Native Sod Provisions
Jun 30, 2016
The U.S. Department of Agriculture’s Risk Management Agency today announced that the final provisions of the 2014 Farm Bill, which provide farmers and ranchers better protection from weather disasters, market volatility and other risk factors, are now fully in place through the publication of a final rule in the Federal Register.
The final rule clarifies an exception that allows producers to break up to 5 acres of native sod and not receive reduced crop insurance benefits premium subsidy on coverage of for native sod acreage.
Q How will agents know that a farmer is tilling native sod if the farmer doesn't tell them?AA producer who has tilled native sod for the first time will have to have a yield for the acreage to obtain crop insurance. Therefore, working with their crop insurance agent, the agent will request proof the acreage has been previously tilled or assign 65 percent of the transitional yield.
Q When will reduced crop insurance benefits impact farmers who have tilled native sod?AStarting in the fall of 2014, producers that till native sod and plant to an annual crop after February 7, 2014, will see these reductions in their crop insurance benefits.
Q How long will reduced crop insurance benefits impact farmers who have tilled native sod?AThe reduced benefits only apply to acreage of an annual crop the first four crop years after the breaking of native sod in Iowa, Minnesota, Montana, Nebraska, North Dakota, and South Dakota: For example, a policyholder breaks native sod and plants alfalfa in years 1-3 and in year 4 plants an annual crop of corn. The corn crop would be subject to the provisions for native sod only for year 4 whereas, the alfalfa and any crops planted subsequent to year 4 would not. The reduced benefits will also apply to prevented planting acreage because the prevented planting payment is determined by multiplying the prevented planting coverage level by the production guarantee (per acre) for timely planted acreage of the insured crop (or type, if applicable) by your price election or your projected price, whichever is applicable. The production guarantee (per acre) for timely planted acreage for native sod in the first 4 years is based on 65 percent of T-Yield in the Actuarial Documents or the Personal T-Yield, if elected.
Q What are the reduced benefits?AApproved Actual Production History (APH) yield is established at 65 percent of the RMA published transitional yield or personal transitional yield, if elected. Production reports are still required by the production reporting date, but are not used to establish your approved APH yield. No yield substitution is allowed. Premium subsidy, excluding Catastrophic Risk Protection (CAT) coverage, is reduced by 50 percentage points.
Q What did RMA change in the Final Rule?AThe native sod provisions provide for a de minimis exemption, which means that producers who till five acres or less of native sod are exempted from the provisions. Under the Interim Rule, RMA administered this exemption on a per crop policy, per year basis, which meant that a producer could break out four acres for soybeans and four acres for corn and still receive an exemption because native sod tilled under each policy was five acres or less. Under the Final Rule and effective for the 2017 crop year, the total native sod acreage is a combination of all native sod acreage the farmer tills for all crop policies and over multiple crop years in a county. Once the farmer exceeds tilling five total acres of native sod, the reduced crop insurance benefits will apply.
Example 1: In 2017, a producer tills three acres of native sod for soybeans and three acres of native sod for corn. The producer would not receive the de minimis exception because the acreage exceeds the five acre threshold.
Example 2: In 2017, a producer tills four acres of native sod for their soybean policy. In 2018, the producer tills another two acres for their corn policy. Since the producer exceeded the acreage exception in 2018, all acreage in 2018 is subject to the reduction in benefits.
Q Will the 2017 acreage in example 2 be subject to the reduction in benefits?AThe 2017 acreage is below the exemption and therefore would not be subject to the reduction in benefits in 2017. The reduction in benefits is crop-year based, since the producer exceeded the total five acre exemption in 2018, all native sod acreage broken out in 2018 and any newly tilled native sod acreage in subsequent years is subject to the reduction in benefits. In the Example 2 above, the four acres of native sod tilled in 2017 and the two acres tilled in 2018 would be subject to the reduction in benefits beginning in the 2018 crop year. The four acres tilled in 2017 would only be subject to the reduction in benefits for three more crop years of planting as one year has already been completed while below the exemption.
Q Are the reduction in benefits applied to the acreage tilled or all the producer’s acreage in the county?AThe reduction in benefits only apply to the native sod acreage that is tilled.
Q If I till more than five acres, will the reduction in benefits apply to just the acreage that exceeds five acres or all the acreage?AOnce total acreage exceeds the de minimis five acres exemption for a policyholder in a county, the reduction in benefits will apply to all tilled native sod acreage in the crop year the de minimis acreage was exceeded, and apply to all tilled native sod acreage in subsequent crop years. For example for 2018 crop year I tilled seven acres of native sod acreage, to be planted to an annual crop. The reduction in benefits would apply to all seven acres.