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John Shea, 202-690-0437

RMA AWARDS CONTRACTS TO ADDRESS DECLINING CROP YIELDS

WASHINGTON, July 25, 2005 -- USDA's Risk Management Agency (RMA) has awarded contracts to Agrilogic, Inc and Science Applications International Corporation (SAIC) to develop new and innovative approaches to mitigate declines in yield guarantees following successive years of low yields.

Multiple years of low yields in some drought affected areas have an impact on the producer's APH, which is often used to determine insurance coverage levels. RMA sought proposals for procedures for establishing approved actual production history (APH) yields that are less subject to decreases during successive years of low yields as compared to current procedures, equitable across insureds with differing average yields and broadly applicable to all crops and regions. The new procedures must mitigate this impact while maintaining the actuarial soundness and integrity of the crop insurance program.

AgriLogic, Inc. will explore several methods of replacing one or more actual yields in the producer's APH database. The replacement yield (RY) could be calculated as a percentage of the APH yield for the applicable crop year by replacing actual yields with higher yields on a year-by-year basis or simply by increasing the APH average yield (the rate yield) by a producer-selected percentage to become the approved APH yield. The rate yield would remain unadjusted for rating purposes. The phase 1 feasibility study will encompass four States, namely Kansas, Nebraska, Washington and Ohio.

The SAIC Team is comprised of 4B Agricultural Consultants, Inc., Alan Walter Agricultural Consultants LLC, and Watts and Associates, Inc. The SAIC team will explore development of a pilot program for indexing crop insurance for major crops, defined as corn, soybeans, cotton, and wheat. The SAIC Team proposes to run two development efforts simultaneously. The development effort will include the major crops in data-rich counties. After initial development and applying the current indexing method to the data-rich major crops, a simultaneous effort will focus on refinements to the indexing method for data-sparse crops or to counties and crops that are susceptible to spot losses/gains that are not reflected in county-level NASS yields.

RMA expects these studies to begin immediately.

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