[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
IMPLEMENTING THE AGRICULTURAL ACT OF 2014: COMMODITY POLICY AND CROP
INSURANCE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
GENERAL FARM COMMODITIES
AND RISK MANAGEMENT
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JULY 10, 2014
__________
Serial No. 113-17
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Agriculture
agriculture.house.gov
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COMMITTEE ON AGRICULTURE
FRANK D. LUCAS, Oklahoma, Chairman
BOB GOODLATTE, Virginia, COLLIN C. PETERSON, Minnesota,
Vice Chairman Ranking Minority Member
STEVE KING, Iowa MIKE McINTYRE, North Carolina
RANDY NEUGEBAUER, Texas DAVID SCOTT, Georgia
MIKE ROGERS, Alabama JIM COSTA, California
K. MICHAEL CONAWAY, Texas TIMOTHY J. WALZ, Minnesota
GLENN THOMPSON, Pennsylvania KURT SCHRADER, Oregon
BOB GIBBS, Ohio MARCIA L. FUDGE, Ohio
AUSTIN SCOTT, Georgia JAMES P. McGOVERN, Massachusetts
SCOTT R. TIPTON, Colorado SUZAN K. DelBENE, Washington
ERIC A. ``RICK'' CRAWFORD, Arkansas GLORIA NEGRETE McLEOD, California
SCOTT DesJARLAIS, Tennessee FILEMON VELA, Texas
CHRISTOPHER P. GIBSON, New York MICHELLE LUJAN GRISHAM, New Mexico
VICKY HARTZLER, Missouri ANN M. KUSTER, New Hampshire
REID J. RIBBLE, Wisconsin RICHARD M. NOLAN, Minnesota
KRISTI L. NOEM, South Dakota PETE P. GALLEGO, Texas
DAN BENISHEK, Michigan WILLIAM L. ENYART, Illinois
JEFF DENHAM, California JUAN VARGAS, California
STEPHEN LEE FINCHER, Tennessee CHERI BUSTOS, Illinois
DOUG LaMALFA, California SEAN PATRICK MALONEY, New York
RICHARD HUDSON, North Carolina JOE COURTNEY, Connecticut
RODNEY DAVIS, Illinois JOHN GARAMENDI, California
CHRIS COLLINS, New York
TED S. YOHO, Florida
VANCE M. McALLISTER, Louisiana
______
Nicole Scott, Staff Director
Kevin J. Kramp, Chief Counsel
Tamara Hinton, Communications Director
Robert L. Larew, Minority Staff Director
______
Subcommittee on General Farm Commodities and Risk Management
K. MICHAEL CONAWAY, Texas, Chairman
RANDY NEUGEBAUER, Texas DAVID SCOTT, Georgia, Ranking
MIKE ROGERS, Alabama Minority Member
BOB GIBBS, Ohio FILEMON VELA, Texas
AUSTIN SCOTT, Georgia PETE P. GALLEGO, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas WILLIAM L. ENYART, Illinois
CHRISTOPHER P. GIBSON, New York JUAN VARGAS, California
VICKY HARTZLER, Missouri CHERI BUSTOS, Illinois
KRISTI L. NOEM, South Dakota SEAN PATRICK MALONEY, New York
DAN BENISHEK, Michigan TIMOTHY J. WALZ, Minnesota
DOUG LaMALFA, California GLORIA NEGRETE McLEOD, California
RICHARD HUDSON, North Carolina JIM COSTA, California
RODNEY DAVIS, Illinois JOHN GARAMENDI, California
CHRIS COLLINS, New York ----
VANCE M. McALLISTER, Louisiana
(ii)
C O N T E N T S
----------
Page
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 1
Prepared statement........................................... 3
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
opening statement.............................................. 6
Prepared statement........................................... 7
Scott, Hon. David, a Representative in Congress from Georgia,
opening statement.............................................. 4
Witness
Scuse, Hon. Michael T., Under Secretary, Farm and Foreign
Agricultural Services, U.S. Department of Agriculture,
Washington, D.C................................................ 8
Prepared statement........................................... 10
Supplementary information.................................... 37
Submitted questions.......................................... 45
Submitted Material
Texas Wheat Producers Association, submitted letter.............. 45
IMPLEMENTING THE AGRICULTURAL ACT OF 2014: COMMODITY POLICY AND CROP
INSURANCE
----------
THURSDAY, JULY 10, 2014
House of Representatives,
Subcommittee on General Farm Commodities and Risk
Management,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 9:31 a.m., in
Room 1300 of the Longworth House Office Building, Hon. K.
Michael Conaway [Chairman of the Subcommittee] presiding.
Members present: Representatives Conaway, Neugebauer,
Rogers, Gibbs, Austin Scott of Georgia, Crawford, Gibson,
Hartzler, Noem, LaMalfa, Hudson, Davis, Collins, McAllister,
Lucas (ex officio), David Scott of Georgia, Vela, Enyart,
Vargas, Bustos, Maloney, Walz, Negrete McLeod, Costa,
Garamendi, and Peterson (ex officio).
Staff present: Bart Fischer, Kevin Kramp, Matt Schertz,
Nicole Scott, Skylar Sowder, Tamara Hinton, Anne Simmons, Liz
Friedlander, Mary Knigge, John Konya, and Riley Pagett.
OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
IN CONGRESS FROM TEXAS
The Chairman. This hearing of the Subcommittee on General
Farm Commodities and Risk Management to discuss the
implementation of the Agriculture Act of 2014, including
commodity policy and crop insurance, will come to order.
I want to thank Michael Scuse, the Under Secretary for Farm
and Foreign Agricultural Service, for being here. He has got
quite the title. Michael and I had the chance to meet for the
first time the day before yesterday. And I told him we were
going to beat him about the head and shoulders today. I was
teasing him about the setup here. We have this august body
sitting up here. We have him way down there at a lower table,
so we are looking down on him. It is the one time Congress has
the advantage over the Administration, or the Executive Branch,
and we take full advantage of that. So it is good to have you.
It has been 5 months since the farm bill became law. And
the purpose of this hearing is to evaluate the implementation
of the commodity and crop insurance titles. Again, I want to
welcome our witness, Under Secretary Scuse.
The commodity title provisions of previous farm bills
included direct payments, counter-cyclical payments, ACRE,
SURE, which were repealed by the 2014 Farm Bill. These
provisions were replaced by a choice of two policies that will
only trigger when a producer suffers a loss. During
consideration of the farm bill, the Congressional Budget Office
predicted this would reduce spending under that bill and would
be something on the order of $18.4 billion. These budget
savings and reforms came with the promise of enhanced risk
management tools under crop insurance. I understand the lift
that the Department has in implementing these provisions. I
appreciate the complications involved. This is why the farm
bill provided extra funds to the affected agencies. And while I
commend the Department for their efforts so far, I want to
challenge the Department to fully deliver on the promise of the
farm bill.
The Department's assurance of a timely, if only partial,
implementation of the Supplemental Coverage Option is
appreciated. We appreciate the RMA Administrator, Brandon
Willis, for working to ensure that SCO is properly implemented.
We hope to learn more today about the Department's plans for a
full implementation of SCO for all crops and counties as
required by the farm bill. We are encouraged by RMA's efforts
to move forward with crop margin coverage, enterprise units by
practice, coverage levels by practice, STAX, beginning farmer
and rancher provisions, and peanut revenue coverage. The
Committee appreciates that there is an effort to get the job
done on each of these fronts. And while some delays are
understandable, they should be held to a minimum.
I am deeply troubled though over the Department's handling
of two very important issues that we will discuss today. The
first is the Actual Production History Adjustment that will
provide critical relief for those producers struggling through
severe drought for a number of years. And the second is the
rollout of conservation compliance, which I fear will undermine
crop insurance and our overall conservation goals if the
approach is overly punitive.
There are farmers and ranchers who have experienced severe
drought for 3 years. Many remain in severe drought this year.
And a good many of these areas are in D4 drought conditions.
Despite all this, we understand that the Department intends to
administratively delay the APH Adjustments relief until 2016,
which would be the third year of our 5 year farm bill. I
respectfully urge the Department to respond to this natural
disaster in states like Texas and Oklahoma, New Mexico and
Colorado and other states around the country with the same
speed and determination as one would expect in the case of a
wild fire or a hurricane.
One other farm bill provisions where the Department has
said it can only partially implement a provision on time, we
hope to exhibit patience. All we ask on the APH Adjustment is
that some effort be made to partially implement the provision
in time for the 2015 crop year where relief is needed the most.
Beyond providing immediate relief to farmers and ranchers
who were hit the hardest, timely action might help insulate the
Department from legal challenges. The APH Adjustment is meant
to be self-executing. Farmers were not meant to have to ask
permission to exclude qualifying yields. The right is the
producers, and it became the producers' right on the day the
farm bill became law.
My second concern regards conservation compliance. This was
never a smart provision, and the interim rule explains why so
many of us were concerned with it. For example, page 11 of the
rule says that if a farmer plants a crop next spring and it is
found to be non-compliant on June 1, even if he or she were to
come back into compliance by July 1, within a month, the farmer
would still be denied premium support for 2016. This
effectively means no insurance. As bad as the compliance
provision is, the objective was to impose the penalty in the
following year, and only if the producer did not come back into
compliance.
I maintain that farmers are our best conservationists. They
know their land, and they know better than you and I how to
keep it productive. From my experience, farmers are at their
best in making conservation investments when they are
profitable. This provision as interpreted by the Department,
along with the EPA's new waters of the U.S. regulation, are
just two examples of why farmers and ranchers are scared to
death about the regulatory overreach of this Administration.
Finally, on two positive notes, I want to commend the
Administrator of the Farm Service Agency, Juan Garcia, for his
exemplary work in implementing Livestock Disaster Assistance.
We hit some bumps along the road early on, but this was the
first rule out of the gate and it turned out well. We really
appreciate Juan and his team's excellent work. And, second, I
want to commend the Secretary for the role that he played in
securing passage of the farm bill and his responsiveness during
implementation. Fully implementing the farm bill in a timely
way not only fulfills a pledge to farmers and ranchers, but it
honors the work that the Secretary did to help the farm bill
happen.
[The prepared statement of Mr. Conaway follows:]
Prepared Statement of Hon. K. Michael Conaway, a Representative in
Congress from Texas
It has been 5 months since the farm bill became law. The purpose of
this hearing is to evaluate implementation of the commodity and crop
insurance titles.
I want to welcome our witness, Under Secretary Scuse.
The commodity title provisions of previous farm bills, including
Direct Payments, Countercyclical Payments, ACRE, and SURE, were
repealed by the 2014 Farm Bill. These provisions were replaced by a
choice of two policies that only trigger when a producer suffers a
loss. During consideration of the farm bill, the Congressional Budget
Office predicted this would reduce spending by $18.4 billion.
These budget savings and reforms came with the promise of enhanced
risk management tools under crop insurance.
I understand the lift the Department has in implementing these
provisions. I appreciate the complications involved. This is why the
farm bill provides extra funds. And, while I commend the Department for
efforts so far, I want to challenge the Department to fully deliver on
the promise of the farm bill.
The Department's assurance of a timely--if only partial--
implementation of the Supplemental Coverage Option is appreciated. We
appreciate RMA Administrator, Brandon Willis, for working to ensure
that SCO is properly implemented. We hope to learn more today about the
Department's plans for the full implementation of SCO for all crops and
counties as required by the farm bill.
We are encouraged by RMA's efforts to move forward with Crop Margin
Coverage, Enterprise Units by Practice, Coverage Levels by Practice,
STAX, Beginning Farmer and Rancher provisions, and Peanut Revenue
Coverage. The Committee appreciates that there is an effort to get the
job done on each of these fronts. While some delays are understandable,
they should be held to a minimum.
I am deeply troubled over the Department's handling of two very
important but very different issues. The first is the APH Adjustment
which would provide critical relief for those struggling against severe
drought. The second is the rollout of conservation compliance which I
fear could undermine crop insurance and our overall conservation goals
if the approach is overly punitive.
There are farmers and ranchers who have experienced severe drought
for 3 years. Many remain in severe drought this year. A good many of
these areas are in D4 drought condition. Despite all of this, we
understand the Department intends to administratively delay APH relief
until 2016, the THIRD year of a FIVE year farm bill.
I respectfully urge the Department to respond to this natural
disaster in states like Texas, Oklahoma, New Mexico, Colorado and other
states around the country with the same speed and determination as one
would expect in the case of a wildfire or a hurricane.
On other farm bill provisions where the Department has said it can
only partially implement a provision on time, we are exhibiting
patience. All we ask on APH is that some effort be made to partially
implement the provision in time for 2015 where relief is needed most.
Beyond providing immediate relief to farmers and ranchers who are
hit the hardest, timely action might help insulate the Department from
legal challenges. The APH adjustment is meant to be self-executing.
Farmers were not meant to have to ask permission to exclude qualifying
yields. The right is the producer's and it became the producer's right
on the day the farm bill became law.
My second concern regards conservation compliance. This was never a
smart provision and the interim final rule explains why many of us
remain concerned.
For example, page 11 of the rule says that if a farmer plants a
crop next spring and is found to be non-compliant on June 1, even if he
were to come back into compliance on July 1, within a month, the farmer
would still be denied premium support for 2016. This effectively means
no insurance. As bad as the compliance provision is, the objective was
to impose the penalty in the following year and only IF the producer
did not come back into compliance.
I maintain that farmers are the best conservationists. They know
their land and they know better than you or I how to keep it
productive. From my experience, farmers are at their best in making
conservation investments when they are profitable.
This provision, as interpreted by the Department, along with EPA's
new waters of the U.S. regulation, are just two examples of why farmers
and ranchers are scared to death about the regulatory overreach of this
Administration.
Finally, on two positive notes: I commend the Administrator of the
Farm Service Agency, Juan Garcia, for his exemplary work in
implementing livestock disaster assistance. We hit some bumps along the
road early on but this was the first rule out of the gate and it turned
out well. We really appreciate Juan and his team's excellent work.
Second, I commend the Secretary for the role he played in securing
passage of the farm bill and for his responsiveness during
implementation. Fully implementing the farm bill in a timely way not
only fulfills a pledge to farmers and ranchers but it honors the work
that the Secretary did to help make the farm bill happen.
I now recognize the Ranking Member, my good friend, Mr. Scott, for
any remarks he may have.
The Chairman. I now recognize my good friend, Ranking
Member David Scott, for any remarks he may have. David?
OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN
CONGRESS FROM GEORGIA
Mr. David Scott of Georgia. Thank you, Chairman Conaway.
And let me thank you for putting this very critical hearing
together, focusing on crop insurance. I am mainly concerned
with Title I and Title XI. Of course, Title I defines the
commodities of peanuts, rice, soy beans, wheat, corn, so forth.
Title XI specifically enhances the coverage of the permanently
authorized Federal insurance program. It is very important for
us to understand that this farm bill completely, completely
changes the way in which farmers receive assistance now.
Farmers must now make a decision as to which crop insurance
program they will sign on to this fall, either the agriculture
risk coverage, ARC, or price loss coverage, PLC. And then once
the farmer makes that decision, they are committed to it for 5
years. For this reason, it is critical that we take the time,
make sure our farmers and our producers get the correct
information, the right information, so that they can make the
right decisions.
And, specifically, I want to start with Title XI. There has
been great concern, and Chairman Conaway has already alluded to
it, regarding the Risk Management Agency which largely
administers the Federal Crop Insurance Program. The issue is
why the RMA imposes what is known as downward trending
adjustment on the Actual Production History, or the APH in
Georgia and South Carolina, while waiving this requirement on
all the other states? That is not right. In the case of South
Carolina and the case of Georgia peach producers, the APH of
the producer is based on the preceding 5 years of the Actual
Production History. However, in Georgia, in South Carolina,
peach growers, the proven yield of the producers that comprise
their APH are then administratively adjusted downward by the
RMA, and this effect of this downward adjustment makes for a
reduction in the yield levels that the producer may insure.
This imposes a tremendous hardship on the peach producers in my
State of Georgia who I have represented here in Congress for 12
years, represented in the State Legislature and the State
Senate for 20, represented in the State Representative House
for 8. And that is 40 years. And then on top of that, I was
born in South Carolina, grew up on a farm there. So when you
talk about Georgia, you talk about South Carolina, you are
hitting David Scott right in the heart.
So we need to get a better understanding from the Under
Secretary today. We understand the theory behind the downward
adjustment is that it is--they say it is necessary in order for
an insurance guarantee to be consistent with the production
expectations for the peach crop, which is anticipated to be
lower in the earlier years of perennial crop. However, any
lower yield associated with the peach crop is already reflected
in the APH of the Georgia and South Carolina producers, which
is based on its 5 year history. Therefore, this downward
trending adjustment is unnecessary. It is punitive. It is
discriminatory to Georgia and South Carolina peach growers.
This is not right. And we have to correct it, Mr. Under
Secretary.
As I mentioned, the downward trending adjustment has been
waived in each of the 2011 through 2014 crop years for the
producers of perennial crops, including peaches, in states from
Maine to North Carolina. However, the same relief was not
granted to my farmers in Georgia or in South Carolina. South
Carolina and Georgia peach growers suffered a devastating
freeze in March, costing millions of dollars in losses, losses
that were exacerbated by the RMA's discriminatory treatment.
And this downward trending adjustment must be waived also for
Georgia and South Carolina as they are in states from Maine to
North Carolina. All we are asking for is to be treated equal.
And as my granddaddy used to say on the farm, ``We all want to
be fed out of the same spoon.''
Now, my other concern is with regards to peanuts, and again
Title XI. The 2014 Farm Bill contains provisions providing for
what is called revenue assurance, specifically for peanut
farmers beginning with the 2015 crop year. Funds for this
initiative were included in the existing farm bill. We need to
know more about this program. We need to know how much money is
in the program. We need to get a clear understanding of how
this money, these funds, will be used, the accessibility and
benefit for our peanut farmers.
In conclusion, Mr. Chairman, we are here at this hearing
today because of these changes. I just briefly want to
highlight how dramatic these are. First, direct and counter-
cyclical payment programs in the state based revenue program
known as ACRE, Average Crop Revenue Enhancement Program, have
all been eliminated. And in their place, as I mentioned
earlier, a farmer now has to choose one of two farm programs
that begin with the 2014 crop year. One, price loss coverage.
