Separate Enterprise Units for Irrigated and Non-Irrigated Acreage
Section 11007 of the Agricultural Act of 2014 authorized separate enterprise units for irrigated and non-irrigated acreage. Currently, Federal crop insurance programs allow one enterprise unit that contains all of the insurable acreage of the same insured crop in the county. The election to have an enterprise unit for irrigated acreage and a separate enterprise unit for non-irrigated acreage will be available for any crop that allows enterprise units in the Crop Provisions, Special Provisions, and where the actuarial documents provide for separate coverage by irrigated and non-irrigated practices. If specified in the actuarial document, the ability to make this election will begin with 2015 crop year spring crops with a contract change date of November 30, 2014, and later.
Separate Enterprise Units for Irrigated and Non-Irrigated Practice Benefits:
- Separates the risk associated with irrigated and non-irrigated acreage.
- Existing enterprise unit subsidy rates apply.
- Results in premium discounts commensurate with the risk insured.
- Separate loss determination, preventing the offsetting effects in the event one practice experiences a loss event when the other did not.
Application for separate enterprise units:
- Producers are required to make the election by the sales closing date.
- Qualification will be determined at acreage reporting time when the insured reports all insurable acreage of the insured crop in the county.
Qualifications for separate enterprise units by irrigated and non-irrigated practices:
- Each enterprise unit must separately contain all of the insurable acreage of the same insured crop and practice in:
- Two or more sections, if optional units are available by sections;
- Two or more section equivalents, if optional units are available by section equivalents;
- Two or more Farm Service Agency (FSA) Farm Numbers, if optional units are available by FSA Farm Number;
- Any combination of two or more sections, section equivalents, or FSA Farm Numbers, if more than one of these is the basis for optional units;
- Two or more units as established by Written Unit Agreement or Unit Division Option; or
- One section, section equivalent, or FSA Farm Number that contains at least 660 planted acres, based on the type of parcel used to establish optional units.
- The parcels above used to qualify for enterprise units must have planted acreage which constitutes at least the lesser of 20 acres or 20 percent of the insured crop acreage in the enterprise unit. If there is planted acreage in more than two sections, section equivalents, FSA Farm Numbers or units established by written agreement, these can be aggregated to form at least two parcels to meet this requirement.
- If qualifications are not met for separate irrigated and non-irrigated enterprise units, unit structure is assigned based on the timing of the discovery.
- If discovery is made on or before the acreage reporting date, the insured may have one enterprise unit, if they qualify, or basic units or optional units depending on the manner in which the insured has reported acreage.
- If discovery is made after the acreage reporting date, the insured will be assigned a single enterprise unit (if the qualifications are met) or a basic unit will be assigned if the insured does not qualify for an enterprise unit.
Premium Discount Impacts:
- Premium discounts are offered for enterprise units to recognize the lower risk associated given geographic diversification.
- The larger the enterprise unit, the lesser the risk and the greater the enterprise unit discount.
- Separate enterprise units by irrigated and non-irrigated acreage will result in smaller tracts of acreage and subsequently, the average discount will generally be smaller, depending on the amount of acreage planted to each practice.
- For example: if an insured currently has a 500 acre enterprise unit made up equally of irrigated and non-irrigated acreage, and decides to have separate enterprise units by irrigated and non-irrigated practice, a smaller premium discount associated with the 250 acres will apply instead of the larger premium discount that would have been associated with the 500 acre enterprise unit.
For more information, contact RMA Public Affairs.