INFORMATIONAL MEMORANDUM: R&D-95-019 TO: All Reinsured Companies CFSA Headquarters, Program Delivery and Field Operations All Risk Management Field Offices FROM: Tim B. Witt /S/ 04/28/95 Acting Director Research and Development Division SUBJECT: Questions and Answers Regarding the Common Crop Insurance Policy Coarse Grains Crop Provisions for the 1995 Crop Year BACKGROUND: Crop provisions for insuring corn, grain sorghum, and soybeans were issued for the 1995 crop year under the common crop insurance policy. The Research and Development Division has been advised that certain provisions may have been misinterpreted. Therefore, we are providing the following answers to questions that have been raised to assure the provisions are uniformly and correctly administered. The major questions concern corn grain and silage issues. Under previous policy regulations, some policyholders were insuring only the corn acreage intended to be harvested as grain and not insuring the corn acreage in the county that was intended to be harvested as silage. Additionally, in previous years when acreage was insured as grain but harvested for silage, grain appraisals were made to settle the claim. This allowed insureds to harvest silage and still collect a grain indemnity. The new crop provisions correct these vulnerabilities. For the 1995 crop year, insurable corn acreage must be insured regardless of whether it is intended for harvest as grain or silage. For any acreage that is insured as grain but harvested as silage, the harvested silage tonnage will be used to determine the production to count for indemnity purposes. These changes facilitate compliance with the linkage requirements of the Federal Crop Insurance Reform Act of 1994 and provide; consistency by considering the crop to be corn regardless of whether it is intended for harvest as grain or silage. ISSUES: Corn-Grain/Silage: 1. How is acreage insured in counties for which the actuarial table provides premium rates for grain but not silage, silage but not grain, or both grain and silage? In accordance with subsection 6.(c) of the coarse grains crop provisions, all insurable acreage in the county will be covered as shown below: a. If the actuarial table for the county provides a premium rate for grain but not silage, then all insurable acreage planted to varieties of corn suitable for grain will be insured as grain, unless a written agreement allows insurance on all or a portion of the insurable acreage as silage. Varieties not suitable for grain can only be insured as silage by written agreement. Written agreements are not available for catastrophic (CAT) coverage. b. If the actuarial table for the county provides a premium rate for silage but not grain, then all insurable acreage planted to corn will be insured as silage unless a written agreement allows insurance on all or a portion of the insurable acreage as grain. Written agreements are not available for catastrophic (CAT) coverage. c. If the actuarial table for the county provides a premium rate for both grain and silage, then all insurable acreage planted to corn will be insured as the type or types reported by the insured on or before the acreage reporting date. However, in accordance with subparagraph 6.(b)(2)(ii) of the coarse grains crop provisions, varieties of corn adapted for silage-use only must be reported and insured as silage. 2. Does the answer in number 1 allow the insured the option of insuring only acreage intended to be harvested as grain in a grain-only county or insuring only acreage intended to be harvested as silage in a silage-only county? No. Paragraph 6.(b)(1) of the coarse grains crop provisions specifies that the insured corn crop will be all corn that is planted for harvest either as grain or as silage. Therefore, if a producer has a corn policy in effect, all insurable acreage planted to corn must be reported as specified in number 1. 3. How is nonirrigated grain corn to be insured in counties for which the actuarial table provides a nonirrigated silage premium rate but not a nonirrigated grain premium rate? The special provisions for such counties contains a statement that specifies that non-irrigated grain corn will be insurable only by written agreement. All non-irrigated acreage planted for harvest as either grain or silage will be insurable as non-irrigated silage. The special provisions statements for these counties will be revised for the 1996 crop year to clarify that non-irrigated grain corn will be insured as nonirrigated silage unless a written agreement provides coverage for such acreage as non- irrigated grain. 4. How are claims to be computed when acreage is reported and insured as grain but a portion or all of the acreage is harvested as silage and vice versa? Guarantees and premiums are based on the type(s) reported and insured, regardless of the actual method of harvest. Subsection 12.