And what this program does, it makes a payment to a producer
when the market price for a covered crop is below a fixed
reference price. Or there is the Agriculture Risk Coverage,
ARC, a program that makes a payment when either the farm's
revenue from all crops that account for the revenue from a
crop, the farmer has to choose the alternatives below 86
percent of the pre-determined bench value. Together, it is
important that we have these programs. And a highlight is that
the savings should be $16.6 million.
And, finally, it is important for us to recognize our
cotton growers who are no longer coming under these programs,
but we put a different program in called the Stacked Income
Protection Program for Upland Cotton acreage. And it is an
additional area of revenue that a cotton producer may use alone
or in combination.
And, finally, the second program, the supplemental coverage
option, provides all crop producers with the option of
purchase. So we have a lot of issues here. I look forward to
hearing the Under Secretary. Thank you very much for coming.
And thank you, Mr. Chairman.
The Chairman. Thank you, David, I appreciate your comments.
We will now recognize the Chairman of the Committee, Frank
Lucas, for any comments he might have.
OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN
CONGRESS FROM OKLAHOMA
Mr. Lucas. Thank you, Mr. Chairman. Under Secretary Scuse,
I appreciate your being here today. And I appreciate all of the
hard work that you and your staff have been doing over the last
several months. The Agricultural Act of 2014 is a shift to a
more risk based safety net. Gone are the days of making
payments regardless of market conditions. Congress gave you a
large task, and I appreciate the willingness of the Secretary
and the Department to listen and act when problems arise.
The Secretary and you have worked with this Committee on
issues that have arisen in the Livestock Disaster Programs, and
many of the improvements Congress made to the crop insurance
title. And I sincerely thank you for that.
That being said, I am concerned about a few key insurance
problems which Chairman Conaway has already highlighted.
Producers in my state pay incredibly high premiums for their
crop insurance coverage, often much higher than their
colleagues in other parts of the country. For example, compared
to wheat producers in your home State of Delaware, wheat
producers in Oklahoma pay almost three times more for their
crop insurance coverage. We have more yield variability in
Oklahoma, so we pay higher rates. And that is understandable,
at least to a degree. But after years of prolonged drought, we
are now paying much higher rates. To add insult to injury, the
amount of production my producers can ensure has been decimated
as well, even though that loss in yield was through no fault of
their own.
This second factor is precisely why I included the APH
Adjustment in the farm bill. For anyone who is facing the
prospect of drought, or who has been suffering for years
through prolonged drought, this provision is designed to
provide immediate relief. We are almost finished with wheat
harvest in Oklahoma. Four years of drought, combined with
widespread freeze damage, have yielded one of the worst crops
in state history. The APH Adjustment would provide widespread
relief for wheat producers, planting and insuring their crops
this fall. Congress was clear: all producers who have been
affected by droughts should be able to exclude those years.
They should be able to do so immediately. I understand there
are challenges, but I think producers affected by drought
deserve the effort.
Again, I thank you for all that you have done, and I look
forward to working together in the future to ensure that our
producers have the full benefits of the new safety net that we
all worked so hard together to provide.
Thank you, Mr. Chairman. I yield back.
[The prepared statement of Mr. Lucas follows:]
Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress
from Oklahoma
Mr. Scuse, I appreciate you being here today and I appreciate all
of the hard work that you and your staff have been doing over the last
several months. The Agricultural Act of 2014 is a shift to a more risk-
based safety net. Gone are the days of making payments regardless of
market conditions.
Congress gave you a large task and I appreciate the willingness of
the Secretary and the Department to listen and act when problems have
arisen. The Secretary and you have worked with this Committee on issues
that have arisen in the livestock disaster programs and many of the
improvements Congress made to the crop insurance title, and I sincerely
thank you for that.
That being said, I am concerned about a key crop insurance
provision, which Mr. Conaway has already highlighted.
Producers in my state pay incredibly high premiums for their crop
insurance coverage, often much higher than their colleagues in other
parts of the country. For example, compared to wheat producers in your
home State of Delaware, wheat producers in Oklahoma pay almost three
times more for their crop insurance coverage. We have more yield
variability in Oklahoma, so we pay higher rates. That is understandable
(at least to a degree), but after years of prolonged drought, we are
now paying MUCH higher rates.
To add insult to injury, the amount of production my producers can
insure has been decimated as well, even though that loss in yield was
through no fault of their own.
This second factor is precisely why I included the APH Adjustment
in the farm bill. For anyone who is facing the prospect of drought or
who has been suffering through years of prolonged drought, this
provision is designed to provide immediate relief.
We are almost finished with wheat harvest in Oklahoma. Four years
of drought combined with widespread freeze damage has yielded one of
the worst crops in state history. The APH Adjustment would provide
widespread relief for wheat growers planting and insuring their crop
this Fall.
Congress was clear. All producers who have been affected by drought
should be able to exclude those years, and they should be able to do so
immediately. I understand there are challenges, but I think producers
affected by drought deserve the effort.
Again, I thank you for all that you have done and look forward to
working together in the future to ensure our producers have access to
the full benefits of the new safety net that we all worked together to
provide.
Background Note: In 2014, wheat producers in Delaware paid $0.0284
for $1 of crop insurance coverage. By contrast, wheat producers in
Oklahoma paid $0.0812 per $1 of crop insurance coverage, almost three
times the rate in Delaware.
The Chairman. I thank the gentleman. The chair will request
that other Members submit their opening statements for the
record so that our witness may begin his testimony, and to
ensure there is ample time for questions.
I welcome to our witness table today, the Honorable Michael
T. Scuse, Under Secretary for Farm and Foreign Agricultural
Services, United States Department of Agriculture, Washington
D.C.
Michael, the floor is yours for your comments. Thank you.
STATEMENT OF HON. MICHAEL T. SCUSE, UNDER SECRETARY, FARM AND
FOREIGN AGRICULTURAL SERVICES, U.S.
DEPARTMENT OF AGRICULTURE, WASHINGTON D.C.
Mr. Scuse. Thank you. Chairman Lucas, Chairman Conaway,
Ranking Member Scott, and Members of the Subcommittee, I am
pleased to be here today to update you on the United States
Department of Agriculture's progress in implementing the
commodity and crop insurance titles of the 2014 Farm Bill.
The new farm bill improves the safety net for producers,
expands crop insurance tools and continues our market
development programs. Implementations of these programs is a
top priority for USDA. In roughly 5 months since enactment,
USDA has made considerable progress in implementing key
provisions.
USDA's first priority was to implement the disaster relief
programs for livestock producers. LSP, LIP, ELAP and TAP were
implemented in 60 days. As of July 2, USDA has provided more
than $1.2 billion under LFP and LIP to livestock producers.
On June 9, CRP continuous signup was restarted, as was the
CRP transition incentives payment for beginning and socially
disadvantaged producers. In lieu of a general signup this year,
we are allowing producers with CRP contracts expiring in
September to receive a 1 year contract extension.
Another priority for USDA and FSA is helping producers
understand ARC, PLC, margin protection program for diary, and
NAP buy-up programs, and what these programs mean for them and
their families. On May 29, USDA announced awards totaling $6
million through our university partners for the development of
online decision tools and producer education on these programs.
The University of Illinois and the University of Missouri with
Texas A&M will simplify complex decisions that producers need
to make by easy to use tools that producers can access on their
home computers. State extension specialists will be trained on
these tools and host meetings to educate producers later this
fall.
This summer, FSA plans to provide producers' information on
their current base acres yields and 2009 to 2012 planting
history, and offer them an opportunity to verify this
information with their local Farm Service Agency office. Later
this fall, there will be an opportunity to update yields and
reallocate bases, the critical first step in implementing ARC
and PLC. By mid-winter, all producers on a farm will be
required to make a one-time unanimous election between price
protection, county revenue protection and individual revenue
protection for the 2014 through 2018 crop years. By early 2015,
producers can expect to sign contracts for ARC and PLC for the
2014 and 2015 crop years. FSA plans to implement the margin
protection program for dairy by September 1.
The Committee can also expect to see a proposed definition
of significant contribution of active personal management later
this year.
Crop insurance has become an increasingly important
component of the farm safety net. Due to efforts that RMA began
last summer, a whole farm revenue protection program was
approved by FCIC in May. RMA expects information about this
program to be available in time for producers to make decisions
for the 2015 crop sales. Last week, RMA published an interim
rule on seven sections of the farm bill. That rule will apply
to producers as soon as this fall, including beginning farmer
and rancher provisions, the authority to correct errors and
make late payments, and restrictions for producers who plant on
native sod. RMA expects to offer enterprise units for irrigated
and non-irrigated crops, and coverage levels by practice for
the 2015 spring crops. APH adjustment will be available for
crops planted in the fall of 2015.
The rule links eligibility for any premium subsidy paid by
FCIC on a policy or plan of federally reinsured crop insurance
to compliance with highly erodible land conservation and
wetland conservation compliance provisions. Although no
producers will lose premium subsidy for the current reinsurance
year, first time compliers will need to visit a Farm Service
Agency to certify their compliance if they have not already
done so. USDA intends to provide more details on the new
conservation compliance requirements later this fall. Education
on this requirement will be a priority for USDA in the coming
months.
RMA plans to release supplemental coverage option materials
later this month, and information for corn, grain, sorghum,
rice, soybean, spring wheat and cotton will be made available
later this summer or early fall. In addition, RMA will be able
to offer SCO for spring barley beginning in 2015. Also this
fall, RMA will be examining additional crop and county coverage
under SCO. We understand that producers need as much
information as possible regarding when they make their ARC and
PLC election. Policy materials and county availability for the
Stacked Income Protection Plan for producers of Upland Cotton
will be made available in August, and RMA anticipates that STAX
will be available for over 98 percent of cotton acreage in
production. Additionally, FSA will have information on the
Cotton Transition Assistance Payment Program available later
this summer.
In closing, I would like to thank the Committee for this
opportunity to update you on USDA's progress in implementing
title I and title XI of the 2014 Farm Bill. Farmers, ranchers,
rural communities and other USDA stakeholders have waited
several years for this legislation, and USDA has made
significant implementation progress.
I would be happy to answer any questions that you may have
at this time. Thank you, Mr. Chairman.
[The prepared statement of Mr. Scuse follows:]
Prepared Statement of Hon. Michael T. Scuse, Under Secretary, Farm and
Foreign Agricultural Services, U.S. Department of Agriculture,
Washington, D.C.
Chairman Conaway, Ranking Member Scott, and Members of the
Subcommittee, I am pleased to be here before you today to provide an
update of the U.S. Department of Agriculture's (USDA) progress in
implementing Title I, the Commodity Title, and Title XI, the Crop
Insurance Title, of the Agricultural Act of 2014, also known as the
farm bill.
The new farm bill improves the safety net for producers, expands
critical crop insurance tools and continues our market development
programs. USDA and the Farm and Foreign Agricultural Services (FFAS)
Mission Area have made the implementation of these programs a top
priority. In the roughly 5 months since enactment, the three agencies
under FFAS, the Farm Service Agency (FSA), the Risk Management Agency
(RMA) and the Foreign Agricultural Service (FAS) have made considerable
progress in implementing many of the key provisions. Today I will focus
on titles I and XI.
In the Commodity Title, USDA's first priority was to implement the
disaster relief programs for livestock producers. With enactment of the
farm bill in February, Secretary Vilsack directed FSA to implement the
livestock assistance programs by April 15th, and we met that goal. In
fact, we implemented the disaster programs--including the Livestock
Forage Program (LFP), Livestock Indemnity Program (LIP), the Emergency
Livestock Assistance Program (ELAP) and the Tree Assistance Program
(TAP)--in just 20 percent of the time it took USDA to implement in
2008. USDA has, through LFP and LIP, provided more than $1.2 billion in
help to livestock producers, many of whom had been waiting for over 2
years for assistance.
USDA's next priority for the mission area was resuming conservation
efforts. On June 9, FSA restarted continuous sign-ups in the
Conservation Reserve Program (CRP), as well as the CRP Transition
Incentives Program (TIP) for beginning and socially disadvantaged
farmers and ranchers. In lieu of a general sign-up this year, we're
allowing producers with CRP contracts expiring this September to
receive a 1 year contract extension. And we've implemented the farm
bill requirement that in certain cases producers enrolled through
general sign-up for at least 5 years can opt-out of their contracts.
Another important priority for USDA and FSA is helping farmers and
ranchers understand the new farm bill safety net programs including
Agriculture Risk Coverage (ARC), Price Loss Coverage (PLC), Margin
Protection Program (MPP) for dairy, and enhanced protection under
Noninsured Disaster Assistance Program also known as NAP buy-up--and
what these programs mean for their families. On May 29, USDA announced
$3 million for two teams of universities representing the geographical
diversity of agriculture--one led by the University of Illinois, and
another led by the Food and Agricultural Policy Research Institute
(FAPRI) at the University of Missouri and the Agricultural and Food
Policy Center (AFPC) at Texas A&M. The awardees are tasked with
integrating the complex data and scenarios of the new safety-net
programs into easy-to-use tools that producers can access on their home
computers to explore program options and coverage levels. These tools
will be available later this summer and in early fall.
Experts at the state cooperative extension services will be trained
and, starting in late summer, producers will be able to pose questions
to and seek advice from extension agents about the new safety net
programs. FSA also recently launched a website with tables of monthly
updated data for those who want to begin exploring how the ARC and PLC
guarantees and payments will be determined for the 2014 crop.
Late this summer FSA also plans to provide producers information on
their current base acres, yields and 2009-2012 planting history and
offer them an opportunity to verify this information with their local
FSA office. Then later this fall, there will be an opportunity to
update yields and reallocate bases--this is the critical first step in
implementing the ARC and PLC programs. By mid-winter all producers on a
farm will be required to make a one-time, unanimous and irrevocable
election between price protection, country revenue protection and/or
individual revenue protection for 2014-2018 crop years. By early 2015
producers can expect to sign contracts for ARC or PLC for the 2014 and
2015 crop years.
Late this summer, FSA also plans to implement MPP for dairy. The
farm bill has a target for MPP to be in effect by September 1 and
USDA's goal is to meet that deadline. Late this summer FSA also plans
to publish the details on the Dairy Product Donation Program (DPDP).
While current margins are well above $4 per hundredweight and DPDP is
not expected to trigger, USDA will have the program details finalized.
By law, dairy producers may not participate in both MPP and RMA's
Livestock Gross Margin for Dairy (LGM-Dairy) programs. As a result, FSA
and RMA jointly sent guidance at the end of June on the transition
period, which will afford dairy producers maximum flexibility by
allowing them to transition to the MPP-Dairy program in either 2014 or
2015. This flexibility will allow producers under LGM-Dairy, who
already have LGM-Dairy target marketings that go into 2015, to
participate in MPP-Dairy in 2015 after their insurance contract is
over, as opposed to keeping these producers out until 2016.
Later this year, the Committee can expect to see a proposed
definition of ``significant contribution of active personal
management.''
The crop insurance program has become an increasingly important
component of the farm safety net, and crop insurance protections for
all farmers, particularly beginning farmers and ranchers, have been
strengthened under the new farm bill.
In order to implement the numerous crop insurance changes as
quickly as possible, the Risk Management Agency (RMA) began preparing
to implement the Stacked Income Protection Plan (STAX) and Supplemental
Coverage Options (SCO) programs months before farm bill passage.
Specifically, since both the House and Senate had similar provisions
related to STAX and SCO, RMA began efforts to develop and implement
policies and procedures soon after passage. These efforts have paid
dividends, and RMA will have information on SCO availability this month
and STAX availability in August.
In April, RMA began revising the premium rates charged for
Catastrophic Risk Protection Endorsement (CAT) coverage base them on
the average historical ``loss ratio'' plus a reasonable reserve. This
change will not increase costs for growers. RMA will update actuarial
documents throughout the year as applicable to fully implement this
section. Additionally, in April RMA implemented a prohibition of
catastrophic coverage on crops used for grazing by issuing a guidance
document to amend the Special Provisions for the annual forage policy.
In May, RMA completed the update to its systems to reflect the
permanent enterprise unit subsidy as mandated by the farm bill. Also in
May, due to efforts that RMA began last summer, a Whole-Farm Revenue
Protection program, as required by the farm bill, was approved by the
FCIC Board of Directors. RMA expects the Whole-Farm Revenue Protection
product information to be available to farmers later this year in time
for producers to make plans and decisions for 2015 crop sales. In mid-
May, RMA's Risk Management Education Request for Application (RFA) for
Risk Management Education Partnerships grants and Crop Insurance in
Targeted States grants were published in the Federal Register. These
RFAs provide funding opportunities related to financial benchmarking.
Last week RMA published an interim rule on seven sections from the
farm bill: highly erodible land and wetland conservation for crop
insurance, enterprise units for irrigated and non-irrigated crops,
adjustment in actual production history (APH) to establish insurable
yields, crop production on native sod, coverage levels by practice,
beginning farmer and rancher provisions, and authority to correct
errors.
This rule will allow RMA to begin offering some of these benefits
to producers as soon as this fall, including the beginning farmer and
rancher provisions, the authority to correct errors and make late
payments, and restrictions for producers who plant on native sod. RMA
expects to offer enterprise units for irrigated and non-irrigated crops
and coverage levels by practice for spring crops in 2015. Adjustment in
APH will be available for crops planted in the fall of 2015. This was
one of the few crop insurance provisions that did not exist in either
the House or Senate version of the farm bill prior to conference. While
RMA understands how important this provision is to many farmers who
have suffered from natural disasters, it is not possible to implement
this provision for the 2015 crop year.
The interim rule links eligibility for any premium subsidy paid by
FCIC on a policy or plan of federally reinsured crop insurance to be in
compliance with Highly Erodible Land Conservation (HELC) and Wetlands
Conservation (WC) provisions. Although no producers will lose premium
subsidy for the current reinsurance year, ``first time compliers'' will
need to visit a FSA office to certify their compliance if they have not
already done so. USDA intends to provide more details on the new
conservation compliance requirements by the fall. New conservation
compliance requirement education will be a priority for USDA in the
coming months.
