugged” yields will be dropped.“plugged” yields will be dropped.

What adjustment to the aph will USDA What adjustment to the aph will USDA make for SURE?make for SURE?


(D) EQUITABLE TREATMENT FOR NONYIELD (D) EQUITABLE TREATMENT FOR NONYIELD BASED POLICIES.—The Secretary shall establish BASED POLICIES.—The Secretary shall establish equitable treatment for nonyield based policies equitable treatment for nonyield based policies and plans of insurance, such as the Adjusted and plans of insurance, such as the Adjusted Gross Revenue Lite insurance program.Gross Revenue Lite insurance program.

Note: GRP is based on yields, county yields.Note: GRP is based on yields, county yields.

How will the Secretary establish SURE How will the Secretary establish SURE guarantees for GRIP/GRP buyers?guarantees for GRIP/GRP buyers?


The Law states that crop insurance indemnity The Law states that crop insurance indemnity payments will count against the SURE payments will count against the SURE guarantee, but does this mean net or gross guarantee, but does this mean net or gross indemnity.indemnity.

(v) the amount of payments for prevented (v) the amount of payments for prevented planting on a farm; planting on a farm;

(vi) the amount of crop insurance indemnities (vi) the amount of crop insurance indemnities received by an eligible producer on a farm for received by an eligible producer on a farm for each crop on a farm; each crop on a farm;

(vii) the amount of payments an eligible (vii) the amount of payments an eligible producer on a farm received under the producer on a farm received under the noninsured crop assistance program for each noninsured crop assistance program for each crop on a farm;crop on a farm;

Net or gross indemnity?Net or gross indemnity?


(5) EXPECTED REVENUE.—The expected revenue (5) EXPECTED REVENUE.—The expected revenue for each crop on a farm shall equal the sum for each crop on a farm shall equal the sum obtained by adding— (A) the product obtained obtained by adding— (A) the product obtained by multiplying— by multiplying—

(i) the greatest of— (i) the greatest of—

(I) the adjusted actual production history (I) the adjusted actual production history

yield of the eligible producer on a farm; and yield of the eligible producer on a farm; and

(II) the countercyclical program payment yield; (II) the countercyclical program payment yield;

(ii) the acreage planted or prevented from being (ii) the acreage planted or prevented from being planted for each crop; and planted for each crop; and

(iii) 100 percent of the(iii) 100 percent of the insurance price insurance price guarantee.guarantee.

How will the Secretary define “insurance How will the Secretary define “insurance price guarantee” for the 90% Cap?price guarantee” for the 90% Cap?


The insurance price guarantee for RAHPO, CRC, The insurance price guarantee for RAHPO, CRC, and GRIPHRO is the higher of the planting price and GRIPHRO is the higher of the planting price or the harvest price.or the harvest price.

In the past the revenue cap was based on the In the past the revenue cap was based on the APH price election. If this is price is used it will APH price election. If this is price is used it will create and incentive to drop replacement-create and incentive to drop replacement-revenue coverage and reduce coverage levels.revenue coverage and reduce coverage levels.

How will the Secretary define “insurance How will the Secretary define “insurance price guarantee for the 90% Cap?price guarantee for the 90% Cap?


Under prevented planting the coverage is Under prevented planting the coverage is reduced to 60% of the guarantee. There is also reduced to 60% of the guarantee. There is also a 1% reduction in the guarantee for each day a 1% reduction in the guarantee for each day the insured plants after the final planting date. the insured plants after the final planting date.

So is the SURE coverage also reduced or do So is the SURE coverage also reduced or do farmers maintain the same SURE coverage level farmers maintain the same SURE coverage level but there are fewer indemnity dollars to count but there are fewer indemnity dollars to count against the guarantee?against the guarantee?

Prevented & Late PlantingPrevented & Late Planting


Under GRIP/GRP the coverage levels are Under GRIP/GRP the coverage levels are typically 85% and 90% while it is 70% or 75% typically 85% and 90% while it is 70% or 75% on aph products, so will USDA use the on aph products, so will USDA use the 90% GRIP 90% GRIP coverage to set the SURE coverage at 90% or coverage to set the SURE coverage at 90% or will they use 80%,will they use 80%, similar to how the subsidy is similar to how the subsidy is set for GRIP (90% GRIP gets the same subsidy set for GRIP (90% GRIP gets the same subsidy rate as 80% aph products)?rate as 80% aph products)?

Setting Sure under GRIP/GRP?Setting Sure under GRIP/GRP?


Under GRIP/GRP there is no individual loss Under GRIP/GRP there is no individual loss adjustment but there is under SURE. adjustment but there is under SURE.

So will FSA also adjust losses in the field?So will FSA also adjust losses in the field?

SURE Loss Adjusting under GRIP/GRPSURE Loss Adjusting under GRIP/GRP


Reduces the A&O by 2.3 points with a 50% Reduces the A&O by 2.3 points with a 50% “snapback” provision if a state’s loss ratio “snapback” provision if a state’s loss ratio exceeds 1.2.exceeds 1.2.

Reduces Cat reimbursement rate from 8% to Reduces Cat reimbursement rate from 8% to 6%6%

Raises statutory loss ratio to 1.0 from 1.075.Raises statutory loss ratio to 1.0 from 1.075.

