APH Yield Exclusion Expanded

By Marcia Zarley Taylor
DTN Executive Editor

HADDONFIELD, N.J. (DTN) -- Two features of the 2014 farm bill's crop insurance coverage will be expanded to winter wheat and other crops starting in 2016, USDA's Risk Management Agency announced Friday. The move should aid growers besieged by extreme yield swings due to drought or excess moisture, although the benefits won't come without higher premium costs.

APH-Yield Exclusion -- a "yield forgiveness" product that allows growers to erase exceptionally bad yields from their 10-year crop production history -- will be available to winter wheat producers for the first time in 2016. RMA Associate Administrator Michael Alston described that as a top priority for the agency. It was first made available to spring crops in most of the nation in 2015, but only in areas where the agency had adequate actuarial data. The agency needed to supplement NASS data with actual crop insurance records to piece together 20-year histories for crop yields in every county -- a massive data collection task.

Crop years are eligible for APH Yield Exclusion when the average per planted acreage yield for the county falls at least 50% below the county average for the previous 10 consecutive crop years. The feature was designed to assist Texas and other Great Plains wheat, sorghum and cotton growers who had suffered through repeated and long-lasting drought, and had seen their APHs erode. Ironically, it also proved popular in corn country after its debut. Nationwide, farmers elected yield exclusion on 208,145 crop insurance policies this year, according to preliminary RMA reports. That's about 19% of all crop insurance policies sold, but corn growers were most enthusiastic, purchasing it on 28% of corn policies in 2015.

Last winter, southern Texas growers near Corpus Christi figured yield exclusion was a chance to erase near zero yields due to drought in 2006, 2009, 2012 and 2013 -- and enhance their yield guarantees going forward. One producer's cotton APH alone would have jumped an average of 26%, with similar boosts for dryland corn and wheat. This week growers in that same region reported receiving nearly 50 inches of rainfall since August 2014 -- almost twice the region's yearly average of 29 inches. Widespread deluges throughout the coastal rim and up to Houston have left a number of fields unplanted this season.

RMA also announced the Supplemental Coverage Option (SCO) feature will expand in 2016. This is the so-called "shallow loss" feature that was intended to enhance coverage for growers who elected Price Loss Coverage (PLC) under the new farm program. For next season SCO will be available for 2016 alfalfa seed, canola, cultivated wild rice, dry peas, forage production, grass seed, mint, oats, onion, potatoes and rye in select counties. New counties will also be eligible for barley and winter wheat. SCO was first made available for 2015-crop barley, corn, soybeans cotton, cottonseed, rice, sorghum and wheat.

Farmers so far haven't embraced SCO. Fewer than 25,000 policies have been sold nationwide, according to RMA reports. Because of high premiums "SCO just wasn't a good buy for me, and that seemed to be the consensus for growers across the state of Texas," said Dee Vaughan, a crop producer from the Texas panhandle who had advocated for the program. "When you looked at the premium cost for SCO, it just made more sense to buy up your individual coverage levels, say from 65% to 70%, rather than spend the extra money on SCO, which insures based off county yields. I looked at it for wheat, corn and sorghum and didn't buy a single policy."

Vaughan said one problem was that one of his Texas county yields had been so devastated by repeat drought. Thus, the average dryland wheat yield was only 11 bushels per acre. Based on USDA's premiums, it would cost several dollars per acre to buy an SCO policy, so the cost per $100 of coverage seemed excessive.

"With any of the new programs -- SCO or APH-Yield Exclusion, we still have to maintain an actuarially sound program," said RMA Deputy Administrator Alston. However, given crop insurance's ability to protect against crop and price disasters, he encourages growers to study tools on RMA's website and talk with their agents to customize an appropriate risk coverage plan.

For fact sheets on APH Yield Exclusion and SCO, as well as maps of eligible counties and crops, go to the RMA website www.rma.usda.gov

Maps are available at http://prodwebnlb.rma.usda.gov/…

Marcia Taylor can be reached at Marcia.taylor@dtn.com

Follow her on Twitter @MarciaZTaylor

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