RMA plans to release policy materials later this month for SCO,
which provides coverage for the layer of risk between 86 percent and
the coverage level selected by the insured. This means an insured that
elects a 70 percent coverage level could elect to cover an additional
16 percent of risk under SCO. County availability for winter wheat will
be published this month. Information for other crops such as corn,
grain sorghum, rice, soybeans, spring wheat, and cotton will be made
available later this summer or early fall for the spring planting. I am
pleased to announce that in addition to these crops, RMA will be able
to offer SCO coverage for spring barley beginning in 2015. This fall,
RMA will look at additional crops that can receive SCO coverage as well
as additional counties. USDA and I understand that producers need as
much information as possible regarding when they are required to make
their ARC or PLC election because producers who elect ARC on a farm
will not be eligible for SCO, and RMA is working to provide additional
information on new crops and counties that may have SCO prior to the
ARC and PLC election period.
Policy materials and county availability for STAX will be made
available in August. RMA anticipates that STAX will be available for
over 98 percent of cotton acreage in production. FSA plans to have more
information on cotton transition payments available later this summer.
For the counties where STAX is not available in 2015, upland cotton
producers will be eligible for an additional transition payment.
RMA is also preparing statements of work and cost estimates for
contracted feasibility studies on food safety and swine catastrophic
loss. In addition, it will be issuing a consultation notice as a first
step in the research and development of a policy to insure biomass
sorghum and sweet sorghum grown for the purposes of producing a
feedstock for renewable biofuel, renewable electricity, or biobased
products.
Finally, RMA appreciates that Congress recognized the importance of
program maintenance and program integrity by providing $9 million to
conduct policy reviews and to ensure actuarial soundness and financial
integrity. As crop insurance continues to be more important to our
farmers and ranchers, it is vital that we also protect the interest of
taxpayers. This money will enhance RMA's investments from discretionary
funding for these activities. At this moment, I would like to express
my thanks to the FSA and RMA employees who are working tirelessly to
assist the American farmers and ranchers who waited so patiently for
these programs. I commend the FSA and RMA employees for their hard
work.
In closing, I would like to again thank the Committee for this
opportunity to update you on USDA's continued progress in implementing
title I and title XI of the 2014 Farm Bill. Farmers, ranchers, rural
communities and other USDA stakeholders have waited several years for
this legislation, and USDA has made significant progress to implement
each provision of this critical legislation.
The Chairman. Thank you, Michael.
The chair will remind Members that they will be recognized
for questions in order of seniority for Members who were here
at the start of the hearing. After that, Members will be
recognized in order of arrival. And I appreciate our Members'
understanding.
I now recognize myself for 5 minutes.
Michael, thank you for all the great work that RMA and FSA
and your team have done. You laid out a few of those
accomplishments, particularly Livestock Disaster Assistance,
and we are truly thankful for the hard work. But under the
guise of, ``What have you done for me lately?'', we will have
some questions about some of the things that are yet to be
done. I don't want to take the edge off how appreciative we are
of what you have accomplished, but there are some things that
are of concern to us. I also want to thank your FSA team; they
are anxiously waiting for a lot of the stuff that you are
trying to kick out to them so that they can actually work with
their producers. There is a sincere joint effort in all of
that.
Talking about the APH Adjustment, we have had a lot of back
and forth with your staff. I need some help understanding why
this is going to be so difficult, why you say you can't we get
it done in 2015. We had an intern last week pull down 20 years'
worth of NASS data for 54 counties in Texas on wheat. It
covered about 75 percent of the wheat crop. They did the
calculations. They figured out which years could be kicked out
under the APH Adjustment. So, if we were able to do that with
the resources we had, why can't RMA, with the new resources
they have, and the broader access to data that they have, can't
get at least a partial roll out of the APH quicker than the
2016 crop year?
Mr. Scuse. Mr. Chairman, I appreciate the concern about
getting the APH done as soon as we possibly can. And we very
much would like to do that.
If you look at everything that RMA is going to be rolling
out for 2015, and the resources that it takes for the Risk
Management Agency to roll out those programs for 2015, it is no
small task just on those. One of the reasons why the Risk
Management Agency is able to roll out this many programs for
2015, Risk Management Agency looked at the bills that had been
passed by the House and Senate previous to the bill that was
ultimately passed by both and signed by the President. We
anticipated these programs, so we started to work on these
programs long before the final bill was passed and signed into
law.
The APH was not in any of those previous forms of
legislation. And it was a last minute addition to the final
farm bill, and one that we did not anticipate having to
implement. Having said that, it is not just about going back
and getting 20 years of data for every single county, but it is
20 years of data for every single county for every single crop
that is grown in that county. And on top of that, we also have
to work with our approved insurance providers, the 18 companies
out there that are responsible for writing the crop insurance.
It is no small effort to do the IT programs for all the
commodities that are grown in all of the counties in the entire
United States.
So what I am going to offer up, Mr. Chairman, to the
Committee, if you will, I will offer up a detailed written
explanation of the issues that we are facing in trying to
implement APH.
[The information referred to is located on p. 37.]
The Chairman. Okay. I appreciate that. As I mentioned in my
opening statement, the APH Adjustment is self-executing. The
law says producers shall be able to do this. Given that, what
is going to happen if producers take it upon themselves to make
their own adjustments, do their own calculations, and then work
through the process? Wouldn't it be better for the Agency to do
it versus each individual producer taking it upon themselves to
say, ``Hey, the law says I can do this, and I am going to do it
on my own?'' What do we tell producers?
Mr. Scuse. We can't implement something that we do not have
the information on.
The Chairman. Okay.
Mr. Scuse. And if we do not have the information that has
been verified by the Agency, then it is something that is very
difficult for--and impossible for us to implement. And on top
of that, we also have to--Mr. Chairman, we actually have to go
back and work with the companies. We also have to look at the
actuarial soundness of these changes and what rates may change
because of this legislation.
The Chairman. Right. I certainly understand the impact on
rates, but there is no actuarial soundness to the production
issue itself. That is just a fact that is out there though,
right? I understand you have something to do after you have
the----
Mr. Scuse. Right. After we get the----
The Chairman. Right.
Mr. Scuse. At some point in time, you are going to have to
verify the actuarial soundness of these changes.
The Chairman. Right. All right. Well, we have a few follow-
up questions of a more legal nature that we will submit for the
record. So with that, I would recognize my Ranking Member for 5
minutes, David?
Mr. David Scott of Georgia. Yes. Thank you, Mr. Chairman.
Mr. Scuse. Yes. Thank you.
Mr. David Scott of Georgia. And our Ranking Member of the
Full Committee, Mr. Peterson has come in. So I would love to
allow him to say something.
The Chairman. Do you have an opening statement?
Mr. Peterson. Well, I am going to ask a couple questions. I
can do it now or--I thank the gentleman.
The Chairman. Go right ahead.
Mr. Peterson. Yes. My concern is on the implementation of
the dairy program. I had a discussion with the Secretary last
week. So I am a little unclear about exactly what the situation
is. But I am concerned that this thing is not going to get
rolled out quick enough, and we are going to have a problem
getting people to understand this. Talking to dairy farmers in
my area, especially the smaller ones, they have no idea that we
have done anything. They have no idea that this margin
insurance exists. They are not used to going into the FSA
office. A lot of them aren't in the program. The rates are in
the statute, so there is no rulemaking or anything. The rates
are in the statute in terms of what the insurance costs for the
different sized producers. The issue is determining what the
base is and determining what new producers are--and so forth
and so on. But I don't think that is going to affect the
decision making.
I just think that you need to get your FSA people up to
speed on this. Because in talking to them, they don't know
anything about this. I think you need to get this information
out for the dairy farmers that this new margin insurance
program exists, that these are what the rates are, that they
need to start thinking about this. I am just worried that we
are going to get a very poor enrollment from what I am hearing
out there. And especially because we have some of the best
prices we have ever had, and people are going to think, ``Well,
what the heck, I don't need any insurance, because I have $20+
milk.'' Everybody knows high prices bring low prices. It is
going to be a problem. So I just think you need to get your FSA
people up to speed as soon as you can. You need to get
something out to the dairy farmers that this is coming. And you
need to do it now instead of in September, I believe. And so I
don't know what your timeframe is, but----
Mr. Scuse. We take the education and outreach for all of
these programs very seriously. And I understand your concerns.
The Committee that is working on the dairy program will be
in Washington next week. We are going to finalize that program
as quickly as we can. And as soon as we finalize it and we have
the educational tools from the universities, we will do all the
outreach that we possibly can to the industry, working with the
industry, working with cooperative extension, working with our
Farm Service Agency and the 2,100 offices around the United
States. But, Congressman, we take our responsibility for the
education and outreach very seriously, and we are going to do
everything that we can to reach as many of those producers as
we possibly can as soon as we can.
Mr. Peterson. So from what I understand, you are kind of
holding things up until you figure out the answers on the base
and the new producers and so forth? You want to have everything
done before you roll this out? Is that what I understand?
Mr. Scuse. Yes. We would like to have it completed before
we roll everything out, and answer as many of the questions as
we possibly can to eliminate any of the confusion that may
exist if we roll it out piecemeal.
Mr. Peterson. Well, I just don't agree that there is going
to be confusion, because the decision that people are going to
make is not going to be, in most cases, based on what their
base is. That is going to be pretty obvious: 2011, 2012 or 2013
is going to be pretty obvious what is going to be the best
situation. Very few people are going to be affected by the new
producer stuff and having sold the dairy and so forth. So you
are holding up the whole situation over things that are not
central to making this decision. The problem I am picking up
out there, people have no idea that this even exists. Why
couldn't the FSA office, or somebody, send a letter to these
dairy farmers saying that there is a margin insurance program
coming, these are the rates that are in the statute, we are
going to be finalizing the base issues and so forth later on.
Just so they understand this is coming, because I am really
worried that----
Mr. Scuse. Congressman, I will take that under
consideration. I will go back and look at it and see if we can
do something about getting notification out to the dairy
producers, just notifying them that this is coming, and the
timeframes.
Mr. Peterson. Yes.
Mr. Scuse. So I will go back and take a look at it,
Congressman.
[The information referred to is located on p. 38.]
Mr. Peterson. I appreciate that, and I thank the Chairman.
I yield back.
The Chairman. The gentleman yields back. Thank you. I
recognize David Scott now for 5 minutes. David?
Mr. David Scott of Georgia. Thank you, Mr. Chairman.
Under Secretary, let us go immediately to the point I
brought up concerning the treatment of the downward adjustment
trend to Georgia and South Carolina peach producers. First of
all, we need to correct that. It is very punitive. It is not
fair. It is costing. And it is not a level playing field. Can
we get your commitment to address this issue for the
satisfaction of the peach farmers in Georgia and South
Carolina?
Mr. Scuse. I will do even better than that. We have the
Administrator for the Risk Management Agency in South Carolina
today who will be leaving South Carolina and going to Georgia.
We are looking at this issue as we speak, and we are taking it
very seriously. And we are looking for a solution.
Mr. David Scott of Georgia. And what would that solution
be? What would be a part of that solution? And will a part of
that solution take into consideration that extraordinary freeze
in March that affected Georgia and South Carolina to the tune
and the losses of millions of dollars? Will that be taken into
consideration as well, as you attend to this issue?
Mr. Scuse. It is--it would be premature for me to speculate
on what the solution might be. I haven't--again, the
Administrator is down there today and the rest of this week
talking with the producers, and talking with the staff. So it
would be premature for me to speculate at this time what the
solution ultimately will be. But we do take this very
seriously.
Mr. David Scott of Georgia. Well, would a part of that
solution be to give Georgia and South Carolina the same waivers
and consideration that you give the other peach growers from
Maine to North Carolina?
Mr. Scuse. That is one of the options we are looking at.
Mr. David Scott of Georgia. Good. And would you please work
with my office, and the people in Georgia and South Carolina,
to give us updates on this?
Mr. Scuse. Sure. And, again, when the Administrator returns
to Washington, as we make progress in this, we will be more
than glad to keep your office posted.
[The information referred to is located on p. 39.]
Mr. David Scott of Georgia. And let me just ask you, is
there--why in the first place would we have these waivers for
some peach farmers from Maine to North Carolina and we didn't
have it in the first place for South Carolina and Georgia? Is
there something I am missing?
Mr. Scuse. And I can't answer your question. I will get you
a response. But that was done before I came into office. But we
will get you a response.
Mr. David Scott of Georgia. Okay. I just want you to know I
am very concerned about that. I would like to work with you and
follow-up on that to make sure we correct that to the
satisfaction of everyone. Our farmers are faced with
tremendously devastating issues right now. It is almost so
difficult for them to actually farm for the amount of other
things that they have to deal with. Now, let me go to the other
issue I raised about this reserve assurance fund for peanuts.
Can you tell us about that? And I do recall that we put money
in there in this fund. I would like to know how much money did
that finally come to, how will that be utilized?
Mr. Scuse. Congressman, I will be perfectly honest with
you. I am not aware of any money that was put in a fund. I do
know that there was a requirement for us to come up with a
peanut insurance policy. It is one that we have been working on
now for quite some years. I know it is of great concern for the
producers in your state. We continue to work on a peanut
revenue policy. I think the requirement is for us to have one
rolled out by 2015. That will depend on a couple different
factors, whether we have a--someone do a private submission, or
if we have to go out and develop it through the Risk Management
Agency. So it is something that we take very seriously, and we
are looking into.
Mr. David Scott of Georgia. Okay. And, again, you will keep
me appraised of that?
Mr. Scuse. Yes, sir.
[The information referred to is located on p. 39.]
Mr. David Scott of Georgia. I mean, after all, my State of
Georgia leads the nation in peanuts and peaches, as well as
poultry and pecans.
Mr. Scuse. Understood.
Mr. David Scott of Georgia. Watermelons and blueberries.
Thank you, Mr. Under Secretary.
The Chairman. The bragging is unflattering. Mr. Neugebauer,
5 minutes.
Mr. Neugebauer. Thank you, Chairman Conaway. Thanks for
having this important hearing. Mr. Secretary, thank you for
being here this morning.
First of all, I want to start off with thanking you for the
progress that you have made, and the hard work that your folks
are doing to implement this very important farm bill.
Unfortunately, these hearings are generally not about all
the things that you are getting done, it is about the things
that you didn't get done because those are the things that we
are hearing about. You and I had a conversation yesterday about
the implementation of the APH. And one of the things that we
were talking about was that Congress had put about $70 million
into the implementation for title XI. I think you weren't aware
that they had put that much money. You thought that that was
for title I, but in fact Congress put $70 million in for
implementation of title XI. And additionally, section 20
provides $9 million which you mentioned in your testimony, and
it gives the Secretary discretion to move these dollars for
implementation. I know that you have a lot to implement. I
think one of the things that was so important about putting
this implementation of the crop insurance, just because some of
the commodity titles aren't really eligible for any title I
programs. And one of those is cotton. Is there a
misunderstanding here about what the money is for and how it
should be used? And if so, do we need to clarify that?
Mr. Scuse. We are definitely going to need to clarify that,
because I am not aware of $70 million for us to implement these
policies or provisions for the crop insurance title. So I am at
a loss. And we will have to have a follow-up conversation.
Mr. Neugebauer. Please do, because we recognize we have
given you a big task to complete in a very short period of
time. And so it is my understanding that this money was put
into the farm bill. And if it is not, then I stand corrected.
But if it is, and you didn't know about it, then we need to
clarify that as quickly----
Mr. Scuse. We certainly do. And we will look to clarify
that.
Mr. Neugebauer. I think along those same lines, because
what you said was the APH issue wasn't necessarily about the
money but just about the timeline, and I guess the importance
about if there is a way here to put additional resources to
work to speed up that timeline. I think something that Chairman
Conaway mentioned that sparked a question on my part is if we
do have these areas where that production history is critical
to next year, is there an opportunity for say a partial
implementation earlier for some of those areas, for example,
Texas, Oklahoma and other states that have been involved in
this serious drought so that they can go ahead and benefit from
making that election on the production history?
Mr. Scuse. I can't give you an answer to that right now,
because we would have to go back and take a look within the
Agency about everything that would be impacted by making that
decision. We would also have to go back and talk to the 18
approved insurance providers about the impacts for writing the
policy. So there would be a lot of questions that we would have
to answer if we were able to--before I could give you an answer
on whether or not we would be able to do a partial
implementation.
Mr. Neugebauer. Well, the reason that is important is
because, as I said, for commodities like cotton, basically the
crop insurance program is their safety net. And so delaying the
implementation of that becomes a critical issue to them. I want
to go back to something else that we had a conversation about.
What you and I agreed was that we have lawyers with different
opinions, but that is on the enterprise units.
Mr. Scuse. Yes.
Mr. Neugebauer. The statute says--or the law--the bill said
the corporation shall make available separate enterprise units
for irrigated and non-irrigated acreage. The current
interpretation that your agency has is that if you elect one,
you have to elect the enterprise for the other. I do not think
that was the original intent. We may try to get the lawyers to
take another look at that. But what I would like to hear from
you is if in fact we have an unintended consequence there that
which caused that interpretation, I would love to hear that you
would help support some efforts to clarify that.
Mr. Scuse. Well, yes, most definitely we will look at
getting some additional clarification on the issue. But I do
want to point out that under that program previously--under
enterprise units, if you had one farm in a county, or five
farms, you had to enroll every farm in the enterprise units.
Every farm within that county that you were tilling had to be
part of that enterprise unit. If you look at how the program
has been previously run, and then the legislation now to give
you the ability to separate irrigated and non-irrigated, I
think that is still keeping with how the original law was
intended. And, again, I am not an attorney. I think that was
part of what we were looking at when that decision was made.
[The information referred to is located on p. 40.]
Mr. Neugebauer. Well, and one of the things that we tried
to do in this farm bill is expand the choices and the
opportunities. And so what we did previously, particularly with
the fact that we are shifting the safety net to more of a crop
insurance oriented--anyway, I would love to----
Mr. Scuse. And as I pointed out, there is the provision
where you can, if you don't want to go with enterprise units,
you can get separate insurance for irrigated and non-irrigated,
which has been an issue for many of our producers around the
United States for a long time. So, that was a really good
addition to the farm bill that is going to help a lot of our
producers that have both irrigated and non-irrigated.
Mr. Neugebauer. I yield back.
The Chairman. The gentleman's time has expired. Mr. Vela,
for 5 minutes.
Mr. Vela. Yes. I just have the same concerns that my Texas
colleagues do in terms of the implementation of the APH
Adjustments. I think you have kind of responded. You are going
to come up with a detailed response and explanation on that.
When can we expect that?