Raises cat administrative fee to $300 per crop Raises cat administrative fee to $300 per crop per county.per county.

Moves up the billing date to August 15 Moves up the billing date to August 15 beginning in 2012.beginning in 2012.

Summary of farm bill crop insurance Summary of farm bill crop insurance titletitle


Delays the payment date for A&O expenses to Delays the payment date for A&O expenses to October 1 in 2012.October 1 in 2012.

Requires USDA to renegotiate the SRA by the Requires USDA to renegotiate the SRA by the beginning of 2011 reinsurance year and every beginning of 2011 reinsurance year and every five years after that.five years after that.

Prohibits, at the discretion of the governor, crop Prohibits, at the discretion of the governor, crop insurance on native sod for five years in states insurance on native sod for five years in states that are part of the Prairie National Pothole that are part of the Prairie National Pothole Area.Area.



Increases focus on risk management education Increases focus on risk management education for socially disadvantaged and beginning for socially disadvantaged and beginning farmers.farmers.

Expands data mining efforts.Expands data mining efforts.

Increases funding to RMA for its IT system.Increases funding to RMA for its IT system.

Requires an expert review of the crop insurance Requires an expert review of the crop insurance price setting method for grain sorghum.price setting method for grain sorghum.



Conduct a pilot that increases the subsidy rate Conduct a pilot that increases the subsidy rate on enterprise & whole farm units to match on enterprise & whole farm units to match optional unit subsidy.optional unit subsidy.

Administratively, USDA increased the price Administratively, USDA increased the price limits on CRC from current levels to 2 Times limits on CRC from current levels to 2 Times base price, e.g. would have increased corn from base price, e.g. would have increased corn from a $6.90 cap ($5.40 + $1.50) to $10.80 and a $6.90 cap ($5.40 + $1.50) to $10.80 and eliminated the downside price limit.eliminated the downside price limit.

Administratively, USDA will apply this same Administratively, USDA will apply this same price limit to RA for the first time.price limit to RA for the first time.



Livestock Disaster ProgramLivestock Disaster Program

Excludes cattle in feedlotsExcludes cattle in feedlots

Requires crop (livestock/forage insurance; Requires crop (livestock/forage insurance; includes pilots) or NAPincludes pilots) or NAP

Covers death lossCovers death lossPays 75% of market value the day before the death.Pays 75% of market value the day before the death.

Covers forage and grazing losses U.S. Drought Covers forage and grazing losses U.S. Drought MonitorMonitor

Payment rate for drought is 60% of monthly feed Payment rate for drought is 60% of monthly feed cost.cost.

Covers fire on public grazingCovers fire on public grazingPayment rate for fire is 50% of monthly feed costs.Payment rate for fire is 50% of monthly feed costs.


Livestock Disaster ProgramLivestock Disaster Program

Monthly payment = 30 days X 15.7 pounds of Monthly payment = 30 days X 15.7 pounds of corn for adult cow or equivalent X 12 or 24 month corn for adult cow or equivalent X 12 or 24 month average NASS price prior to march 1 divided by 56average NASS price prior to march 1 divided by 56

Severe Drought (D2) in a county for 8 consecutive Severe Drought (D2) in a county for 8 consecutive weeks will be eligible to receive assistance of 1 weeks will be eligible to receive assistance of 1 monthly paymentmonthly payment

Extreme Drought (D3) in a county will be eligible Extreme Drought (D3) in a county will be eligible to receive assistance of 2 monthly paymentsto receive assistance of 2 monthly payments

Extreme Drought (D3) in a county for 4 Extreme Drought (D3) in a county for 4 consecutive weeks or Exceptional Drought (D4) consecutive weeks or Exceptional Drought (D4) will be eligible to receive assistance of 3 monthly will be eligible to receive assistance of 3 monthly paymentspayments


Tree Assistance Program (TAP)Tree Assistance Program (TAP)

TAP provides assistance to eligible orchardists and TAP provides assistance to eligible orchardists and nursery tree growers if tree mortality from nursery tree growers if tree mortality from damaging weather or related conditions exceeds damaging weather or related conditions exceeds 15% (adjusted for normal mortality).15% (adjusted for normal mortality).

Payment covers 70% of replanting and 50% of Payment covers 70% of replanting and 50% of salvage or land preparation costs.salvage or land preparation costs.

Tree Assistance Program Payments cannot exceed Tree Assistance Program Payments cannot exceed $100,000/year, nor be made on more than 500 $100,000/year, nor be made on more than 500 acres. AGI limits and the direct attribution rule acres. AGI limits and the direct attribution rule apply.apply.


Honey Bees and Farm-Raised FishHoney Bees and Farm-Raised Fish

Emergency Assistance for Livestock, Honey Bees, Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish provides up to $50 and Farm-Raised Fish provides up to $50 million/year to reduce losses from disease, million/year to reduce losses from disease, adverse weather, and other environmental adverse weather, and other environmental conditions not covered under the other Livestock conditions not covered under the other Livestock programs.programs.


Thank YouDR. G. A. “ART” BARNABY,

JR.KANSAS STATE UNIVERSITY& 4B AG CONSULTANTS,

LLC

PHONE: 7855321515EMAIL: [email protected] out our WEB page athttp://

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1 1 Copyright 2008, All Rights Reserved Dr. G. A. “Art” Barnaby, Jr Kansas State University...

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