Final Agency Determination: FAD-124

FAD-124

Subject: Request dated June 1, 2010, requesting a Final Agency Determination for the 2009 crop year regarding the interpretation of section 17(e)(1)(i)(A) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions), published at 7 C.F.R. 457.8. This request is pursuant to 7 C.F.R. part 400, subpart X.

Background:

Section 17 of the Basic Provisions states, as here pertinent:

17. Prevented Planting

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(e) The maximum number of acres that may be eligible for a prevented planting payment for any crop will be determined as follows:

(1) The total number of acres eligible for prevented planting coverage for all crops cannot exceed the number of acres of cropland in your farming operation for the crop year, unless you are eligible for prevented planting coverage on double cropped acreage in accordance with section 17(f)(4). The eligible acres for each insured crop will be determined in accordance with the following table.

Type of Crop

Eligible acres if, in any of the 4 most recent crop years, you have planted any crop in the county for which prevented planting insurance was available or have received a prevented planting insurance guarantee

(i) The crop is not required to be contracted with a processor to be insured.

(A) The maximum number of acres certified for APH purposes, or insured acres reported, for the crop in any one of the 4 most recent crop years (not including reported prevented planting acreage that was planted to a second crop unless you meet the double cropping requirements in section 17(f)(4)). The number of acres determined above for a crop may be increased by multiplying it by the ratio of the total cropland acres that you are farming this year (if greater) to the total cropland acres that you farmed in the previous year, provided that you submit proof to us that for the current crop year you have purchased or leased additional land or that acreage will be released from any USDA program which prohibits harvest of a crop…

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The Risk Management Agency is requested to provide an interpretation for eligible base acres for prevented planting regarding added land and increased base acres.

Interpretation Submitted

The requestor states the provision is careful to designate the cropland acres this year to the total cropland acres last year rather than addressing just the number of added land acres so that the ratio allows for potential lost acres thus netting the cropland acres. The provision does not address the years after the added land factor is calculated and therefore implies the base calculated in the added land year stays intact until planted acres of a particular crop exceed the base calculated in the added land year or the added land year expires as it is outside the initial prevented planting base calculation, i.e. four years have passed.

A policyholder that "added" the land is still farming that land and to replicate historical planting practice, needs the increased base until he has either exceeded the added land factor increased base or four crop years have passed. In practice, if a policyholder loses land, that history is removed from his database and the prevented planting base will be reduced accordingly addressing a loss of cropland acres resulting in a lower base.

The requestor provided an example of a high added land factor of 5.6 to illustrate when a policyholder has acquired a large tract of land and is adding to a small existing tract. With a wet spring, the policyholder planted mostly soybeans, their base calculated in the added land year should stay intact until exceeded or until that base falls off.

If the requestor's interpretation of the provisions is sustained, it would result in a higher payment for the policyholder. The requestor does not believe this issue is often noticed due to the fact that a small farmer does not usually expand his operation at a rate of 500% in any one year, had the factor been the customary 1.2 to 1.4, the impact would be minimal.

Final Agency Determination

FCIC disagrees in part with the requestor's interpretation. Prevented planting eligible acreage is determined in accordance with the provisions contained in section 17(e)(1)(i)(A) of the Basic Provisions, which state the number of acres eligible for prevented planting coverage for each insured crop will be the maximum number of acres "certified for actual production history (APH) purposes, or insured acres reported, for the crop in any one of the four most recent crop years (not including reported prevented planting acreage that was planted to a second crop unless you meet the double cropping requirements in section 17(f)(4))." Further, provided the requirements specified in section 17(e)(1)(i)(A) have been met a policyholder's eligible acres for prevented planting may only be increased for the current crop year when the policyholder acquired the additional land or the acreage was released from a USDA program which prohibited harvest of a crop. The prevented planting eligible acreage would be based on the factor determined by dividing the total cropland acres farmed this year by the total cropland acres farmed in the previous year. This added land factor is only applicable in the year in which the land is added. In any subsequent year, the determination of prevented planting eligible acreage reverts back to the maximum number of acres certified for APH purposes, or insured acres reported, for the crop in any one of the four most recent crop years. If the added land is certified or reported in one of the four most recent years, it may be included in that maximum but the added land factor is not applicable.

FCIC does not agree with the requestor that if a policyholder loses land, that history is removed from the policyholder's APH database and the prevented planting eligible acres will be reduced accordingly to address the loss of cropland acres. In accordance with section 17(e)(1)(i)(A), the number of eligible prevented planting acres are the maximum number of acres certified for APH purposes or insured acres reported for the crop in any one of the four most recent crop years. Therefore, a reduction in acreage in a single year would not automatically reduce the prevented planting eligible acreage because it is only one of four years used to determine the maximum. FCIC agrees that if the policyholder only certifies or reports the reduced acreage for four years that the following year, the prevented planting eligible acreage will be based on the maximum amount of that reduced acreage.

In accordance with 7 C.F.R. 400.765 (c), this Final Agency Determination is binding on all participants in the Federal crop insurance program for the 2009 crop year. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: Aug 31, 2010