Mr. Scuse. We will have that to the Committee next week.
Mr. Vela. Okay. Thank you.
Mr. Scuse. Okay.
Mr. Vela. Mr. Chairman, I yield back.
The Chairman. Thank you, Mr. Vela. Mr. Crawford, for 5
minutes.
Mr. Crawford. Thank you, Mr. Chairman.
A quick question on the cotton transition program, Mr.
Secretary. Is USDA still on track to conduct a sign-up for the
cotton transition program in August and issue payments in
October?
Mr. Scuse. Yes.
Mr. Crawford. Okay. Good. All right. Let me ask you about
peanuts. I certainly appreciate the efforts to ensure that
peanut revenue coverage is in place for the 2015 crop year. Do
you have an update on that, how we are progressing there?
Mr. Scuse. Again, we have been working on that program now
for quite some time. We will continue to look at it and monitor
and review any submissions that come before the Board. It would
be my wish that we could have something by 2015. But, again,
whatever is submitted has to have the approval of the FCIC
Board before we can implement it. So if there is approval by
the Board for a program this year, we could implement it for
the 2015 crop year. Again, as I pointed out, if there is not a
private submission that the Board could approve, then we would
be tasked to go out and have a contractor develop one on our
own in-house. And if that were the case, then the earliest that
we would be able to do one would be 2016.
Mr. Crawford. Okay. One of the challenges in particularly
my district with rice producers is crop insurance trying to
find a crop insurance product that works. There is an
authorization for RMA to develop a margin product. It may be a
little early. But can you comment on what the progress has been
on that?
Mr. Scuse. It is a bit early to--and premature to comment
on anything that we have done so far with that. We do know that
it has been an issue for the rice producers. Again, this is
something that the rice producers have brought to our attention
for several years. And it--and I agree with your point, they
are growing a crop in water, so it is not--they are not looking
at crop failure. They are looking at revenue.
Mr. Crawford. Right.
Mr. Scuse. So it does create a little bit of a different
scenario for us to get a product for the rice producers out
there that they are going to be satisfied with, again that the
companies can run that is going to be actuarially sound.
Mr. Crawford. Well, and you mention actuarially sound. And
we are only talking about probably this year, 3 million acres
at the most, by comparison.
Mr. Scuse. Yes.
Mr. Crawford. That makes it difficult for an actuary base
to exist. Is that a fair statement?
Mr. Scuse. I think you understand some of the problems that
we face in developing a product. Okay.
Mr. Crawford. Well, I just want to kind of keep my eyes on
that one for obvious reasons. My district is probably the
biggest rice producing district in the country. About \1/2\ of
the rice crop is produced there. Let me switch gears,
supplemental coverage option. One of the inequities that is
resulting from the delay in SCO implementation is that farmers
must elect sometime later this year, or early next year,
between PLC and SCO versus ARC. For some farmers, SCO won't be
available yet. So you can see where the problem exists there.
It means that some farmers have to make a choice on whether or
not supplemental coverage will be available. Can you comment
on--is it safe for them to make that election for the 2015 crop
year? Are we going to have that in place?
Mr. Scuse. This is one of the hopes that the decision tools
will be able to provide the information for them. They will be
able to plug in the yields, the prices for the different
programs, and see the overall impacts and make a decision for
when SCO actually becomes available to them. Right now, SCO
will be available in the 2015 crop year to 90 percent of the
corn farmers in the United States, 90 percent of the soybean
farmers in the United States, 95 percent of the cotton
producers in the United States, 80 percent of the wheat, and 70
percent of the rice producers. That is for the 2015 year. And
we will continue to take a look at that and add to that in the
coming year, and for the 2016 crop year. So the majority of
producers will have SCO available to them in the 2015 crop
year.
Mr. Crawford. Excellent. Thank you, Mr. Secretary. I yield
back.
The Chairman. The gentleman yields back. Mr. Maloney, for 5
minutes?
Mr. Maloney. Thank you, Mr. Chairman. Again, Under
Secretary Scuse, the farm bill contains a number of provisions
that help small diversified producers like the ones I represent
in the Hudson Valley of New York. And a number of us, including
my colleague, Chris Gibson, who represents the same region of
New York--a number of us worked on a number of provisions to
help those types of farmers. In particular, I am interested in
the whole farm revenue insurance program. The Secretary
recently announced he thought those programs would be available
for the 2015 crop year. I was just hoping you could expand on
that and give us a little update on that timeframe and whether
you are comfortable with that?
Mr. Scuse. The whole farm revenue will be available in a
pilot in 2015 for the areas where we had AGR and AGR-Lite. And
so it will be available to those producers where we had those
programs the last few years in a pilot, and then it will be
expanded in 2016.
Mr. Maloney. Well, and you anticipated my next question,
which is how will the program, if you can tell us, differ from
this existing AGR and AGR-Lite programs?
Mr. Scuse. I would have to provide that to you in writing
what the differences are. There are some differences between
how the programs are going to be functioning. But we will
provide you those differences in writing.
[The information referred to is located on p. 41.]
Mr. Maloney. That would be wonderful. Thank you. And as you
know, there is also a provision in the bill called the CROP
Act, which is dear to my heart, that I worked on. And that
would help facilitate the development of new insurance,
particularly for these smaller specially crop and diversified
family farms that I mentioned. And one aspect of that is to
allow the RMA to develop these plans in-house. Is there work
being done on that that you can give us an update on?
Mr. Scuse. We greatly appreciate your efforts and the
efforts of other Members of the Committee in getting that
language put in there to allow RMA to develop some of these. As
you know, there are products out there that some of the larger
companies may not want to develop because of the time or the
money that it would take and what little return there might be
on that investment. And this gives RMA an opportunity to look
at some of those products. There has been a demand for crop
insurance for additional products now for quite some time. I
think this will allow us an opportunity to develop some of
those products in-house, and help many of those smaller
producers that aren't able to get coverage today. So it is one
of the things that we are going to look at as the demand comes
in for new products. We will take a look at developing those.
Mr. Maloney. Is there any specific work being done now?
Mr. Scuse. Not at this moment. But, again, we continue to
look at the demand. And as the demand for products comes in,
then we will look at developing some of these products in-
house.
Mr. Maloney. Well, I appreciate that. And I appreciate your
attention to that, because it is really very important for the
types of farms that we have in the Hudson Valley in New York.
So I am very glad to hear that you are eager to utilize those
provisions.
Mr. Scuse. We greatly appreciate that.
Mr. Maloney. Finally, let me just ask you, sir, a question
about fraud and the crop insurance program. You know, we had
quite a debate in this Committee around nutrition assistance
and around possible fraud in the SNAP program. There has been
some attention paid recently to instances of fraud in the crop
insurance program. I would like to give you an opportunity to
speak about that since there are considerable amounts involved
in these programs. Is this a concern? What is being done on it?
And can you give us an update on that?
Mr. Scuse. Well, let me start out by thanking the Members
for the money that was added to the title XI to help us look at
some of the issues that we have faced. That funding is greatly
appreciated.
We are looking at--we do data mining to go back and look at
the producers, look at the acreage, look at the yields, look at
the income. We also go out and do field spot checks. The Risk
Management Agency works with the Farm Service Agency to go out
and do those checks to verify production or non-production. We
are going to be looking at using some of that funding to hire
additional staff, again, to help us look at different policies
and additional data mining so that we can have any abuse of the
system cut to a bare minimum. So, again, we greatly appreciate
the funding that was put in the farm bill for the use for us to
look at those issues.
Mr. Maloney. Thank you. Mr. Chairman, I yield back.
The Chairman. The gentleman yields back. Thank you. Mrs.
Hartzler, for 5 minutes?
Mrs. Hartzler. Thank you, Mr. Chairman. First, I want to
start off and thank you for the good work that you and the USDA
has done to implement the Livestock Disaster Programs in such a
timely fashion. I can tell you from my constituents in Missouri
that the money is going out, and it is very much appreciated.
Obviously, they were devastated with those droughts a couple
years ago. So we very much appreciate that.
We do have one concern though as it relates to the forage
programs and the dairy farmers in our area. As you know grazing
dairies intensively manage their operations, and this
management practice allows them to meet the greater forage need
of the dairy cows in their program. However, the current
formulas used by the USDA uses beef cow forage values on a per
unit basis that are significantly less than the needs of a
dairy cow. And my office and others have raised this issue with
the USDA. And I would like to know if the USDA plans to explore
this inequity to address the concerns of these operations?
Mr. Scuse. Thank you. And I visited your state in 2012 on
several occasions. And I personally saw the effects of the
drought and the impact that it had on your producers. In fact,
on April 16, I went back to your state and I visited a dairy
operation that we were going to be able to give LFP funding to.
So--and they were very appreciative. But we--it is something
that we take seriously. This is not the first time the issue
has been brought up. There is a difference between dairy
operations and beef operations and the pasture, the amount of
forage that it does take. It is an issue, and it is something
that we are looking into. I don't know that we are going to be
able to address the problem. But it is something that we are
looking at. And I would ask that the producers--the dairy
producers that feel that they have been adversely affected work
with Cooperative Extension, get better information and deliver
that information to our Farm Service Agency offices so that we
will have a better understanding of exactly what the issue is.
Mrs. Hartzler. Okay. Well, thank you for looking in that.
And we will certainly pass that on as well. On another topic,
many producers have been chomping at the bit to learn more
about the signup for the safety net programs. I understand they
may start this fall. And the farm bill provides $3 million for
decision making tools. And the USDA decided to split that money
between two separate consortiums of universities. And I want to
thank you again that the University of Missouri is part of
that. But I was curious. Can you provide a little more insight
into the reason USDA decided to create two separate tools as
opposed to focus the resources on just a single tool?
Mr. Scuse. We discussed that quite a bit about the funding.
Of course, we went out--it was an open process. You know, it
was open to any university to apply for the funding. When we
look at the proposals that came back, and you looked at the
proposal from Illinois and A&M, these were two very, very good
proposals. One went a little bit further than the other when it
came to the dairy and to the NAP buy-up. And we felt that the
other proposal was a solid proposal for ARC and PLC. And then
if you look at the comfort level for the producers and what
they are going to be comfortable--which tool they would be
comfortable using, to us it made a lot of sense to split the
funding and allow the one group to do ARC/PLC dairy and the NAP
buy-up, and then the other group to do ARC and PLC. We just
thought it was really good to have two different tools out
there for our producers to take a look at.
Mrs. Hartzler. I am sorry. I just wanted to clarify. Did
you say that both of them though will be doing PLC and ARC?
Mr. Scuse. Both groups will have PLC and ARC.
Mrs. Hartzler. Now, will that be divided up by county? So
if a farmer in one county uses one tool and then somebody--or
is it----
Mr. Scuse. In theory, both tools should work the same way
anywhere.
Mrs. Hartzler. Okay. Just hope it doesn't cause confusion
like medical records like----
Mr. Scuse. Understood.
Mrs. Hartzler. Electronic medical records.
Mr. Scuse. One of the things that--one of the requirements
is that before these tools are released, they will come back to
USDA and they will be tested for accuracy.
Mrs. Hartzler. Okay. Very good. Well, I have more
questions. Time is up. Thank you very much. Thank you, Mr.
Chairman.
The Chairman. The gentlelady yields back. Rodney Davis, for
5 minutes?
Mr. Davis. Thank you, Mr. Chairman. And thank you, again,
Mr. Scuse, for being here. I appreciated our conversation
before the hearing began. And a lot of the questions that I had
planned to ask have already been asked. That is the detriment
of being a freshman and to being a little further down the
dais. But I do want to thank you for what you guys are doing in
implementing many of the provisions in the farm bill. As a
freshman legislator and as a Member of the conference committee
on the farm bill, it has been a great learning experience for
me. And it is also something that I look forward to working
with your agency on to further our implementation goals.
I had one question though, and it is in regards to the
standard reinsurance agreement. And the 2008 Farm Bill
authorizes the SRA to be renegotiated every 5 years. And the
last SRA was negotiated in 2010 and implemented in 2011. Are
there any plans within your Department to renegotiate the SRA
next year?
Mr. Scuse. Not at this time.
Mr. Davis. All right. Do you have any plans to renegotiate
the SRA down the road?
Mr. Scuse. I can't make that determination today. I don't
know what is going to come down the road. But we have no
intentions of renegotiating the SRA next year.
Mr. Davis. Okay. Well, I look forward to your written
responses to some of the questions that were asked earlier. And
I look forward to working with you on implementing some of the
new provisions, especially in relation to the crop insurance
which is crucial to my district in central Illinois.
And thank you for your visits. And I yield back the rest of
my time.
The Chairman. The gentleman yields back. Mr. Scott, do you
want to give it a go?
Mr. Austin Scott of Georgia. Thank you, Mr. Chairman. I
will do my best to get--I have been a little under the weather
lately. But just to share my colleague from Georgia's concerns
about the peaches and the peanuts, and certainly appreciate
seeing your response to that. And I will submit my other
questions in writing. Thank you.
Mr. Scuse. Thank you.
Mr. Austin Scott of Georgia. I yield back.
The Chairman. The gentleman yields back. Mr. LaMalfa, for 5
minutes?
Mr. LaMalfa. Thank you, Mr. Chairman. Thank you, Mr. Scuse,
for appearing here today. I know you have as many different
Members as there are here as there are different aspects of the
programs you have to administer and make work. So I know it is
not easy. As you know in California, we are facing huge drought
problems with many constituents affected different ways over--
at least over \1/3\ of the state is suffering under some of the
worst of the drought conditions. And it seems to be getting
worse. Optimism for the El Ninnos coming off of--filling up the
reservoirs next year. So I don't know. We are looking pretty
tough.
Mr. Crawford talked pretty well about some of the rice
issues earlier that affect a lot of my constituents. I am a
rice grower myself. But also, we have great concerns with our
livestock growers as well with the disaster funding that has
been very critical for them. And, again, their concern that
there has been a backlog ever since the passage of the farm
bill that the offices aren't able to keep up with that. And so
I know you have staffing issues there. And there is kind of a
which one do you work on the most of the different aspects you
have to try and catch up to in the short amount of time.
In two of my 11 counties, for example, I represent, cattle
outnumber the people. So you can understand how big of a deal
this is for those payments to be made for these ranchers up
there. And some of them are still waiting on 2013 payments, and
that the 2014 payments are going to be behind. So can you just
speak briefly about how we can assure them that we are going to
catchup to the backlog as you are balancing everything that you
are dealing with there?
Mr. Scuse. Sure. I visited your state earlier this year. I
went to one cattle operation. And, unfortunately, the day that
I was there, the gentleman was dividing his herd into two. And
\1/2\ the herd was going to be sold that day because of the
lack of pasture. I visited another sheep operation where they
could no longer irrigate out of the river because of the salt
line, and the cost for drilling a well was going to be
prohibitive. So I can appreciate what your constituents are
going through.
What we are doing, we have hired temporary staff in offices
where we know that we need additional staffing levels. On top
of that, we have asked the SEDs in each state to look at their
staffing levels, where they currently are, and if they are in
non-livestock production areas to see about a temporary shift
of those workers into areas where we have the livestock
production taking place. So we are looking at different ways to
manage--to better manage the resources that we have available
so that we can get through the signup.
Mr. LaMalfa. Do you squeeze the balloon there, then it
starts to fall short on the PLC program, for example, was----
Mr. Scuse. Well, that is why we want to get--that is why we
want to do the shift now. That is why we want to get as many
resources in place today as we can, because we recognize the
fact that we are going to have ARC and PLC signup, and we will
be hiring additional temporary staff to help us with the signup
for ARC and PLC and that work later this year. So we are trying
to get as much--keep trying----
Mr. LaMalfa. Would that still be--keep people on time for
2015?
Mr. Scuse. Pardon?
Mr. LaMalfa. It will still keep people on time for 2015?
Mr. Scuse. Yes.
Mr. LaMalfa. And then some of the 2014, we are wondering
about that. Is that going to catch up here pretty soon for
those that are still----
Mr. Scuse. Yes. You----
Mr. LaMalfa. And adding the 2014 Fiscal Year as well?
Mr. Scuse. And I appreciate your concern. But we are asked
at the Farm Service Agency to do 3 year's worth of work in just
a very short time period. The 2008 Farm Bill--these disaster
programs expired before the 2008 Farm Bill did. So they weren't
in existence in 2012. In 2013, these programs--when the farm
bill was extended, these programs were included in that
extension but were not funded. And now, if you look at the
drought in California, as well as the Southwest, we are now
asking our office staff to do 3 years' worth of work in a very
short period of time. And in spite of that, I think they are
doing a very, very good job. I will brag on my staff. I think I
have the best workforce in all the Federal Government in those
county offices. So we are looking at managing our resources as
best we can to get as much of that backlog taken up as quickly
as we can.
Mr. LaMalfa. All right. Maybe you can comment more--my time
has expired--on what is it we need to provide either in
legislation or funding efficiently to help catch you up even
more so, so we don't face 2015 problems. Thank you.
The Chairman. The gentleman's time has expired. Mr.
McAllister, for 5 minutes?
Mr. McAllister. Thank you, Chairman. And thank you,
Secretary. I will try to be--me being from Louisiana and being
under the weather, it is probably going to be really tough to
understand me. But I will try to be as clear as possible.
I have just a couple of quick questions. We know farmers
know how to farm. And when they farm, they do their job. But
when it comes to implementation of crop insurance, some of the
concerns I have is there are a couple of very important issues
that were included in the farm bill. One provision just tells
the FSA to be sure to share important information with the
producers' crop insurance agent so that the agent has all the
information they need to write the policy and not have it
canceled because of some error. The provision is really aimed
to avoiding errors in the first place. The second provision
allows the agents to correct honest errors that have in the
past led to the nullification of a policy, which is pretty
harsh medicine to the farmer. We certainly hope and expect the
Department to implement these provisions in a way that it in
fact prevents errors from ever occurring in the first place.
But if they do occur, as they will, to allow the errors to be
corrected without yanking coverage from a producer. How is this
implementation coming on these fronts?
