John Shea, (202) 690-0437
RMA ADMINISTRATOR'S YEAR-END REVIEW 2006
WASHINGTON, Jan 3, 2007 - Upon completing my first full year as Administrator of the Risk Management Agency
(RMA) , I'm happy to report that RMA is alive and well and serving the needs of American farmers and ranchers.
We have seen new programs, improved programs, increased communications with our various audiences, and even more
demands on our time and resources. We recognize that RMA is a critical component of the safety net for the business
of agriculture in this country. We have a great responsibility,
but more than ever, I am convinced the dedicated and capable RMA people are up to the challenge.
The Federal Crop Insurance Corporation (FCIC) Board of Directors (Board), with its
Chairman, Dr. Keith Collins, Chief Economist for the U.S. Department of Agriculture, took action on numerous
proposed submissions this year. Early in the year, the Board approved the implementation of two pilot insurance
programs targeted for the 588 million acres of pasture and rangeland and 61.5 million acres of hay land in the
country today. Until the 2007 crop year, RMA was limited in what it had to offer the many ranchers who depend
on grazing and haying for a significant amount of livestock feed.
In early August of this year, RMA, along with
contractor Grazingland Management Systems, Inc., rolled out the new Pasture,
Rangeland, Forage (PRF) pilot programs
at Texas A&M University during the Beef Cattle Short Course. This gathering of hundreds of cattle ranchers was the
perfect venue to explain PRF to potential policyholders. In recent drought-ridden years, we have seen ranchers
forced to give up or sharply curtail their herds due to lack of vegetative feed and forage. PRF offers ranchers
in selected counties in nine states the opportunity to insure this valuable resource. Two different indices will
use rainfall or the greenness of vegetation to determine crop condition. November 30, 2006 was the sales closing
date for the 2007 crop year and soon we will know how successful our first effort was.
The Board also resolved to send two separate proposals, designed to address declining actual production history
(APH) yields, to review by
independent experts in the agricultural field. For the past several years, many parts of the country have suffered
from drought. As a result, some producers have seen their annual crop production drop for several years in a row.
Since the amount of crop insurance a farmer is eligible for often depends on the APH of
the farm, RMA continues to search for a method of mitigating that lowered yield and permitting producers to insure a
higher yield on that cropland.
RMA contracted with Science Applications International Corporation (SAIC) and
AgriLogic, Inc in 2005 to develop these approaches. Each company presented proposals at the November 2006 Board
meeting, where the Board made the decision to investigate each of them further. SAIC developed an indexed yield
approach to the declining yield problem and Agrilogic recommended alternatives to the current APH yield methods
that would limit the amount of yield reduction. Listening sessions were held in the late winter of 2005 or early
spring of 2006 with producers, agents, and companies in the targeted states to hear farmers' comments and concerns
on this significant issue.
The Board considered and approved an LRP Lamb Pilot program in 2006. Producers in 27 states will have the ability
to manage some of the risk of raising sheep. This pilot program marks the first insurance program based on an
econometric model in the absence of a publicly traded contract for discovery of sheep and lamb prices.
In addition to final approval of several new pilot programs, the Board considered other proposals for the coverage
of new commodities. After hearing the submission for a plan for oysters and for processing pumpkins, the Board sent these proposed
plans for review by independent experts who will make recommendations in 2007 regarding the soundness of the proposals. In addition,
the Board also sent for independent expert review proposals to offer unit based discounts and experienced based discounts.
The Board also approved the expansion of the Adjusted Gross Revenue-Lite plan of insurance into 10 additional
states, making this "whole farm" insurance plan now available in 28 states.
The long rotation cycles in North Dakota counties made the usual APH history requirement of four consecutive crop
years difficult to achieve. The Board approved a pilot program called the Personal Transitional
Yield program that
calculates APH using actual and assigned yields, giving a more realistic picture of the farmer's
actual production for purposes of calculating crop insurance coverage.
Our proposed "Combo" product rule was published this year for comment. The proposed combination policy would provide both
revenue and yield protection for small grains, cotton, coarse grains, malting barley, rice, canola, and rapeseed, and replace the Crop
Revenue Coverage, Income Protection, Indexed Income Protection, Actual Production History and Revenue Assurance plans of insurance.
Amendments would offer producers a choice of revenue protection (against loss of revenue caused by low prices,
low yields or a combination of both) or yield protection (for production losses only) within the same Basic Provisions and applicable Crop
Provisions. As the year draws to a close we are carefully reviewing comments and will use them as we structure the final rule.
We expect that the new Combo product will be ready for the 2009 crop year.
This year was full of decisions involving RMA's IT systems, and how we are complying with Federal requirements
while updating our long-overdue processing systems. eWA is our name for the new system which will replace virtually
all of the current RMA and FCIC processing systems. The user requirements phase of the project is nearly complete.
The next step is to analyze the user requirements and then design, develop and deploy the new system. System
implementation is planned to coincide with implementation of the combination regulation beginning with the 2009
As we do each year, RMA awarded millions in partnership agreements intended
to provide outreach and education to small, limited resource,
women and minority farmers and ranchers, and to provide non-insurance risk management tools
for loss mitigation. In 2006, we awarded over $20 million in partnership agreements throughout the United States.
Research and development non-insurance tool projects accounted for $3.6 million,
Community Outreach for $7.1 million,
and $10.1 million went to education projects. The Targeted States program will
use $4.5 million to deliver crop insurance information to 15 historically
underserved states and the New American Farmer program will use $300,000 to educate
immigrant and refugee farmers. Knowing how to manage risk is especially
crucial for small farmers.
The Federal crop insurance program has experienced extraordinary growth in the last quarter century. Through the
private sector delivery system in crop year 2005, RMA provided approximately $44 billion of protection to farmers on
approximately 370 commodities, covering nearly 80 percent of major crops for which we can determine total eligible
acres within the United States. This coverage was offered through 22 plans of insurance and approximately 1.2 million
policies insuring about 246 million acres. Crop year 2006, while not all the numbers are in, looks to be even bigger
with about $50 billion in coverage provided by the Federal crop insurance program.
In 2007, we will continue to strive toward providing a useful, practical safety net for America's farmers and ranchers.