(d) of the crop provisions specifies that production to count for indemnity purposes will be in bushels for grain and in tons for silage as follows: a. For harvested acreage, according to the method of harvest; and for unharvested acreage, according to the information contained on the insured's acreage report; unless the acreage is abandoned, put to another use without consent, damaged solely by uninsured causes, or acceptable production records are not provided. b. Based on the above, claims for indemnity will be computed as follows: ( i) Grain-only county: The production guarantee for the type reported (grain) will be multiplied by the insured acreage and this result multiplied by the grain price election to determine the dollar guarantee for the unit. Production to count for unharvested acreage will be based on grain appraisals, acreage harvested as grain will be based on grain bushels, and acreage harvested as silage will be based on silage tonnage. The production to count for each type will be multiplied by the price election for the applicable type (see NOTE below) and those dollar amounts will be summed to determine the dollar value of production to count. This value will be deducted from the dollar guarantee. NOTE: The grain price election selected by the insured will be used to determine the dollar value of grain production to count. In accordance with subsection 3.(b) of the crop provisions, a silage price election will be assigned that bears the same percentage relationship to the maximum price election the insured selected for grain to determine the dollar value of silage production to count. The Special Provisions for all grain-only counties specify that: "To determine the dollar value of production to count for indemnity purposes for any acreage harvested as silage, the maximum price election for silage is $15.20 per ton if your grain price election is based on the established price, or the market price for silage if your grain price election is based on the market price." ( ii) Silage-only county: The production guarantee for the type reported (silage) will be multiplied by the insured acreage and this result will be multiplied by the silage price election to determine the dollar guarantee for the unit. Production to count for unharvested acreage will be based on silage appraisals, and acreage harvested as silage or grain (see NOTE below) will be based on silage tonnage. The silage production to count will be multiplied by the silage price election to determine the production to count dollar value for the unit. This value will be deducted from the dollar guarantee. NOTE: The special provisions for silage only counties require that the insured notify the crop insurance agent prior to harvest if he/she anticipates harvesting any acreage for grain which is insured as silage. Production to count for indemnity purposes for such acreage will be determined on our appraisals on a silage tonnage basis. (This provision should not substantially increase the number of appraisals that may be required because only 18 counties nationwide have premium rates for silage only.) (iii) Both grain and silage county: The production guarantee for acreage reported as silage will be multiplied by the silage acreage, and the result multiplied by the silage price election. The production guarantee for acreage reported as grain will be multiplied by the grain acreage, and the result multiplied by the grain price election. Production to count for unharvested acreage insured as silage will be based on silage appraisals and unharvested acreage insured as grain will be based on grain appraisals. Production to count for acreage harvested as silage will be based on silage tonnage, and acreage harvested as grain (see NOTE below for exception) will be based on grain bushels. Silage tonnage will be multiplied by the silage price election and grain bushels will be multiplied by the grain price election. The dollar value of production to count will be deducted from the applicable dollar guarantee. NOTE: The special provisions, for all counties for which the actuarial table contains premium rates for nonirrigated silage, but not non-irrigated grain, require that the insured notify the crop insurance agent prior to harvest if he/she anticipates harvesting any acreage for grain which is insured as non-irrigated silage. Production to count for indemnity purposes for such acreage will be determined on our appraisals on a silage tonnage basis. (This provision should not substantially increase the number of appraisals that may be required because only 82 counties nationwide have premium rates for non- irrigated silage but no premium rates for non-irrigated grain.) For acreage which will be harvested but the insured will not be able to provide acceptable production evidence (e.g., feeding from the field, production will be placed in airtight silo, etc.), silage appraisals will be used to determine silage production and grain appraisals will be used to determine grain production. 5. How will the harvested production to count be entered on the claim for indemnity when acreage is insured as grain but harvested as silage and vice versa (dollar amount, bushels, or tons)? The unit of measure based on the method of harvest will be entered on the claim form (i.e., tons for silage harvested and bushels for grain harvested). The adjuster must enter any adjustments (e.g., moisture, test weight, quality adjustment factors, etc.,) and enter the resulting dollar value of production to count for each applicable type. 6. For replants or situations where the insured intends to destroy the crop, how does the company determine which acres are grain versus silage (e.g., reported 60 acres grain and 40 acres silage in a 100 acre field, 50 acres are damaged and will be replanted). Are acres paid on a grain or silage basis - maximum replant payment? The insured must designate what the intended method of harvest was for the 50 acres and the applicable type for that method of harvest will be used, provided it does not exceed the reported acreage for that type. For example, if the insured stated that the 50 acres were intended for harvest as grain, the 50 acres would be based on grain because 60 acres were reported as grain. However, if the insured stated that the 50 acres were intended for harvest as silage, only 40 acres could be considered as silage because that is the maximum silage acreage reported, and the remaining 10 acres would be based on grain. 