Mr. Scuse. Those are some of the things that we are looking
at and taking very seriously. As you pointed out, we don't want
any of our producers to be put at a disadvantage because there
may not be proper information. One of the ways that we hope to
accomplish this is there was funding in the farm bill for the
acreage, crop reporting streamlining initiative. And what this
does is this will allow us to share information between the
Farm Service Agency, Risk Management Agency and vice versa, so
that we don't have the two different crop reports, so we don't
have a risk of misinformation unintentionally being given to
one or the other. So those are some of the things that we are
looking at. We also have the system, SCIMS where we can share
information between the Farm Service Agency and the Risk
Management Agency. So we take that very seriously. And we want
to do everything that we can to make sure that our producers
have the very best information, as well as their agents.
Mr. McAllister. I appreciate that. And then second is I
appreciate all your efforts to ensure that STAX is made
available to all the cotton producers in all the counties and
parishes in Louisiana, where we have the parishes, in time for
the 2015 crop year. But I have heard that you expect the STAX
to be made available to about 98 percent of cotton acreage by
2015 crop year. Can you tell us what cotton producing counties
or parishes you are having difficulty with, and when you expect
those difficulties to be resolved so that we have 100 percent
availability?
Mr. Scuse. Those maps will be released I believe next
month, so we will be able to see where these programs are going
to be--where they are going to be available. But, again, it is
98 percent of the production will be available to get that
product. We are going to release the maps next month.
Mr. McAllister. Okay. Well, I appreciate all the hard work.
We know this has been a monumental task. And these are one of
the--this is one of the agencies that does work well sometimes.
So anything that we can do, we appreciate the hard work. And I
yield back my time, Chairman.
Mr. Scuse. Thank you. And I didn't have any trouble
understanding you because Commissioner Strain is a good friend
of mine.
Mr. McAllister. There you go.
The Chairman. The gentleman yields back. Mrs. Noem, 5
minutes?
Mrs. Noem. Yes. Thank you for being here. I am from South
Dakota, so we are home of the disaster of Winter Storm Atlas
that hit us last October. And so I want to really tell you how
much I appreciate the fact that when we had signup for the
Livestock Indemnity Program on April 15, my producers came back
telling me that within 6 to 7 days, they had checks in their
hands. So that was real help that was desperately needed,
especially since we have been hit with the drought of 2012 as
well. And so a lot of these guys took two hits right in a row.
And that was absolutely devastating for South Dakota. So that
gave them a little hope that they would be able to stay on
their ranches and maybe someday see cattle back in their
pastures. So thank you for that hard work and making it a
priority, which we had asked and you really followed through
and did that.
I do have some concerns about the Livestock Forage Program,
because I understand that there is some backlog that is going
on and that you are moving people around trying to deal with
the backlog that is happening across the country in some areas.
Can you speak to that?
Mr. Scuse. Yes.
Mrs. Noem. And also, when you speak to it, give us an
update on where we are as far as dollars out the door on the
indemnity program and on the forage program, on both of those?
Mr. Scuse. I don't have that particular breakdown. But if
you look at the combination of the both, we are looking at $1.2
billion in money out the door. The last week of June, for the
example, we had just over 17,000 applications done that week.
So we are still receiving a tremendous amount of applications.
We are looking at not only hiring temporary staff and
reallocating resources within the state, but we have also put
together jump teams from other states that don't have livestock
to go into those states where we do have a backlog and try to
deal with that backlog and get it taken care of as quickly as
possible. So we have used a combination of things, temporary
staff, reallocation of resources in-state, and jump teams from
other states to help us get through this.
Mrs. Noem. Do you have an end date on when--like an
occurrence like Winter Storm Atlas that we had--an end date
where applications will no longer be accepted?
Mr. Scuse. I believe--let me get that to you. I believe it
is later on this year.
Mrs. Noem. Okay. Okay. And then we have some----
Mr. Scuse. January----
Mrs. Noem. 2015?
Mr. Scuse. That is really good. January of 2015. I didn't
want to give you a wrong date.
Mrs. Noem. Oh, you have staff back there? Yes, that is
great.
Mr. Scuse. But it is January. I have visited your state.
Mrs. Noem. Yes.
Mr. Scuse. I was there after the blizzard. I was there in
2012. And I was also there for the first day of signup on April
15.
Mrs. Noem. I appreciate that. Also, I have heard some
instances where extreme heat losses are not covered. Again, we
have that in South Dakota. Unfortunately, while we are a land
of extremes, but once in a while we will lose some cattle due
to extreme heat and feed lots, especially. Can you speak to why
that would happen that there would be a denial based in that
program?
Mr. Scuse. I will have to get back to you on what is and is
not covered, because there are some things that are covered
under LIP.
[The information referred to is located on p. 43.]
Mrs. Noem. Okay. Yes.
Mr. Scuse. And then there are other things that are
covered, or maybe covered, under the Emergency Livestock
Assistance Program.
Mrs. Noem. Okay. I have another question about conservation
compliance, because I am concerned about how that--the rules
are being written and how they will be implemented. But the
interim rule suggests that all farmers need to sign up for all
acres and show that they are in compliance. But yet the law is
written such that they will only have to be in compliance on
tillable acres that they till each year. So can you speak to
why that appears to be being implemented a little bit
differently than how the law states that--the law states that
they will have to be required annually on tillable acres to be
in compliance, rather than the producer having to come in and
sign up there?
Mr. Scuse. Because the conservation is now tied to crop
insurance, so it is directly tied to the subsidy for the land
that you are farming.
Mrs. Noem. Yes. But it is only going to be tied to tillable
acres?
Mr. Scuse. I don't--you have to have a--you will have to
have a conservation plan for your farm in effect when you sign
up to give the 1026 Form, which those that do not currently
have a 1026 Form filed with the FSA office will have to do so
by the 1st of June next year.
Mrs. Noem. Okay. So then if a producer is found to be out
of compliance in 2015, my understanding is that they could not
receive the subsidy in 2016 and could not be reinstated till
2017, which seems as though even if it is a good faith effort,
honest mistake, not someone who knowingly violated the
conservation practice laws, is that true?
Mr. Scuse. Yes. If you are not in compliance, you cannot
receive the subsidy.
Mrs. Noem. So even if a producer in 2016 went back in good
faith and fixed that conservation practice, they are still
going to be ineligible for----
Mr. Scuse. They are going to be--they will be ineligible
for 2016.
Mrs. Noem. That is a heavy penalty for producers,
considering the amount of subsidy on crop insurance policies to
not be reinstated until 2017.
Mr. Scuse. Well, remember, we are asking them to sign up
that they will be in compliance on June 15. And then they are
given a period of time to come into compliance.
Mrs. Noem. How long is that period of time?
Mr. Scuse. They will have until the next--now--I can't
answer that right now, because that is going to be in the rule
when it is ultimately----
Mrs. Noem. Well, if they are--and that is what I would like
the rule to reflect is that if they are found to be in
violation and they can show that it is a good faith mistake,
that they didn't knowingly violate their conservation practice,
if there is a period of time for them to fix that and come back
and repair what was done without losing the subsidy, that is
how I would prefer to see it written, because I know producers
out there many times are busy. They have a lot of acres they
are covering. They may knowingly make a change--or unknowingly
make a change, and to make it whole before they lose that
subsidy would be the right thing to do.
Mr. Scuse. Again, they are having--they have the ability to
come into compliance before the 2016 crop year.
Mrs. Noem. Yes, let me know what that timeframe is.
Mr. Scuse. Okay.
Mrs. Noem. How much time they----
Mr. Scuse. They have the ability to come into compliance.
That is the way the law is written, before the--crop year so
that they will not lose that subsidy.
Mrs. Noem. Okay. Yes----
The Chairman. The gentlelady's time has expired. Mr.
Gibson, your 5 minutes?
Mr. Gibson. Thanks, Mr. Chairman. And I thank you and the
Ranking Member for your leadership in pulling this together
today. And, Mr. Under Secretary, thank you. This has been an
informative hearing, and I appreciate your leadership and the
work of the great Department.
I just have a few points. I just want to follow-up on a few
things. The first thing with regard to what Mr. Peterson was
talking about earlier, I share the concern that we get the
widest dissemination about the margin insurance program. I am
doing my part on that doing a series of events to get the word
out. I am encouraged to hear you are considering a letter that
would go out to dairy farmers. And should you decide to do
that, I would love to get a copy of it. Maybe we can get it to
the Cornell Cooperative Extension and the Farm Bureau. I can
use it, going forward, in radio engagements and the like. I
think that is something we can do together, continue to get the
word out on that.
Likewise, on risk management--and I appreciated your
colloquy with my colleague, Mr. Maloney, and that part of the
intent of when we drew up some of the language was to bring in
closer the Department with our farmers to collaborate, to take
their input as you work together with the RMA to come up with
new products. And I am just curious, have you come forward with
any processes that would get the input of farmers for these new
products?
Mr. Scuse. Well, the way that this works, I travel a great
deal around the country to meet with different producers, as
does the Administrator. As I pointed out earlier, Administrator
Willis is in South Carolina and Georgia this week. And we get
feedback from producers on what products they would like to see
us develop. Some of the products that have been developed in
the past have come from the agricultural community, because
that is what they have asked us for. We have been asked, for a
period of years, for a peanut program and one for rice as well.
And these are some of the things that we have taken very
seriously and looked at. So a lot of the times, it comes from
our visits out in the countryside talking with the producers
and what they would like to see. A good example would be
several years ago, sweet potatoes in Louisiana, the producers
came. There was an opportunity there to have a facility built,
but the farmers weren't willing to grow the sweet potatoes
unless there was a revenue product or a crop insurance product
out there for them. So we worked with them and developed that
and helped build an entire industry down there. So that is a
good example of how the system works that when they come to us
with their concerns or with a product that they would like to
have developed, we take it seriously and take a look at it in-
house and then see if there is a private submitter that is
interested.
Mr. Gibson. Well, thank you. And on behalf of my colleague,
we would invite you to the Hudson River Valley. We have had the
Secretary before as well. So our staff will be reaching out. We
would love to have an event where you get to hear firsthand,
from especially our crop growers, as you pull together these
products. So we will be reaching out to your staff on that. And
thank you for your willingness to move all about the country on
this. It is very important.
Last--similarly, the young farmers program--Sergeant Major
Walz and I worked together on that. And I have one of the
leaders in the Younger Farmer's Coalition right in our
district, Lindsey Shute. And I am curious how the expansion we
put in there for this farm bill, how that is coming along, and
would likewise offer that if I could be of assistance linking
you up with some of the leadership in the Young Farmer's
Coalition as you roll out implementation, I would be honored to
do it.
Mr. Scuse. Those benefits for the young and beginning
farmer programs will start in 2015. I think those were really
outstanding provisions. As you know, the average age of the
American farmer continues to get older. I finally surpassed it.
But it does continue to increase in age. We need to do
everything that we can to get that next generation involved in
farming. The Department has worked--it is something that is
near and dear to Secretary Vilsack and Deputy Secretary
Harden's heart. They have worked very, very hard on some of
these programs. And so we take it quite seriously. And we think
that these were great additions to the farm bill to help those
young producers get started in farming. I think with the--not
just the provisions that pertain to them in the farm bill, but
the provisions in general in the farm bill that is the safety
net that they so desperately need, I think that is a help. And
then if you look at the current prices for livestock and some
of the grains, good prices help entice the next generation. I
think a combination of things, we are looking better.
Mr. Gibson. Well, thanks, Mr. Under Secretary, and look
forward to working with you. With that, I yield back.
The Chairman. The gentleman's time has expired. Mr. Rogers,
for 5 minutes?
Mr. Rogers. Thank you, Mr. Chairman. I just had a comment.
As you know, this farm bill was very difficult to get through
Congress. It gets increasingly difficult each cycle. It is very
complex politically. And I recognize for you it is going to be
very complex undertaking to implement. But I would remind you
that there is a whole universe of producers out there that are
excited but also anxious about how you are going to choose to
implement it. One of the evidences of that came with Kristi
Noem's question about this time period. So I would urge you
that as you walk along on this that you stay in touch with this
Committee about Congressional intent. If you do get to an
implementation component that you have questions about, I can
assure you that I will meet with you at any time. And I am sure
the other Members of this Committee would explain why a
provision was inserted, because I can tell you it wasn't easy
for us to explain why we put an extra $100 million in for
implementation. So be good with it. And be sure and stay in
touch with us.
And that is all I have, Mr. Chairman.
The Chairman. Thank you. The gentleman yields back. We have
time for a second round of questions. I think Mr. LaMalfa has
another question and I have a couple more to ask.
Michael, again, I appreciate you being here today. Thank
you. Given that we have begun to blend title I and crop
insurance and the decision making tools that have been
referenced that are about to be released, and that your FSA
folks are excited about and so are the producers, can you give
us the assurance that RMA and FSA are working together to make
sure those decision tools are appropriate with that blend
between the two programs? Let us say you have one that does PLC
and the other one does----
Mr. Scuse. I can assure you that they are working closely
together. Both of those--the Farm Service Agency and Risk
Management Agency, they both are under me. And if I thought for
1 minute that they weren't working together in getting this
done, they would know how I feel about it real quick. Let us
put it that way.
The Chairman. It is good to hear that. Thank you. And then
following up on conservation compliance: If a producer is in
compliance today, as we understand compliance, will they be in
compliance, going forward? I mean, are you going to be moving
the goal post on them?
Mr. Scuse. No. No, we are not going to move the goal post.
If they are in compliance today, they are in compliance for
next--for the next crop--unless they do something----
The Chairman. Right, right, right.
Mr. Scuse.--subject to some change. If they don't do
anything----
The Chairman. Yes, subject to some change.
Mr. Scuse. But if there is no change to their operation--if
they are in compliance today----
The Chairman. If they are in compliance and they don't do
any change to get out of compliance, they are good to go?
Mr. Scuse. No--yes.
The Chairman. Okay. Thank you. Mr. Scott?
Mr. David Scott of Georgia. Thank you very much, Mr.
Chairman. Thank you, Under Secretary.
Let me ask you, because there are two safety net issues--
risk areas to the future farming, and threats. One we touched
upon. And that is you touched upon a little bit earlier. And
that is the age of the average farmer is now right at 60 years
of age. Each year, it continues to escalate. And I am wondering
if the Department--the Agriculture Department is really looking
at this in a way in which to truly address this issue. And I
know the waiving of $300 for the administrative fee--I mean,
that is sort of like a little--not even a drop in the bucket.
And I know you are doing some other things. But why not take a
look at the farm bill, and how creative have you all been, in
looking at how we can really put some incentives in here to
really, truly help beginning farmers? We have land-grant
universities, and most of which are in Farm Belt states.
Florida, you have University of Florida, and you have Florida
A&M University. Alabama, you have University of Alabama,
Alabama A&M. Georgia, you have the University of Georgia, you
have Fort Valley State, 1890s, 1862s institutions. We put
millions of dollars in the farm bill for these. But we do not
allow any of that money to be used for scholarships for those
who would study Agriculture. Incentives for loan forgiveness
for those students who will go into agriculture. I think that
would be a very, very important step that we could take
forward. Would the Agriculture Department be interested in
taking a look at this, and it only would require some language
change in the farm bill that would just simply say in addition
to research, in addition to the other things that we put in
there for these, that some of this money could be used to give
kids scholarships to go into agriculture and farming, or pay
their loans?
Mr. Scuse. The Department continually looks at ways to get
new people involved in agriculture, whether it be a young
producer or someone that is coming out of another occupation,
or our veterans. As I pointed out earlier, this is something
that the Secretary and the Deputy both take very, very
seriously and push very, very hard for us to look at in the
Department. We are open, Congressman, to any suggestions.
Mr. David Scott of Georgia. Okay. Great.
Mr. Scuse. If you look at our microloan program and the
success of that program that the Department created, and the
farm bill increased the funding for that microloan program,
that has helped a lot of people get involved in agriculture.
But we are open to suggestions and any help that this body can
give us.
Mr. David Scott of Georgia. Well, that is one we are
percolating on, and we will be working with you on that.
Another is that some of the groups outside of Congress, like
Farm Credit for example, and AgSouth we call it down in our
part of the country, have an excellent program that they are
moving with with getting beginning farmers. I was wondering if
you all at the Agriculture Department were familiar with what
Farm Credit was doing and how you might be able to work with
them?
Mr. Scuse. I think if you look at our loan program at the
Department, there is a very high percentage of our loans that
are targeted for young, beginning and socially disadvantaged
producers out there. But, again, we are open to suggestions.
Any way that we can get that next generation or someone new
involved, we are looking for suggestions and help.
Mr. David Scott of Georgia. Yes. I would encourage you to
look at the Farm Credit. Now, the other area to mention, if I
may, that we really have to seriously address, and that is
workers for these farms and for our producers. I hear it all
the time, they can't find workers to pick the blueberries. They
are on the ground. They can't find workers to get the peach
crop, pecans, so forth. Has the Department taken a strategy of
being able to separate this issue and focus on the dire
consequences that face this country and the future of
agriculture and getting food into Publix and into Kroger for
our American people, if we don't have workers, if we don't
address this? I mean, there is a cry out there from wherever we
hear it throughout the country from our farmers, we need to
address this problem. If it is guesswork or whatever it is. And
I was wondering if the Agriculture Department is developing a
strategy in which they could deal with this in a way away from
this--deal with it as a basic labor and economic issue facing
the future of farming?
Mr. Scuse. The labor issue is, as you pointed out, of great
concern almost in every state. I think the Secretary, on
numerous occasions, as have I when we have had the opportunity,
have said that we desperately need for the sake of agriculture,
meaningful immigration reform. Agriculture needs a workforce
and a workforce that we know will be there, one that we can
depend on. I personally have visited farms that had crops rot
because we could not get a workforce to harvest those crops. If
you look at our processing plants, if you look at our dairy
operations, if you look at our fruit and vegetable operations,
all of these are very dependent on a workforce. So we have
spoken repeatedly on the need for meaningful reforms so that
the agricultural community will in fact have that workforce
available to them.
Mr. David Scott of Georgia. Thank you, Mr. Under Secretary.
Thank you, Mr. Chairman.
The Chairman. The gentlemen's time has expired. Mr.
LaMalfa, 5 minutes?
Mr. LaMalfa. Thank you, Mr. Chairman. I will try to move
quickly here. There is a lot to cover.
We were talking earlier about the moving around of
resources and personnel within USDA to address the backlog--on
the livestock, forage program backlog portion. In California,
we face droughts. Some areas are having trouble getting grazing
permits, as they had been in the past with sage grouse going
on, even wild horses. And so especially northeast California
faced some really acute problems with grazing there. So can you
address this--have you had the opportunity to push the
resources up into that portion of the state with the acute
problem there is there?
