is - | · PDF fileWFRP is a new product offered through Federal crop insurance that covers...

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Transcript of is - | · PDF fileWFRP is a new product offered through Federal crop insurance that covers...

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  • WFRPisanewproductofferedthroughFederalcropinsurancethatcoversfarmrevenueproducedforthewholefarmfortheinsuredyear.TheUSDAagencythatoffersFederalcropinsuranceistheRiskManagementAgencyandaportionoftheproducerspremiumamountissubsidized.

    WFRPissoldbyinsurancecompaniesthathaveareinsuranceagreementwiththeFederalCropInsuranceCorporation(FCIC).ThesecompanieshaveinsuranceagentsthatsellWFRPdirectlytoproducersandlossadjustorswhowillworkwithproducerswhentherearelosses.

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  • Revenue foreachcommodityisvaluedatthelocalmarketexpectedvalueusingtheexpectedvalueguidelinesinthepolicy.Thesevaluesmustbewhatproducerscanreasonablyexpecttoreceiveinthelocalareaforthecommodityandarebasedtotheextentpossibleonthirdpartyvaluesorfordirectmarketers,forthethreeyearaverageseasonaveragepricereceived.

    Organicproducersthatarenotrequiredtohaveformalorganiccertifications(lessthan$5,000ingrossrevenuefromorganicproductincomeperyear)butthatstillfollowtheorganicguidelines,mayuseorganicprices.

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  • Forexpandingoperations:

    Youproviderecordsshowingyourfarmhasincreased productioncapacityinsomemeasurableway

    Farmiscapableofproducingup to 35%morerevenuethanhistorical (5year)average

    TheApprovedInsuranceProviderhastheauthoritytoapproveordisapprovethe35%expansionfortheexpandingoperationsprovision

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  • Postproductioncoststhatdo notqualifyasmarketreadinessoperations(minimal,onfarm,infieldorcloseproximitytofield)mustbeadjustedoutofthecommoditysrevenue.ThisisbecausethesecostsarenotatriskfromacommodityproductionpointofviewandarenotallowedtobecoveredundertheFederalCropInsuranceAct.Leavingmarketreadinesscostsintheinsuredrevenuewasachangeprovidedbythe2014FarmBilltohelpmakewholefarminsurancemoreconvenientandsimplerforproducersgrowingspecialtycropsforspecialtymarkets.

    IfothercropinsuranceispurchasedattheCATlevel,thefarmisnoteligibleforWFRP.

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  • Ifafarmhasallowablerevenuehigherthanthemaximum,itisnoteligibleforWFRP.

    Iffarmshavetoomuchrevenuefromanimals/animalproductsorgreenhouse/nursery,theyarenoteligibleforWFRP.

    Ifgrowingtheactualcrop(notjusttheplant)thenthecropwouldbelistedas,forexample,tomatoes,notgreenhouse/nursery.

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  • Revenuefortheyearwillbedeterminedusing taxfortheinsuredyear,farminformationastowhatwasproduced,informationaboutinventorywhathasntbeenharvestedorsold,etc.

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  • Thediversificationrequirementiscalledthecommoditycountinthepolicy.

    TheWFRPcommoditycountisacalculationratherthansimplyacountofcommoditiesproduced.ItisimportanttounderstandthatthecommoditycountusedbyWFRPisnotjustwhatyouaregrowingorproducingonthefarm,butisameasureoffarmdiversificationthatshowsthefarmhasreducedriskbyproducingsignificantamountsofmultiplecommodities.Forexample:Afarmmayhave95percentofitsrevenuecomingfromapplesandfive(5)percentfrompears.ForWFRPpurposes,thisfarmwouldbeconsideredtohaveonly1commodity.However,ifthefarmhad80percentofitsrevenuecomingfromapplesand20percentfrompears,thefarmwouldbeconsideredtohavetwo(2)commodities.

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  • Forexample:Afarmwithfourcommoditieswouldbeperfectlydiversifiedif25percentofitsrevenuecamefromeachofthosecommodities.Inreality,theamountofrevenuefromeachcommoditycanvarywidely.Thecommoditycountcalculationdetermineshowmuchrevenuewouldhavetocomefromonecommoditytoachieve1/3ofthatperfectamountofdiversification.Sowiththe4commodityfarm,eachcommoditywouldhavetoproduceatleast8.3%(25%multipliedby.333)ofthefarmrevenuetobecountedasacommodity.Thenthecommoditiesthatmeetthatrequirementarecounted.ThecommoditycountprovisionsalsoallowcommoditiesnotqualifyingbythemselvestobegroupedtogethertomeettherequirementwhichcanresultinahighercommoditycountthanwouldotherwisewouldbeallowedthusincreasingthediversificationbenefitsprovidedintheWFRP.TheformulaforthecommoditycountcanbefoundintheWFRPpolicy.

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  • Potatofarmsmusthave2commoditiesbecausetheFederalCropInsuranceActspecificallylimitspotatorevenueinsurancetothatonawholefarmbasis.

    OtherrevenuecoverageincludesRevenueProtection,RevenueProtectionw/theHarvestPriceExclusion,andActualRevenueHistory

    Thediversification discountwillbemadefor2,3,4,5,6,or7ormorecommoditiesandreducesthepremiumratefortheinsurance.Thisreflectsthelowerriskofrevenuelossforafarmwithmultiplecommodities.

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  • Lackofmidyearunderwritingidentifiedasprogramvulnerability

    Toooften,AGRpolicieswerereunderwrittenatclaimtimeThreepartFORtoaddressvulnerabilitybyaddingmidyearreportDesignedtomirrorMPCIreporting

    IntendedFORequivalenttointendedacreagereport;requiredatSCD

    Documentationofinitialplantingintentions;providesprotectionsimilartoPPNOTbasisofliability,premium,orinsuredrevenue

    RevisedFORequivalenttoacreagereport;

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  • requiredatARDDocumentationofactualplantingand/orfarmmanagementdecisionsBasisofliability,premium,andinsuredrevenue

    FinalFORequivalenttoproductionreportUsedforunderwritingsubsequentyearsDatawillbeusedforpremiumrating

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  • *IncertaincasessuchasforBeginningFarmersandRanchers,TribalEntities,andfarms whichhaveexperiencedeventspreventingfarminginasingleyear,lessthan5yearsoftaxhistoryarerequired.

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