NCC Comments on RMA’s Interim Rule Regarding Farm Law Provisions
The NCC submitted comments on the Risk Management Agency’s (RMA) Interim Rule published on July 1 that addressed implementation of enterprise units by practice, coverage by practice, beginning farmer provisions and the new linkage of crop insurance and conservation compliance.
September 2, 2014
Director, Product Administration and Standards Division
Risk Management Agency
United States Department of Agriculture
P.O. Box 419205
Kansas City, MO64133-6205
RE: Docket Number FCIC-14-0005
The National Cotton Council (NCC) appreciates the opportunity to submit comments on the Federal Crop Insurance Corporation's Interim Rule regarding provisions included in the 2014 Farm Bill. The NCC is the central organization of the U.S. cotton industry representing producers, ginners, warehousemen, merchants, cooperatives, textile manufacturers, and cottonseed processors and merchandisers in 17 states stretching from California to the Carolinas. Annual cotton production is valued at more than $5 billion at the farm gate. The industry and its suppliers, together with the cotton product manufacturers, account for more than 230,000 jobs in the U.S. Taken collectively, the annual economic activity generated by cotton and its products in the U.S. economy is estimated to be in excess of $120 billion.
On behalf of the U.S. cotton industry, I would first commend you for the excellent work the Risk Management Agency (RMA) has already completed in order to be able to offer both the Stacked Income Protection Plan (STAX) and the Supplemental Coverage Option (SCO) for the 2015 insurance year in cotton-producing counties. These two products, along with traditional crop insurance will be the foundation of risk management for cotton producers beginning in 2015.
We also appreciate RMA's work in making other provisions included in the 2014 Farm Bill applicable for the 2015 insurance year including: the ability to insure at different coverage levels by practice; enterprise unit coverage by practice; and the beginning farmer provisions. One provision that RMA has indicated will not be available in 2015 is the Actual Production History (APH) adjustment. This provision is especially important for portions of the Cotton Belt who have recently incurred several years of historic drought conditions. Again, with insurance being the foundation of risk management for cotton producers, the NCC urges RMA to continue to review every avenue possible for implementation of this important provision.
The NCC has a long history of supporting a producer's ability to purchase separate insurance for irrigated versus dry-land production. This Farm Bill provision was supported by the U.S. cotton industry and will be extremely beneficial to cotton producers. We commend RMA for making this change available for 2015.
When the option for Enterprise Unit (EU) coverage was introduced in the 2008 Farm Bill, it quickly gained popularity across the Cotton Belt. The new farm law enhances EU coverage by providing the ability to separate irrigated and non-irrigated acres when using EU coverage. However, it is our understanding that this provision will only be available when a producer has the ability to qualify for EU coverage for both their irrigated acreage and non-irrigated acreage. If a producer cannot qualify for EU coverage in both practices, that producer would then have a common EU. The NCC recommends that RMA implement the new EU provisions with greater flexibility than we currently understand to be the case. Specifically, if a grower qualifies for EU coverage for a single practice, the grower should be allowed to select EU coverage for that practice, without impacting his ability to choose the most appropriate unit structure, be it a separate EU or optional units that meets the needs of his operation under the other practice. This would allow growers to utilize the law's intent of separating by practice and also prevent them from being penalized simply because a portion of their acreage does not meet the EU size requirements.
As the average age of farmers increase, it is imperative for U.S. agriculture to encourage more new and beginning farmers. We believe the 10 percentage point premium subsidy increase for beginning farmers is an important provision that can allow a new producer to possibly purchase higher levels of coverage or provide a savings in insurance premiums that can be used for further investments. For many of these individuals, the prospect of starting an operation from bottom up is nearly impossible due to the capital costs and credit availability. A more common practice is for new and beginning farmers to form partnerships within established operations with the intention of taking over the operation as the more established producer retires. RMA's exclusion of these individuals by limiting the increased premium subsidy to only operations in which all of the substantial beneficial interested holders qualify as a beginning famer severely limits the reach of this provision. It is our understanding that the percentage of substantial beneficial interest holders is noted within the insurance documents. It is our recommendation that RMA prorate the 10 percentage point increase in relation to the new and beginning farmer's percentage of substantial beneficial interest. This would allow more beginning farmers to utilize this provision and not disadvantage the type of partnerships that represent the only option for some beginning farmers to enter farming.
Regarding the requirement of maintaining Conservation Compliance in order to qualify for the insurance premium subsidy, we agree with RMA's approach of not denying benefits during the year in which a farm is found to be out of compliance. However, we urge RMA to reconsider the manner in which penalties are imposed in the following year. There is significant time between the start of the reinsurance year and the sales closing date for most crops, especially cotton and other spring-seeded crops. If a producer is found to be out of compliance at the beginning of the reinsurance year, we would encourage RMA to consider giving producers the opportunity to reinstate their eligibility for premium subsidies if they are able to achieve Conservation Compliance by the sales closing date.
Again, the work that RMA has been able to accomplish since passage of the 2014 Farm Bill is nothing short of extraordinary. As U.S. cotton producers move to heavier reliance on crop insurance products, it is imperative that we continue to work jointly in order to guarantee that the best products are available to cotton producers while also protecting the integrity of the crop insurance program. Thank you for your consideration of our comments.
President & CEO