Mr. Scuse. I am not aware of where we have moved our
resources in the State of California. But we could get the
information. I can get in touch with our State Executive
Director, and we can provide you with that information on what
we have done and what the issues are in that part of the state.
[The information referred to is located on p. 43.]
Mr. LaMalfa. All right. I appreciate being able to work
with you on that. On the--with the Act in 2014--the
Agricultural Act, we have more important key roles for the FSA
and RMA they are going to be taking on. And so in implementing
the new law, we are wondering are they going to be able to
speak the same language? Because you are going to have growers
that are going to have types of crops that are in the category
of each of those organizations. And so are they going to be
able to coordinate and work well together? Do you see any
roadblocks or any hurdles that--
Mr. Scuse. Congressman, I don't see any issues with us
working together through the Farm Service Agency and Risk
Management Agency. Both organizations know that we are there
for the same purpose, and that is to serve our producers to the
very best of our ability. So we will continue to look for ways
to work together. I think right now, there are agencies along
with NRCS. I think everyone right now is working together more
closely than we have at any other time. I know Chief Weller has
been great for us to work with at NRCS. We understand the
importance of all of us getting together, especially because of
this farm bill----
Mr. LaMalfa. Well, being able to share data and things like
that should be----
Mr. Scuse. Yes. And so we understand the importance of
working together, sharing the data, sharing the information and
trying to get things done for our producers.
Mr. LaMalfa. Good. Thank you. Finally, on specialty crops
here, we have, in California, Mr. Gibson was talking about how
important they are up in his state. And it is really huge in
California, as you know, that the changes involved in the Whole
Farm Insurance Program, and that overlaid on top of the
catastrophic coverage, we are understanding the requirements
there might be that they are going to have to have duplicate
coverage for the same proportion of the crop--the amount of
crop. I don't think that would really be the intended
consequence, but it would make it very, very difficult for
specialty crop growers to be able to be in both and participate
in both, because it is not going to pencil out for them. So we
don't think that was the intention in the farm bill, but we are
getting feedback that that might be the direction the USDA is
trying to take this. What can you say on that?
Mr. Scuse. We will take a look at it.
[The information referred to is located on p. 44.]
Mr. LaMalfa. Okay. Because the overlap just blows up the
program for the ability of the farmers to be in--the specialty
crop growers to be in the catastrophic program as well as
overlapping with the other aspects of the two. So anyway, I
appreciate the time, Mr. Chairman. Thank you. And I thank you
for appearing with us today.
Mr. Scuse. Thank you.
The Chairman. The gentleman yields back. Mrs. Bustos, for 5
minutes?
Mrs. Bustos. Thank you, Mr. Chairman. Mr. Scuse, thank you
for your work on behalf of the American farmer, and especially
as it pertains to crop insurance. When I go around and talk to
our farmers, it is the issue I hear more about than anything.
So thank you for your hard work on that.
As you know, there are as many parts of the country where
farmers and many of us have to worry about either too much
water or not enough. And when you have a district like mine
where your entire western border is the Mississippi River, and
then you have the Illinois running through--the Illinois River
running through the southern part, it is--we have had a lot of
water, and we have had a lot of rain lately, as you may know.
What I am wondering about is producers are dealing with the
crop insurance prevented planting rules, and can you walk me
through how this policy works for crop insurance?
Mr. Scuse. Sure. I can give you the basics. Preventive
planting, if a producer does not plant the crop and does not
harvest, then they will get 60 percent of their premium.
Mrs. Bustos. Okay.
Mr. Scuse. If in fact they end up planting a second crop
later on in the year, they will receive 35 percent of the
premium. Their yield, that will not be held against them
because they--in the first scenario, if they didn't plant it
and didn't harvest it, the zero yield would not be held against
them. That is the basic.
Mrs. Bustos. Okay. So how is prevented planting treated for
Actual Production History?
Mr. Scuse. The zero will not count.
Mrs. Bustos. Okay. Okay. All right. Good. That is all I
need.
Mr. Scuse. Okay.
Mrs. Bustos. Thank you, sir.
The Chairman. The gentlelady yields back?
Mrs. Bustos. Yes, I do. Thank you.
The Chairman. Okay. The gentlelady yields back.
Before we adjourn, I would like to invite the Ranking
Member, Mr. Scott, for any closing remarks he has. David?
Mr. David Scott of Georgia. Thank you, Mr. Chairman. And
thank you, Mr. Under Secretary. You have given an excellent
presentation, very informative, very straight forward. As you
have noted, we have a number of challenges. And we really,
really appreciate you looking very, very closely at the
Georgia/South Carolina situation regarding peaches and the
adjustable downward trend methodology. They hope you will
correct that. And we look forward to working with you with my
office on that particular issue, as well as moving forward on
the peanut issue as well. Thank you very much for being with
us.
The Chairman. The gentleman yields back.
Mr. Scuse, I too want to thank you for your appearance
today. You have made reference to the best workforce,
particularly at the county level, in the government, and I
would not disagree with that. You have great folks. And please
express to them our appreciation for the hard work they are
doing. A lot of them will work a lot of extra hours over the
next several months, making sure the producers that they live
next door to are taken care of. It is a labor of love. I want
to thank them in advance for all they will do. Thank you to
your team and everything that you are working on. I know they
are working really hard at it.
I would like to just reiterate one more time how important
the Actual Production History Adjustment is and making that
work. The intensity of your answer a while ago on making sure
that RMA and FSA work together on the decision tools, and that
there are no conflicts, I would hope you bring that same kind
of intensity to taking a hard look at whatever the barriers
might be with respect to making the Actual Production History
Adjustment available to producers, particularly in those areas
of our country that have been really hard hit. I don't know it
has to be an all-or-nothing kind of circumstance. I would
appreciate you continuing to push. If you have the authority to
contract out some of that kind of thing, if that needs to get
done. It is important to us, I appreciate your efforts so far.
Most of what we have said, we have talked about the things
that were of concern, going forward. Again, please don't let
that taint the hard work you have already done, and the
recognition for what your team has put in place. My producers
are just normally anxious at the beginning of every farm bill.
This isn't their first rodeo. They have seen it before. Your
FSA folks and RMA folks have seen it as well. So we will get
through these transition periods, and quickly, hopefully. And
with as little impact--negative impact as we can. We know that
is your goal. We are on the same side. We just wanted to make
sure that we are doing our job to make sure that the resources
available to you, that have been made available to you, are
properly structured. So again, thank you very much for being
here.
Under the rules of the Committee, the record of today's
hearing will remain open for 10 calendar days to receive
additional material and supplemental written responses from the
witness. You have mentioned several times you will get us
written responses to some things posed by the Members at this
hearing.
The Subcommittee on General Farm Commodities and Risk
Management is adjourned.
[Whereupon, at 11:12 a.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Supplementary Information Submitted by Hon. Michael T. Scuse, Under
Secretary, Farm and Foreign Agricultural Services, U.S. Department of
Agriculture
Insert 1
The Chairman. . . .
Mr. Scuse. .
Talking about the APH Adjustment, we have had a lot of back
and forth with your staff. I need some help understanding why
this is going to be so difficult, why you say you can't we get
it done in 2015. We had an intern last week pull down 20 years'
worth of NASS data for 54 counties in Texas on wheat. It
covered about 75 percent of the wheat crop. They did the
calculations. They figured out which years could be kicked out
under the APH Adjustment. So, if we were able to do that with
the resources we had, why can't RMA, with the new resources
they have, and the broader access to data that they have, can't
get at least a partial roll out of the APH quicker than the
2016 crop year?
Mr. Scuse. Mr. Chairman, I appreciate the concern about
getting the APH done as soon as we possibly can. And we very
much would like to do that.
If you look at everything that RMA is going to be rolling out
for 2015, and the resources that it takes for the Risk
Management Agency to roll out those programs for 2015, it is no
small task just on those. One of the reasons why the Risk
Management Agency is able to roll out this many programs for
2015, Risk Management Agency looked at the bills that had been
passed by the House and Senate previous to the bill that was
ultimately passed by both and signed by the President. We
anticipated these programs, so we started to work on these
programs long before the final bill was passed and signed into
law.
The APH was not in any of those previous forms of
legislation. And it was a last minute addition to the final
farm bill, and one that we did not anticipate having to
implement. Having said that, it is not just about going back
and getting 20 years of data for every single county, but it is
20 years of data for every single county for every single crop
that is grown in that county. And on top of that, we also have
to work with our approved insurance providers, the 18 companies
out there that are responsible for writing the crop insurance.
It is no small effort to do the IT programs for all the
commodities that are grown in all of the counties in the entire
United States.
So what I am going to offer up, Mr. Chairman, to the
Committee, if you will, I will offer up a detailed written
explanation of the issues that we are facing in trying to
implement APH.
APH Adjustment Issue
Question. Why isn't the APH provision being implemented sooner?
One reason RMA was able to implement so much of the farm
bill so quickly was that they began preliminary work before the
farm bill passed on many of the changes that were consistent
between the two bills. For example, the House and Senate each
had similar language for SCO and STAX.
I appreciate that the APH adjustment is important to
producers who have suffered multiple years of widespread
drought. However, this was one of the very few provisions, as
ultimately written, in the Crop Insurance Title that wasn't in
either the House or Senate passed version of the farm bill.
This provision was significantly revised during Conference.
Question. Why this cannot be completed for 2015?
Determining what counties qualify
There is a significant amount of administrative work
involved in not only determining which counties will
qualify, but also which historical years will qualify for
the yield exclusion. For example, to identify whether crop
year 2012 qualifies for exclusion for irrigated corn in
2012, yield data must be compared to crop years 2001-2011,
2011 must be compared to 2000-2010 and so forth, spanning
numerous years of past history for which the data is not
consistently available for all crops by practice and
location. At a minimum, to assess qualifying years back to
2001 requires consistently reported yield data from 1991 to
present. This must also be done at the irrigated and non-
irrigated practice basis.
RMA must establish procedures for how to address
sporadic and limited yield histories outside of the primary
growing regions to determine qualifying years. This will
require decisions regarding imputation, substitution or
other legal alternatives of missing years and data for
counties in order to make the option widely available.
b For example, the National Agricultural Statistics Service
(NASS) did not
publish crop level wheat estimates for Roger Mills
County, Oklahoma in
2008 or 2013. In addition, practice specific (irrigated
vs. non-irrigated) esti-
mates have not been reported since 2007.
b RMA is establishing a framework to address these situations
with the im-
plementation of STAX. RMA intends to use lessons learned
from STAX in
the implementation of Section 11009 (as well as further
refinement and ex-
pansion of SCO in 2016 to more effectively align the
coverage with practice
(i.e., irrigated vs. non-irrigated).
b While the data compiled for SCO could be utilized for Section
11009, this
data is largely at the county level and does not reflect
or differentiate be-
tween irrigated and non-irrigated acreage. RMA intends to
utilize crop in-
surance data for SCO beginning with 2016 that allows for
more offers at
the practice specific level, at which time APH yield
exclusions can also be
appropriately aligned.
IT Issues
This complexity also carries over to the IT systems
and with the effort involved in SCO and STAX there simply
isn't the manpower to get this up and running this year.
Adjustments to APH requires substantial programming
modifications for RMA's business support systems to accept
the APH yield exclusions submitted by insurance providers.
RMA has an obligation to consider program integrity and
considerations of improper payments with the Improper
Payments Elimination and Recovery Act of 2012. RMA verifies
the calculation of approved yields in these cases, and
validates the year(s) qualifying for the exclusion.
b RMA's Actuarial Filing System (an RMA Mission Essential
Function) has
to develop an entirely new actuarial processing standard
to detail to AIPs
and producers which years are eligible for exclusion
appropriately for each
crop and county. RMA's Policy Acceptance Storage System
(PASS) Yield
and Yield History processing records have to be modified
to validate proper
eligibility for which years can and can't be substituted.
This all requires
substantial time to reprogram systems.
b Other considerations that must be addressed for the yield
exclusions in-
clude validation and edit checks to recognize the
excluded years, and in-
cluding other new farm bill changes like the 80 percent
T-Yield plugs for
beginning farmer and rancher, conservation compliance,
enterprise units by
practice, coverage levels by practice, as well as changes
in subsidy for be-
ginning farmer and rancher along with crop insurance on
native sod that
will have indirect impacts stemming from this significant
farm bill change.
RMA, AIP, and Agent automation tools that include quoting
software
changes must be made to accommodate all the various
choices of yield ex-
clusions and substitutions impacting the overall
guarantee and policy pre-
mium so producers can make informed buying decisions.
In addition, this section requires substantial data analysis
and actuarial review/rating adjustments to ensure actuarial
soundness and maintain program integrity. By law, RMA must
assess actuarial soundness of existing premium rating
methodology in light of this provision and make appropriate
adjustments, if necessary. To the extent that yield exclusions
increase coverage, expected indemnities are also likely to
increase requiring RMA to calculate the amount of premium
increase that may be needed to cover anticipated losses. In
addition, if the premium rate changes needed are outside what
the current methodology produces, then an alternative mechanism
will be needed for assessing appropriate premium rate charges.
The actuarial analysis considerations span roughly 39,000
county crop programs, or half the Federal crop insurance
program.
Insert 2
Mr. Peterson. So from what I understand, you are kind of
holding things up until you figure out the answers on the base
and the new producers and so forth? You want to have everything
done before you roll this out? Is that what I understand?
Mr. Scuse. Yes. We would like to have it completed before we
roll everything out, and answer as many of the questions as we
possibly can to eliminate any of the confusion that may exist
if we roll it out piecemeal.
Mr. Peterson. Well, I just don't agree that there is going to
be confusion, because the decision that people are going to
make is not going to be, in most cases, based on what their
base is. That is going to be pretty obvious: 2011, 2012 or 2013
is going to be pretty obvious what is going to be the best
situation. Very few people are going to be affected by the new
producer stuff and having sold the dairy and so forth. So you
are holding up the whole situation over things that are not
central to making this decision. The problem I am picking up
out there, people have no idea that this even exists. Why
couldn't the FSA office, or somebody, send a letter to these
dairy farmers saying that there is a margin insurance program
coming, these are the rates that are in the statute, we are
going to be finalizing the base issues and so forth later on.
Just so they understand this is coming, because I am really
worried that----
Mr. Scuse. Congressman, I will take that under consideration.
I will go back and look at it and see if we can do something
about getting notification out to the dairy producers, just
notifying them that this is coming, and the timeframes.
Mr. Peterson. Yes.
Mr. Scuse. So I will go back and take a look at it,
Congressman.
USDA Farm Service Agency will be sending guidance to state offices,
including a draft form letter to producers, that can be sent out in
advance of the implementation of the program to ensure producers are
aware of the program and options available to them.
Insert 3
Mr. David Scott of Georgia. Thank you, Mr. Chairman.
Under Secretary, let us go immediately to the point I brought
up concerning the treatment of the downward adjustment trend to
Georgia and South Carolina peach producers. First of all, we
need to correct that. It is very punitive. It is not fair. It
is costing. And it is not a level playing field. Can we get
your commitment to address this issue for the satisfaction of
the peach farmers in Georgia and South Carolina?
Mr. Scuse. I will do even better than that. We have the
Administrator for the Risk Management Agency in South Carolina
today who will be leaving South Carolina and going to Georgia.
We are looking at this issue as we speak, and we are taking it
very seriously. And we are looking for a solution.
Mr. David Scott of Georgia. And what would that solution be?
What would be a part of that solution? And will a part of that
solution take into consideration that extraordinary freeze in
March that affected Georgia and South Carolina to the tune and
the losses of millions of dollars? Will that be taken into
consideration as well, as you attend to this issue?
Mr. Scuse. It is--it would be premature for me to speculate
on what the solution might be. I haven't--again, the
Administrator is down there today and the rest of this week
talking with the producers, and talking with the staff. So it
would be premature for me to speculate at this time what the
solution ultimately will be. But we do take this very
seriously.
Mr. David Scott of Georgia. Well, would a part of that
solution be to give Georgia and South Carolina the same waivers
and consideration that you give the other peach growers from
Maine to North Carolina?
Mr. Scuse. That is one of the options we are looking at.
Mr. David Scott of Georgia. Good. And would you please work
with my office, and the people in Georgia and South Carolina,
to give us updates on this?
Mr. Scuse. Sure. And, again, when the Administrator returns
to Washington, as we make progress in this, we will be more
than glad to keep your office posted.
USDA Risk Management Agency continues to work on this issue and
will schedule a follow-up phone call with Rep. Scott's staff to
summarize the resolution for the peach growers in this region.
Insert 4
Mr. David Scott of Georgia. Okay. I just want you to know I
am very concerned about that. I would like to work with you and
follow-up on that to make sure we correct that to the
satisfaction of everyone. Our farmers are faced with
tremendously devastating issues right now. It is almost so
difficult for them to actually farm for the amount of other
things that they have to deal with. Now, let me go to the other
issue I raised about this reserve assurance fund for peanuts.
Can you tell us about that? And I do recall that we put money
in there in this fund. I would like to know how much money did
that finally come to, how will that be utilized?
Mr. Scuse. Congressman, I will be perfectly honest with you.
I am not aware of any money that was put in a fund. I do know
that there was a requirement for us to come up with a peanut
insurance policy. It is one that we have been working on now
for quite some years. I know it is of great concern for the
producers in your state. We continue to work on a peanut
revenue policy. I think the requirement is for us to have one
rolled out by 2015. That will depend on a couple different
factors, whether we have a--someone do a private submission, or
if we have to go out and develop it through the Risk Management
Agency. So it is something that we take very seriously, and we
are looking into.
Mr. David Scott of Georgia. Okay. And, again, you will keep
me appraised of that?
Mr. Scuse. Yes, sir.
USDA Risk Management Agency continues to work on this issue and
will schedule a follow-up phone call with Rep. Scott's staff to
summarize the status of the peanut revenue policy.
Insert 5
Mr. Neugebauer. The statute says--or the law--the bill said
the corporation shall make available separate enterprise units
for irrigated and non-irrigated acreage. The current
interpretation that your agency has is that if you elect one,
you have to elect the enterprise for the other. I do not think
that was the original intent. We may try to get the lawyers to
take another look at that. But what I would like to hear from
you is if in fact we have an unintended consequence there that
which caused that interpretation, I would love to hear that you
would help support some efforts to clarify that.
