Cotton: New Crop Insurance Provisions, Cottonseed Endorsement Prices

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The USDA Risk Management Agency provided a handful of new crop insurance provisions that will become effective for 2018 Spring-seeded crops and producers will find many of them check off long-awaited items from their crop insurance wish list. In addition to changes that will impact the delivery of crop insurance overall, RMA announced also the 2018 insurance price for the Cottonseed (Pilot) Endorsement.

According to information published in the 2018 Upland Cotton Special Provisions the Cottonseed (Pilot) Endorsement will offer yield loss coverage for cottonseed at a price of $0.09 per pound, the equivalent of $180 per ton.

Coupled with the previously announced 2018 seed to lint conversion factor of 1.316 for Texas, the cottonseed endorsement will provide an additional $0.118 of insurance protection on every pound of cotton lint loss below a producer’s yield guarantee in 2018.

The cottonseed endorsement provides yield-only coverage for cottonseed at the same coverage level selected for cotton lint when purchased in conjunction with a Yield or Revenue policy.

In regard to other changes announced by USDA RMA over the last week, there were several additional adjustments made that will impact how crop insurance is delivered in 2018.

Most of the changes announced will be positive for producers, however, a change to the definition of what constitutes a “Replanted Crop” will likely impact producers in 2018 and has been the subject of multiple conversations between Plains Cotton Growers, USDA RMA staff and staff at the House Agriculture Committee.

There has been a considerable amount of confusion about how replanted crops could be handled in 2018, with many growers worried that the changes would completely remove their ability to replant cotton as an uninsured second crop.

The good news for producers in 2018 is that they will continue to have an opportunity to choose to replant cotton as an uninsured second crop, although the window during which that decision will be allowed has been restricted compared to previous years.

Beginning with the 2018 crop year, cotton producers who incur an insurable loss to their initially planted cotton acreage and fail that acreage will be unable to replant cotton as an uninsured, second crop until 15 days after the Final Plant Date or, stated differently, eight days past the end of the seven-day Late Planting Period.

Specifically, the new definition for “Replanted Crop” will consider any failed crop acreage replanted to the same crop prior to the end of an established Late Planting Period, or within the period of time specified in the Special Provisions (which impacts cotton specifically), to be a replanted crop from which final production will be determined and used to establish any possible indemnity that might be payable.

More on Cotton

For cotton, which has one of the shortest Late Planting Periods among major crops at seven days, RMA has added a statement to the Special Provisions for each county that states cotton replanted behind failed cotton will be considered an uninsured second crop only when it is planted 15 days after the Final Plant Date.

Cotton replanted between the end of the Late Planting Period and the 15th day after the Final Plant Date will be considered a replanted crop and any pending insurance claim will be influenced by the yield produced on the replanted acreage.

“Earlier this summer, USDA RMA revised the definition of ‘Replanted Crop’ in such a way that the new interpretation could have potentially eliminated any possibility for a producer to replant the same crop as an uninsured, second crop under the first-crop/second-crop rules as we currently understand them,” explained Steve Verett, Plains Cotton Growers Executive Vice President.

“As soon as we became aware of the problems caused by this revision, PCG contacted USDA RMA staff to understand why the original change had been made and to work to reduce the potential impact on cotton producers.”

He notes that the final decision by RMA to establish the 15-day Special Provision statement for cotton was not an acceptable outcome and said that the conversation with RMA will be ongoing on this issue. “Our focus going forward will be to work with RMA and work toward returning the replant rule as it pertains to cotton to its pre-2018 state,” said Verett.

As noted earlier, there were several other changes announced by RMA for 2018 that producers will appreciate. Chief among them are:

  • Enterprise Units by Practice – RMA announced a change to its implementation of the 2014 Farm Bill provision and have updated the Enterprise Unit by Practice guidelines to finally allow a producer to establish an enterprise unit on one practice and maintain optional unit coverage on a different practice. This is good news for producers who need the flexibility to choose the most appropriate unit structure for each practice on their farm.
  • Cotton Quality Adjustment Procedures – RMA released the new Upland Cotton Loss Adjustment Manual that changes the procedure from requiring a 15 percent quality loss deductible to be met before the quality loss can be calculated to a 10 percent quality loss trigger that will then allow the full amount of the quality loss to be captured by the producer. The new procedure will continue RMA’s current practice of applying the resulting quality loss factor to the grower’s total pounds of production and therefore reduce the amount of production that will subsequently be reported on the grower’s final production report for APH purposes.
  • Yield Cups & Yield Exclusion/Trend Yield Adjusted APH’s – RMA announced that beginning in 2018 yield cups that prevent a producer’s APH yield from declining more than 10 percent from one year to the next will become optional. Growers should be sure that they elect to have yield cups apply to their APH databases on or before applicable Sales Closing Dates to ensure that the cup will continue to apply to their APH database. In addition to making the cups optional, RMA has also extended the applicability of the yield cup to APH databases that are participating in the Trend Adjusted Yield provision as well as the 2014 Farm Bill’s Yield Exclusion option, which will prevent large year-to year fluctuations in TA- or YE-adjusted APH database yields.
  • Conservation Compliance Form Deadlines – RMA has also shifted the deadline for receiving revised AD-1026 Conservation Compliance forms from June 1 to the premium billing date to allow additional time for forms to be submitted to the USDA Farm Service Agency and transmitted to RMA and avoid loss of premium subsidy benefits.

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