August 28, 1998

INFORMATIONAL MEMORANDUM:  R&D-98-041

TO:      All Reinsured Companies
         All Risk Management Agency Field Offices
         Other Interested Parties

FROM:    Tim B. Witt /s/ Tim B. Witt
         Deputy Administrator

SUBJECT: Alfalfa Seed Pilot Program Participation

BACKGROUND:
 
The Risk Management Agency (RMA) is researching the feasibility of a pilot insurance program
for alfalfa seed.  The following is a summary of where the crop is grown and the relative
economic impact of the industry.

Information collected by the Economic Research Service (ERS), National Agricultural Statistics
Service (NASS), and the Census of Agriculture indicated that the top alfalfa seed producing
States include the Dakotas, California, Idaho, Washington, Montana, Nevada, and Oregon. 
Additionally, there is smaller acreage of some economic importance in Wyoming and Utah.  The
estimated average annual value of alfalfa seed is $93 million grown on about 135,000 acres. 
Alfalfa seed is a relatively high valued crop; an exceptional crop can gross as much as $1200 per
acre (according to the most recent Census of Agriculture data available). 

There is significant producer interest in an insurance product based on focus group meetings
between RMA Regional Service Office (RSO) personnel and producers.

About one-third of all U.S. alfalfa seed production is certified each year, although the amount
varies by region (in Montana, approximately one half of all alfalfa seed production is certified
production).  Certified seed is more valuable due to its genetic purity and higher quality.  Special
procedures must be followed during all stages of production and marketing in order for seed to
be certified and marketed as such.  Each bag or container of certified seed must bear the official
tag provided by the State crop improvement association.  The numerous specialized requirements
for certified seed may tend to lessen the potential for moral hazard and makes certified seed a
better candidate for an insurance product.  In many cases, acreage on which seed production is
not the sole intended use (such as non-certified seed) is prone to low yields because
recommended management practices for forage production do not promote high seed yields. 
Other major perils affecting a possible insurance product include ill-timed rains and hail.  Hail in
particular can damage both the crop and the leaf cutter bees necessary for pollination.   
The Forage and Turf Seeds (including Alfalfa Seed) feasibility study can be obtained by
contacting the Research and Evaluation Division at (816) 926-6343.  Billings, Sacramento, and
the Spokane RSO's have indicated an interest in developing an Alfalfa Seed Pilot Insurance
Program for their respective areas.  Each insurance provider interested in participating in the
development of an alfalfa seed program is invited to designate a representative or representatives
from their organization to work with RMA on this product.

ACTION:

Jamie Koch, of the Billings RSO, is the Project Manager for the Alfalfa Seed Pilot Insurance
Program.  Jay Garner, of the Research and Evaluation Division, is the Kansas City liaison for the
development team.  Insurance providers wanting to participate in the development of the Alfalfa
Seed Insurance Pilot Program should provide their name, address, and phone number to
Jay Garner, by September 11, 1998.  Jay can be reached at the following address:

                    Jay Garner
                    USDA/RMA
                    Research and Evaluation Division
                    P. O. Box 419293
                    Kansas City, Missouri 64141
                    Phone: (816) 926-1899
                    Fax: (816) 926-7343
                    jgarner@rm.fcic.usda.gov


DISPOSAL:

This Informational Memorandum is for the purpose of transmitting information and the
expiration date is December 31, 1998