Mr. Scuse. Well, yes, most definitely we will look at getting
some additional clarification on the issue. But I do want to
point out that under that program previously--under enterprise
units, if you had one farm in a county, or five farms, you had
to enroll every farm in the enterprise units. Every farm within
that county that you were tilling had to be part of that
enterprise unit. If you look at how the program has been
previously run, and then the legislation now to give you the
ability to separate irrigated and non-irrigated, I think that
is still keeping with how the original law was intended. And,
again, I am not an attorney. I think that was part of what we
were looking at when that decision was made.
Question: Why has the Risk Management Agency (RMA) written the new
regulations regarding enterprise units for irrigated and non-irrigated
acreage to require an insured producer to qualify independently for
each practice in order to be eligible as opposed to allowing Enterprise
units on one practice coupled with non-enterprise units on the other
practice?
Response: Section 11007 states that ``the Corporation shall make
available separate enterprise units for irrigated and non-irrigated
acreage of crops in counties.'' We believe that this section simply
allows an existing enterprise unit, as currently defined in the crop
insurance policy, to be divided into two enterprise units, one for
irrigated and one for non-irrigated acreage. Since nothing in the
section otherwise modifies the existing definition of an enterprise
unit, each of these units must still qualify as enterprise units as
defined in the policy. This definition requires an enterprise unit to
include all the acreage of the crop in the county, and such acreage
must be located in two or more sections, section equivalents, FSA farm
serial numbers, or units established by written agreement. In addition,
two or more of the sections, section equivalents, FSA farm serial
numbers, or units established by written agreement must each have
planted acreage that constitutes at least the lesser of 20 acres or 20
percent of the insured crop acreage in the enterprise unit. Section
11007 does not provide RMA authority to define an enterprise unit
differently for different purposes. This means that acreage not meeting
all the requirements for an enterprise unit cannot qualify as
enterprise units.
This is consistent with the premise of enterprise unit construction
stemming from the 2008 Farm Bill, and follows current rules for an
enterprise unit (EU) which requires all the acreage within a county to
be in one EU. The new policy provision published in the Interim Rule
follows similar rules, and allows for one EU to be subdivided into two
EU's, one for all the irrigated acreage in the county and one for all
the non-irrigated acreage in the county.
If a producer does not qualify for separate irrigated and non-
irrigated EUs, there are two options based on the timing of the
discovery: (1) If the discovery is made on or before the acreage
reporting date (ARD) the insured may have one EU, if they qualify,
which is the same as current rules. Or they will have basic (BU) or
optional (OU) units depending on which unit structure the insured has
reported on the acreage report; and (2) If the discovery is made after
ARD, the policy allows the insured to have one EU if they meet the
qualifications, or a BU will be assigned. In addition, allowing EU for
one practice and another unit structure for the other practice
complicates program administration and premium subsidy determinations.
Meeting the enterprise unit requirements specified above is
critical in justifying, on an actuarially soundness basis, the current
enterprise unit discount. For example, to qualify as an enterprise
unit, the producer must have acreage planted in least two sections,
with a minimum of 20 acres (or 20 percent of all acres) of the unit in
each section. This is because the enterprise unit discount, and the
higher premium subsidy that goes with it, is based on the risk-reducing
effects of spreading production over a wider area. For example, if you
currently have a 500 acre EU made up of both irrigated and non-
irrigated acreage, and you decide to have separate EUs by irrigated and
non-irrigated practice, the smaller premium discount associated with
250 acres will apply to EU by practice instead of the larger premium
discount associated with what would have been the 500 acre EU.
The larger the enterprise unit, the lesser the risk and the greater
the enterprise unit discount. To the extent smaller tracts of land may
be considered as enterprise units, the average size of the discount
diminishes and the premium subsidy will be commensurately reduced.
Subdividing EU's by practice has implications for the EU subsidy.
The 2008 Farm Bill directed RMA to set the EU subsidy rates such that a
grower would get about the same number of subsidy dollars per acre as
if he or she had selected optional or basic units. For example, if EU's
are around 30 percent cheaper (due to lower risk), then the EU subsidy
rate would need to be 30 percent greater to keep the number of subsidy
dollars the same with optional/basic units.
The reduction in risk for EU's is due to their size and
geographical spread. On average, the bigger the EU, the more that risk
is diversified away, and the bigger the discount.
The 2014 Farm Bill now allows for EU to be subdivided, which
undermines the risk reducing effects of combining land together, and
reduces the EU discounts. The smaller discounts require decreased
subsidy rates to equalize the subsidy dollars between EU's and
optional/basic units
The more that EU's start to resemble optional/basic units, the more
that the EU subsidy rates will resemble those for optional/basic units.
The enterprise unit qualification standards are intended to ensure
that only those producers whose risks have truly been reduced receive
the additional benefit of the enterprise unit discount and increased
subsidy. For example: Allowing a producer to choose EU on irrigated
acreage and optional units on non-irrigated acreage because the non-
irrigated acreage is in locations more susceptible to early season
flooding, and other acreage more prone to later season drought and
hail, would not necessarily be reducing their risk, but adversely
selecting against the program while taking advantage of increased
subsidy on the least risky acreage.
Insert 6
Mr. Maloney. . . . In particular, I am interested in the
whole farm revenue insurance program. The Secretary recently
announced he thought those programs would be available for the
2015 crop year. I was just hoping you could expand on that and
give us a little update on that timeframe and whether you are
comfortable with that?
Mr. Scuse. The whole farm revenue will be available in a
pilot in 2015 for the areas where we had AGR and AGR-Lite. And
so it will be available to those producers where we had those
programs the last few years in a pilot, and then it will be
expanded in 2016.
Mr. Maloney. Well, and you anticipated my next question,
which is how will the program, if you can tell us, differ from
this existing AGR and AGR-Lite programs?
Mr. Scuse. I would have to provide that to you in writing
what the differences are. There are some differences between
how the programs are going to be functioning. But we will
provide you those differences in writing.
USDA's Risk Management Agency shared information highlighting the
key differences between Whole Farm and AGR/AGR-Lite with Rep. Maloney's
staff the week of July 14. A summary is below and a table is attached
with more details.
Whole-Farm Revenue Protection covers 50 to 85 percent of
revenue. AGR/AGR-Lite previously covered 65-80 percent. The
change reflects diversified farmers who wanted to be able to
insure lower levels and farmers that were not as diversified
that wanted to be able to purchase higher levels of coverage.
The Whole-Farm Revenue Protection product does not have
`payment rates' that were present in the AGR/AGR-Lite programs
(75% and 90%) so once the loss threshold is met, 100 percent of
the loss is paid.
Sales closing dates for Whole-Farm Revenue Protection will
be the spring sales closing dates applicable for the county, or
January 31, February 28, and March 15. Previously AGR had a
sales closing date of January 31 in all areas and AGR-Lite
allowed new insured's to purchase their policy on March 15 but
returning insured's had to purchase by January 31.
Liability limits--Whole-Farm Revenue Protection has an $8.5
million liability limit compared to the AGR limit of $6.5
million and the AGR-Lite limit of $1 million. Eligibility also
requires no more than 35 percent or $1 million of expected
revenue to come from animals and animal products. AGR
previously had a 35 percent limitation for animals and animal
products to a maximum of 35 percent or $1 million and there was
not a limit for AGR-Lite. Whole-Farm Revenue Protection also
has an eligibility requirement of no more than 35 percent or $1
million of expected revenue from greenhouse/nursery and neither
AGR/AGR-Lite had this limit.
The Whole Farm Revenue Protection recognizes that farm
operations may be expanding and that prices change over the
years and includes a new calculation in the determination of
the amount of insured revenue that allows for expanding
operations in addition to the indexing procedure that was also
available in the AGR/AGR-Lite programs.
Whole-Farm Revenue Protection has a ``market readiness''
feature that allows the value of washing, trimming, packing,
packaging, labeling, and any other similar on-farm activity
that is the minimum necessary to make the commodity market
ready to not be deducted from the revenue amount insured. (Not
covered under market readiness are activities that change the
form of the commodity (such as slicing apples), storage costs,
added value (gift baskets/wine, etc.), or any off-farm
activities.)
Replanting coverage--Under Whole-Farm Revenue Protection,
producers may receive payment for replanting annual crops, when
appropriate. This coverage was not available under AGR/AGR-
Lite.
The new Whole-Farm Revenue Protection product requires a
Farm Operation Report to be filed during the common acreage
reporting period of July which is a new requirement that was
not previously present in AGR/AGR-Lite.
Whole-Farm Revenue Protection
What Changed Compared to AGR and AGR-Lite?
[As of July 30 2014.]
------------------------------------------------------------------------
Comparison AGR-Lite AGR WFRP
------------------------------------------------------------------------
Liability Limit $1 Million $6.5 Million $8.5 Million
Coverage Level 65, 75, 80* 65, 75, 80* 50-85 in 5%
increments
3 Commodities
for 80 and 85%
One Commodity No Restriction No Restriction Not eligible for
WFRP if only
one commodity
and that
commodity has
an MPCI revenue
product
available.
Payment Rate 75, 90 75, 90 None
Animal or Animal None 35% of 35% of expected
Product Limit Expected revenue up to
Income $1 million
(Max)
Nursery and None None 35% of expected
Greenhouse Limit revenue up to
$1 million
(Max)
Potato Requirement Minimum of 2 Minimum of 2 Minimum of 2
Commodities Commodities Commodities
(with (with (with
calculation) calculation) calculation)
Replant Payments None None Up to 20 percent
of expected
revenue for
annual
commodity with
20 acres or 20
percent of crop
needing
replant. Not
allowed if also
insured under
MPCI with
replant
provisions.
Other Federal Crop Optional MPCI required Optional--MPCI
Insurance if 50% of allowed--No CAT
expected level MPCI
income from allowed.
MPCI crops
and allowed
otherwise--CA
T level
allowed
Market readiness No No Yes
amounts left in
insured revenue
Expanding operations No No Average
allowable
historic
revenue
increased by
10% if approved
by AIP, to
allow for minor
farm growth
that might not
trigger
indexing.
Cancellation/ 31-Jan 31-Jan Same as sales
Termination closing date
for county. (2/
28, 3/15)
Contract Change 31-Aug 31-Aug 31-Aug
Sales Closing Date March 15 New 31-Jan In Actuarial
Jan 31 Documents--same
Carryover as dates for
spring crops
for county: 2/
28 and 3/15
depending on
county
Rating Methodology Same as AGR Rates revenue Same as AGR
variability
of individual
commodities.
------------------------------------------------------------------------
* 3 Commodities.
Insert 7
Mrs. Noem. I appreciate that. Also, I have heard some
instances where extreme heat losses are not covered. Again, we
have that in South Dakota. Unfortunately, while we are a land
of extremes, but once in a while we will lose some cattle due
to extreme heat and feed lots, especially. Can you speak to why
that would happen that there would be a denial based in that
program?
Mr. Scuse. I will have to get back to you on what is and is
not covered, because there are some things that are covered
under LIP.
Extreme heat is an eligible cause of loss under LIP. An eligible
livestock owner on a farm that retains ownership in livestock that are
being fattened in a feedlot and that die in the feedlot due to an
eligible adverse weather event, such as extreme heat, will be eligible
for compensation under LIP, if all other eligibility conditions under
the program are met.
Insert 8
Mr. LaMalfa. Thank you, Mr. Chairman. I will try to move
quickly here. There is a lot to cover.
Mr. LaMalfa. Thank you, Mr. Chairman. I will try to move
quickly here. There is a lot to cover.
We were talking earlier about the moving around of resources
and personnel within USDA to address the backlog--on the
livestock, forage program backlog portion. In California, we
face droughts. Some areas are having trouble getting grazing
permits, as they had been in the past with sage grouse going
on, even wild horses. And so especially northeast California
faced some really acute problems with grazing there. So can you
address this--have you had the opportunity to push the
resources up into that portion of the state with the acute
problem there is there?
Mr. Scuse. I am not aware of where we have moved our
resources in the State of California. But we could get the
information. I can get in touch with our State Executive
Director, and we can provide you with that information on what
we have done and what the issues are in that part of the state.
USDA sent the attached summary of applications and payments in Rep.
LaMalfa's district on July 16, 2014.
Livestock Programs in CA-1 (LaMalfa)
[July 21, 2014]
2013 NAP:
Butte County--12 producers have grazing coverage; seven
have filed an application for payment for grazing and
seven of those have been paid.
Total NAP paid as of today........................... $77,096
Glenn County--46 producers have grazing coverage; 46 have
filed an application for payment for grazing and 42 of
those have been paid.
Total NAP paid as of today........................... $1,308,617
Lassen/Plumas/Sierra Counties--23 producers have grazing
coverage; six have filed an application for payment for
grazing and five of those have been paid.
Total NAP paid as of today........................... $72,727
Modoc County--33 producers have grazing coverage; zero
have filed an application for grazing and zero have been
paid
Shasta County--26 producers have grazing coverage; eight
have filed an application for payment for grazing and
six of those have been paid.
Total NAP paid as of today........................... $78,401
Siskiyou County--200 producers have grazing coverage; 13
have filed an application for payment for grazing and 13
of those have been paid.
Total NAP paid as of today........................... $99,149
Tehama County--56 producers have grazing coverage; 39
have filed an application for payment for grazing and 34
of those have been paid.
Total NAP paid as of today........................... $740,854
LFP for 2012, 2013, and 2014:
Butte--36 payments....................................... $459,165
Glenn--60 payments....................................... $1,662,696
Lassen/Plumas/Sierra--58 payments........................ $1,899,892
Modoc--60 payments....................................... $1,584,807
Shasta--15 payments...................................... $182,646
Siskiyou--87 payments.................................... $1,127,861
Tehama--60 payments...................................... $1,418,689
CA Statewide FLP Totals:
2012 Applications--558 Payments.......................... $2,651,413
2013 Applications--1,457 Payments........................ $18,100,517
2014 Applications--1,539 Payments........................ $26,563,694
------------
Total Applications--3,554 Total payments............... $47,315,694
Insert 9
Mr. LaMalfa. Good. Thank you. Finally, on specialty crops
here, we have, in California, Mr. Gibson was talking about how
important they are up in his state. And it is really huge in
California, as you know, that the changes involved in the Whole
Farm Insurance Program, and that overlaid on top of the
catastrophic coverage, we are understanding the requirements
there might be that they are going to have to have duplicate
coverage for the same proportion of the crop--the amount of
crop. I don't think that would really be the intended
consequence, but it would make it very, very difficult for
specialty crop growers to be able to be in both and participate
in both, because it is not going to pencil out for them. So we
don't think that was the intention in the farm bill, but we are
getting feedback that that might be the direction the USDA is
trying to take this. What can you say on that?
Mr. Scuse. We will take a look at it.
USDA sent a response to Rep. LaMalfa's office on July 29th via e-
mail. A copy of the response follows.
RMA is aware of the questions regarding: (1) CAT level insurance
with Multi-Peril Crop Insurance (MPCI), and (2) the requirement of
corresponding coverage levels when underlying MPCI coverage is
purchased with Whole Farm Revenue Policy (WFRP), as we recently
received comments from several of our companies who provided reviews of
the WFRP policy.
These questions refer to the dual insurance provisions that allow
an insured to buy individual coverage policies under MPCI insurance
along with their WFRP insurance. This allows producers to tailor their
risk management to still allow individual coverage for a commodity if
they so choose without eliminating their ability to insure the rest of
their commodities under WFRP. When an insured covers their farm under
both types of crop policies, an adjustment to the WFRP premium is made
to account for the coverage provided under the MPCI policy. In return,
any indemnity paid under the MPCI policy is counted as revenue to count
and reduces indemnity paid under the WFRP policy. RMA is working to
assure that the premium adjustments made actuarially sound and
accurately reflect the remaining risks. Offsetting the individual
policy indemnity payments from the WFRP indemnity should ensure that
producers do not receive disproportionate benefits.
RMA is in the process of finalizing the WFRP policy and program
materials and we are still evaluating these recently identified issues
raised regarding coverage level requirements. We will be happy to
provide an update once this is finalized.
______
Submitted Letter by Texas Wheat Producers Association
Brandon Willis,
Administrator,
Risk Management Agency, U.S. Department of Agriculture,
Washington, DC 20250
Administrator Willis;
On behalf of the more than 35,000 wheat growers in Colorado,
Kansas, Oklahoma and Texas, we are writing to urge you to implement the
actual production history (APH) adjustment provisions of the
Agricultural Act of 2014 in time for the 2015 crop year.
In the most recent farm bill debate, producers made great
sacrifices and worked with decision-makers to implement changes to farm
safety net programs that drastically reduced the level of support and
predictability traditionally provided by Federal farm programs.
Producers were willing to make these sacrifices largely due to the
ongoing coverage provided by the Federal Crop Insurance Program and key
improvements to the program included in the final bill.
Many of the changes contained in the Agricultural Act of 2014
recognized crop insurance as the center of our modern safety net.
Unfortunately, many of our growers have been stuck in the worst drought
since the Dust Bowl of the 1930s and have found their crop insurance
coverage diminishing at an alarming pace. Back-to-back drought years
have reduced producers' APHs to levels that no longer reflect even
average production expectations, therefore reducing crop insurance
guarantees. Additionally, producers across this region will suffer the
effects of this drought for years to come as their APHs are continually
punished because a one-in-eighty year drought is included in their 10
year production history.
The farm bill was authored at the height of a drought that gripped
the Plains states. In an analysis using National Agricultural
Statistics Service data for Colorado, Kansas, Oklahoma and Texas, we
estimate that more than \1/2\ of the 22 million annually planted wheat
acres across these four states would be eligible to drop their 2013
wheat yield due to the severity of the drought. We believe that further
analysis would reveal even more eligible years of production due to the
ongoing nature of the current drought.
Implementing these provisions in time for the 2015 crop year would
allow wheat producers across this region the opportunity to further
protect their farms from the effects of drought. While the
implementation of these provisions will provide benefits to growers
across the country when future adverse weather conditions occur, it
will make an immediate and lasting impact for our growers who have been
operating under extreme drought conditions. We realize that a change to
the APH calculation isn't as simple as flipping a switch. If it is not
feasible to implement these provisions nationwide for the 2015 crop
year, we ask that they be implemented for growers in states
experiencing persistent drought to provide growers the needed benefits
of the new provision while not over-burdening your agency.