7. How does the insurance provider address over or under-reported acreage when both types are reported on the same unit? Over-reported acreage will be reduced by dividing the acreage of each reported type by the total acreage reported for the unit and multiplying the resulting factor for each type by the total determined acreage for the unit (e.g., reported 60 acres grain and 40 acres silage, determined 80 acres total. 60 acres grain reported ö 100 acres reported for the unit = .60 factor x 80 acres determined for the unit = 48 determined acres grain; and 40 acres silage reported ö 100 total acres reported for the unit = .40 factor x 80 acres determined for the unit = 32 determined acres silage). Under-reported acreage will be determined on the claim form for each type by using the same factoring method. 8. Assume a farmer with a corn policy, regardless of type, chops some of the unit for silage and the silage is being fed to livestock so representative strips are left to determine production to count. The adjuster would follow silage appraisal procedures. If a grain deficiency adjustment is allowed, may the maturity line method be used to determine a grain yield, or must the corn mature below 40 percent moisture to use the weight method? Allowing the maturity line method would prevent a second trip to the field by the adjuster. Current procedure directs that for quality adjustment of silage for grain deficiency, concurrent appraisals of silage and grain must be done. The grain appraisal method must be appropriate for the stage of growth. If the growth stage indicates maturity line as the appropriate appraisal method, that is the method to use. 9. How will actual production history (APH) yields be established for grain/silage? Refer to Informational Memorandum: R&D-95-008.2 dated March 24, 1995. Grain Sorghum: 10. Is a dual-purpose type of grain sorghum insurable under CAT coverage? No. Paragraph 6.(d)(3) of the crop provisions specifies that a dual-purpose type of grain sorghum (a type used for both grain and forage) is not insurable unless a written agreement allows insurance of such grain sorghum; however, written agreements are not available for CAT. Soybean Issues: 11. How are air-seeded soybeans to be insured for the 1995 crop year? Air-seeded soybeans are insurable for limited and additional coverage only by written agreement in states and counties for which the actuarial tables allow such insurance. Written agreements are not available for CAT coverage. 12. Are pre-acceptance inspections required for air-seeded soybeans? The insured must complete and certify to the information required on the pre-acceptance inspection report. From this information, the insurance provider will determine if a pre-acceptance field inspection is necessary. 13. Are speciality soybeans (e.g., black, edible, etc.) and soybeans grown for commercial seed beans insurable under the coarse grains crop provisions? Yes, provided the soybeans meet all policy requirements (i.e., intended for harvest as beans, adaptable to the area, etc.) and the yield for such specialty soybeans is the same as the yield on which the insurance guarantee is based. If the yield is not comparable to the yield on which the insurance guarantee is based, a written agreement for limited and additional coverage would be necessary to establish an appropriate APH yield and rate. Written agreements are not available for CAT coverage. Quality standards would not apply for uninsurable causes such as black beans graded and/or sold as soybeans. Corn, Grain Sorghum and Soybean Issues: 14. It appears the unit division language contained in section 2 of the new coarse grains crop provisions requires that if an insured has one center pivot irrigated field in a section where the planting pattern continues into the non-irrigated corner acreage, and one nonirrigated field in the same section whose planting pattern does not continue into the irrigated field, both fields would be combined into one unit instead of qualifying for two optional units. The common crop insurance policy basic provisions, section 5 (Liberalization) specifies that, "If we adopt any revisions which would broaden the coverage under this policy subsequent to the contract change date without additional premium, the broadened coverage will apply." This bulletin liberalizes the unit division provisions to specify that non-irrigated corners of center pivot irrigation systems will be considered part of the irrigated unit when the irrigated acreage continues into the non-irrigated acreage in the same rows or planting pattern. This will prevent other non-irrigated acreage in the same section that does not continue into the irrigated acreage from being combined with the irrigated acreage. FCIC will propose to amend this provision in the coarse grains crop provisions for the 1996 crop year. NOTE: Optional units are not available under CAT coverage. ACTION: Effective immediately, these issues will be administered as specified in this bulletin.