Thank you for your consideration,
Sincerely,
Colorado Association of Wheat Growers;
Kansas Association of Wheat Growers;
Oklahoma Wheat Growers Association;
Texas Wheat Producers Association.
______
Submitted Questions
Response from Hon. Michael T. Scuse, Under Secretary, Farm and Foreign
Agricultural Services, U.S. Department of Agriculture
Questions Submitted by Hon. Frank D. Lucas, a Representative in
Congress from Oklahoma
Supplemental Coverage Option
Question 1. We believe the SCO rule as implemented so far looks
good. We would note particularly that the wording is cleared up
concerning interaction between SCO and ARC by determining SCO
eligibility by farm number and we believe that this is a good solution
to what could have been a real implementation problem. Thank you.
We would note one typo and observe one problem on the 2015 wheat
deadline to drop SCO if a producer elects ARC. The typo is on page 2,
in the second column, in the sixth line from the top. The reference is
5(a) and it ought to be 6(a). The sentence should read: ``Premium for
this Endorsement is calculated by multiplying your supplemental
protection from section 6(a) by the premium rate and any premium
adjustment percentages that may apply.'' Is our understanding correct?
Answer. The Supplemental Coverage Option (SCO) endorsement released
by RMA on its website correctly refers to 6(a). The SCO endorsement can
be found at the following link: http://www.rma.usda.gov/policies/2015/
15sco.pdf.
Question 2. Section 11003 requires that the Supplemental Coverage
Option (SCO) be available to all producers on all insurable crops. The
provision became effective on the date of enactment, February 7, 2014,
but the statement of managers clarified that SCO would be made
available in time for the 2015 crop year to allow ample time for
implementation. However, the Risk Management Agency (RMA) has indicated
that SCO will only be available on corn, soybeans, wheat, cotton, rice,
spring planted barley, and grain sorghum and then only in certain
counties. The SCO provision has been in each legislative draft of the
farm bill since 2011 giving RMA significant lead time to examine what
would be needed to ensure full and timely implementation.
Answer. RMA has made every effort to make SCO as widely available
as possible given the time frame between the enactment of the 2014 Farm
Bill, the work needed to make sure SCO meets the applicable
requirements of the Federal Crop Insurance Act, and contract change
dates for the 2015 crop year. When SCO first appeared in earlier drafts
of the farm bill, RMA began reasonable planning/development efforts--
and is why RMA was able to implement SCO in time for the 2015 crop year
for a number of crops. While the appearance of SCO early in the farm
bill process allowed time for preparation, there were limits to what
could be done for a provision that was not yet law.
The initial crops covered by SCO already had area-based insurance
coverage developed, making implementation more straightforward.
Expanding SCO beyond these crops required significantly more time and
development and the process could not be undertaken until the farm bill
was enacted.
Question 2a. Please provide specific timelines regarding the
following: (a) the scheduled availability of SCO in all counties with
respect to corn, soybeans, wheat, cotton, rice, spring planted barley
and grain sorghum; (b) the scheduled availability of SCO for all other
title I commodities in all counties; (c) the scheduled availability of
SCO with respect to non-title I commodities. Please explain the
reasoning behind each timeline. We request such timelines as part of
these questions submitted to you for the record.
Answer. On November 19, 2014, RMA published a list of crops that it
will analyze during the 2015 calendar year to determine if sufficient
data exist to offer SCO for the 2016 crop year. In addition, RMA is
currently looking at expanding availability for corn, soybeans, wheat,
cotton, rice, spring planted barley and grain sorghum. which were first
made available in the 2015 crop year for which it previously had group
risk plans of insurance developed, making implementation more
straightforward.
Question 3. SCO is designed to supplement individual insurance
policies (not just revenue policies), so delayed implementation of the
peanut revenue policy should not prevent timely implementation of SCO
for peanuts. Why will SCO not be available to peanut producers for the
2015 crop year?
Answer. RMA first made SCO available for crops covered by existing
area-based risk plans of insurance making implementation more
straightforward. While crop provisions were previously in place for a
peanut area-based insurance plan, the peanut area coverage was
discontinued in December 2009 due to little or no business and changes
in the peanut industry. For 2016, RMA will strongly consider SCO for
peanuts. RMA does intend to offer a peanut revenue policy for 2015.
Question 4. Given that SCO triggers on an area wide basis, to what
extent might currently uncovered counties be covered by triggering
indemnities for producers in those counties based on losses experienced
by similarly situated covered counties?
Answer. In counties where there is insufficient data to establish
SCO coverage, the use of data from the NASS crop reporting district,
which includes other counties, was considered and utilized for spring
crops. For SCO cotton, RMA has examined the use of data from specific,
similarly-situated, counties to establish coverage (based on the
development efforts for STAX). This approach is planned to be extended
to other SCO crops for 2016.
Question 5. The farm bill statement of managers expressed our
intent that SCO yield and revenue policies be available to hybrid seed
crops. What is the status of implementation?
Answer. RMA understands the intent of the Managers and is working
to make SCO available to the broadest number of crops possible. RMA
included Hybrid corn and grain sorghum seed on a list published
November 19, 2014, of crops RMA will analyze to potentially offer SCO
for the 2016 crop year.
Question 6. The farm bill statement of managers expressed the
intent that SCO be made available on a yield basis for cottonseed. What
is the status of implementation?
Answer. RMA is strongly considering cottonseed for SCO for the 2015
crop year.
Question 7. The farm bill statement of managers expressed the
intent that Area Risk Protection Insurance be made available to popcorn
producers under written agreement until the policy is amended to allow
for this. What is the status of implementation?
Answer. Area Risk Protection Insurance (ARPI) for popcorn was
recently approved by the Federal Crop Insurance Corporation Board of
Directors, and is planned for implementation for the 2016 crop year.
Enterprise Units by Practice
Question 8. Section 11007 reads as follows: ``Beginning with the
2015 crop year, the Corporation shall make available separate
enterprise units for irrigated and non-irrigated acreage of crops in
counties.''
We understand that RMA interprets this text to mean that if a
producer elects to insure an irrigated crop of a commodity on an
Enterprise Unit (EU) basis that the producer must also insure the non-
irrigated crop of the commodity on an EU basis. RMA has offered a
number of reasons why the agency arrived at this conclusion.
The first we understood to be a legal justification that the
conjunction ``and'' in the section requires this result. However, had
Congress used the conjunction ``or'' RMA might have just as easily
maintained that the agency is free to make available EU for one
practice or the other but is not required to make EU available with
respect to both practices. The statutory text states that ``the
Corporation shall make available separate enterprise units'' but the
text does not require a producer to actually elect EUs with respect to
both practices. The producer is free under the text to elect EU for
both practices or elect EU for only one practice while electing
optional or basic units for the other.
Answer. See response to Question 8a.
Question 8a. During the hearing, Under Secretary Scuse requested
and was granted the opportunity to reply in writing to certain
questions of Committee Members. In answer to the question regarding
this particular issue, the written response of RMA was, ``We believe
that this section simply allows an existing enterprise unit, as
currently defined in the crop insurance policy, to be divided into two
enterprise units, one for irrigated and one for non-irrigated acreage.
Since nothing in the section otherwise modifies the existing definition
of an enterprise unit, each of these units must still qualify as
enterprise units as defined in the policy . . . Section 11007 does not
provide RMA authority to define an enterprise unit differently for
different purposes.'' With respect, statutory text enacted into law as
part of the farm bill that amends another act of Congress, the Federal
Crop Insurance Act (FCIA), is not required to conform to preexisting
agency regulations which are subordinate to statutory text. Rather,
agency regulations are meant to conform to statutory text. The
statutory text supports, and is certainly not inconsistent with, the
Congressional intent that a producer be able to elect an EU for all of
a crop in a county produced under, for example, a non-irrigated
practice without having to elect an EU with respect to the same crop in
the county produced under an irrigated practice. In fact, this
flexibility is precisely a part of the objective of section 11007 of
the 2014 Farm Bill.
Answer. RMA believes the Interim Rule regarding Section 11007 is
consistent with the statute. RMA is currently evaluating comments
provided to the Interim Rule that implemented this provision.
Question 8b. Although the agency relies on the 2008 Farm Bill
provisions to support this interpretation, nothing in the statutory
text nor the statement of managers in that Act supports--much less
requires--the agency's reading of the situation. In fact, we are deeply
troubled by a paragraph in the answer to the question that reads in
part: ``The 2014 Farm Bill now allows for EU to be subdivided, which
undermines the risk reducing effects of combining land together, and
reduces the EU discounts. The smaller discounts require decreased
subsidy rates to equalize the subsidy dollars between EU's [sic] and
optional/basic units.'' The response continues at some length on this
point declaring that under certain conditions ``the premium subsidy
will be commensurately reduced,'' that the 2014 Farm Bill ``reduces the
EU discounts,'' and ``the EU subsidy rates will resemble those for
optional/basic units''. We would stress in the strongest possible terms
that the amendment made by the 2014 Farm Bill in section 11007 does
absolutely nothing to change the requirements made by the amendments to
the Federal Crop Insurance Act made under section 12011 of the 2008
Farm Bill concerning premium support for EUs. Rather, the 2014 Farm
Bill confers the same premium support on EUs conferred by the 2008 Farm
Bill but changed how EUs are to be understood. The percentage of
premium support for EUs is codified and fixed under the 2008 Farm Bill
and nothing in the 2014 Farm Bill changed that percentage. Section
11006 of the 2014 Farm Bill merely makes the availability of EUs
permanent. The only way the agency could argue differently is if it
maintained that the premium support requirements of the 2008 Farm Bill
only applied to EUs as EUs were understood prior to the enactment of
the 2014 Farm Bill, but this is a wholly unsupportable contention.
Congress enacted a law to change the manner by which EUs may be elected
(i.e., by practice) but Congress did not alter the EU premium support
that inures to a producer that makes such an election. In fact, the
Congressional Budget Office (CBO) charged Congress for this change to
the law ($533 million) taking into account all of the cost
considerations for which RMA now intimates the agency may seek to
charge producers. We cannot overstate that the Committee will take
strong exception to any action that results in a lower premium support
level for EUs, however they are elected by the producer, than what is
clearly provided for under section 12011 of the 2008 Farm Bill.
Moreover, adhering to the premium support requirements of the 2008 Farm
Bill does not permit an offsetting change in premium support for
optional units or basic units as the written response of the agency
seems to suggest. Nothing in the FCIA allows for this. Never was this
discussed during farm bill discussions. Please clarify if the agency
has somehow arrived at a different conclusion. Provided immediately
below is the complete body of section 12011 of the 2008 Farm Bill, as
amended by section 11006 of the 2014 Farm Bill, as it appears today in
the FCIA:
(5) Enterprise and whole farm units.--
(A) In general.--The Corporation may pay a portion of
the premiums for plans or policies of insurance for
which the insurable unit is defined on a whole farm or
enterprise unit basis that is higher than would
otherwise be paid in accordance with paragraph (2).
(B) Amount.--The percentage of the premium paid by
the Corporation to a policyholder for a policy with an
enterprise or whole farm unit under this paragraph
shall, to the maximum extent practicable, provide the
same dollar amount of premium subsidy per acre that
would otherwisehave been paid by the Corporation under
paragraph (2) if the policyholder had purchased a basic
or optional unit for the crop for the crop year.
(C) Limitation.--The amount of the premium paid by
the Corporation under this paragraph may not exceed 80
percent of the total premium for the enterprise or
whole farm unit policy.
Concerning the agency's practical reasons for the inability to
allow EU on one practice and optional unit/basic unit on the other
practice, the agency appears to rely on a rating issue. In the example,
provided in the written answer to a question posed at the hearing, the
EU is on the irrigated and the optional unit/basic unit is on non-
irrigated. The EU on the irrigated should be rated to show the reduced
risk since all the irrigated acreage is together. The non-irrigated
optional unit/basic unit is already rated to show its increased risk.
So, why would having the EU on the irrigated change that? RMA has
always published different rates and reference yields for irrigated and
non-irrigated units so why does having the EU on the irrigated acreage
change that? It does not in our view.
Answer. According to the Federal Crop Insurance Act, the
Corporation is required to determine premium subsidy rates for
enterprise units such that premium subsidy per acre would, to the
maximum extent practicable, equal that of basic or optional units.
Given the legislated direction, RMA determined enterprise unit subsidy
rates based on an analysis of policyholder data that existed at the
time. Enterprise unit subsidy rates have remained constant since the
2009 crop year implementation. Subsequent analysis, based on more
recent policyholder data, has yet to support an increase or decrease in
enterprise unit subsidy. However, if changes in participation and
premium rates (or premium discounts) consistently alters the
relationship between premiums across types of units, then RMA is
required to adjust enterprise unit subsidy rates. Allowing separate
enterprise units for irrigated and non-irrigated acreage does alter
this relationship for those making the election. For example, if a
producer has a 500 acre enterprise unit consisting equally of irrigated
and non-irrigated acreage and the producer elects separate enterprise
units by irrigated and non-irrigated practice, then a smaller premium
discount applies to each 250 acre unit compared to what would be
applicable to the 500 acre enterprise unit. This is highly contingent
upon the distribution of irrigated and non-irrigated acreage within
existing policies. To the extent acreage is equally distributed, the
effect (reduction in subsidy rate) could be more pronounced. To the
extent acreage is dominated by one practice over another, the effect
could be minimal if at all differentiable. RMA continues to analyze
policyholder data to assess whether this election alters the aggregate
relationship.
Question 9. Despite significant communication between USDA and the
Committees throughout farm bill deliberations, particularly during
conference committee, there appears to be many misunderstandings on the
import of various provisions where the provisions were written more
generally. In the view of the department, would it be useful for
Congress to be more prescriptive in future Acts in regard to statutory
text and statement of managers, including the statutory nullification
of agency regulations or actions where it is believed such regulations
or actions may be construed to work to frustrate the requirements of a
statutory provision? We are reluctant to go in this direction, but if
it would help clear up any possible misunderstandings and expedites
proper implementation, we would certainly be willing to pursue this
route in future legislation.
Answer. RMA strives to interpret the statute in a way that meets
congressional intent and that provides a working, useful, and
actuarially sound product to the producers. While non-ambiguous
statutory text reduces the amount of discretionary decisions needed,
the nature of crop insurance requires RMA to implement legislation
within already existing confines of contractual agreements with private
insurance companies and already existing law such as the requirement
that the program remain actuarially sound. Therefore, clear legislative
text does not always reduce the number of issues RMA must resolve in
implementing new programs.
Question 10. You also state in the interim rule that, ``Enterprise
units by irrigated and non-irrigated practice will be available for any
crop in which enterprise units are allowed through the actuarial
documents.'' Please explain the practical implications of this
limitation in terms of for what counties and crops producers will not
be able to access EU by practice. Also, please explain what the agency
will do to obtain the actuarial documents necessary to ensure all
producers have access to EU by practice.
Answer. The statement was intended to clarify that the actuarial
documents will identify where separate enterprise units for irrigated
and non-irrigated acreage are applicable since enterprise units are
currently not available for all crops. Crops that offered enterprise
unit coverage for 2014 include barley, canola, corn, cotton, flue cured
tobacco, fresh market beans, grain sorghum, olives, pecans, rice,
soybeans, sunflowers, sweet potatoes, and wheat. RMA continues to
review crops for enterprise unit expansion, and, has already expanded
enterprise units for dry peas and grass seed for the 2015 crop year.
RMA also expanded enterprise units for dry beans and popcorn for 2015.
In addition, for crop programs that do allow enterprise units, not all
counties specify or allow coverage for both irrigated and non-irrigated
production. For example, if non-irrigated acreage is currently not
insurable in a given county due to excessive risk, then non-irrigated
coverage will not be available, nor will separate enterprise units.
Last, the provision to allow separate enterprise units for irrigated
and non-irrigated acreage will first be available for crops and
counties that have a November 30 contract change date (spring 2015
crops).
Actual Production History Adjustment
Question 11. Section 11009 allows a producer to exclude certain
yields from the APH of the producer. The section amends the Federal
Crop Insurance Act and the provision became effective upon enactment,
February 7, 2014. However, RMA maintains that the provision requires
agency implementation and that such implementation will take nearly 2
years, making the provision first eligible with respect to the 2015
fall planted crop. Please explain in detail why any agency
implementation is necessary to carry out what we crafted as a self-
executing provision and why such a long delay is also necessary? Please
also explain why the provision cannot be implemented for the 2015
spring planted crop or partially implemented for this fall with respect
to hardest hit regions of the country or crops where the provision is
needed the most.
Apart from any other considerations, has RMA evaluated the
feasibility of implementing the APH adjustment for 2015, for the fall
or spring planted crops, and found that it is technically feasible but
that there are other considerations that make implementation for the
2015 crop undesirable from an agency or departmental policy
perspective? Or does RMA or the department maintain that implementation
for 2015, fall or spring, is infeasible?
Answer. To implement the APH adjustments provided for in section
11009, substantial programming modifications must be made to the core
foundation of RMA's business support systems to validate and accept the
APH yield exclusions impacting insurance guarantees and associated
premium costs submitted by Approved Insurance Providers (AIPs). These
adjustments include modifications to be able to determine those
producers who may qualify for the yield exclusion, for what years, what
crops, what practices, and tracking the producer's elections.
Furthermore, RMA's Policy Acceptance Storage System Yield and Yield
History processing records have to be modified to validate proper
eligibility for which years can and cannot be substituted. This will be
accomplished by reprogramming RMA's Actuarial Filing System to develop
a new actuarial processing standard to detail which years are eligible
for exclusion appropriately for each crop and county.
These modifications must be made to reasonably ensure that the
threats of fraud, waste, or abuse to the Federal Crop Insurance Program
are detected, deterred, mitigated, and addressed. Without these
verifications, FCIC could be in violation of the Improper Payments
Elimination and Recovery Improvement Act of 2012 which requires us to
limit fraud, waste, and abuse of the program and ensure that improper
payments do not occur.
Another significant task will be determining which counties and
historical years will qualify for the yield exclusion. The yield
exclusion applies if the county yield is less than 50 percent of the
simple average of the per planted acre yield of the agricultural
commodity in the county during the previous 10 consecutive crop years.
This is not a single one year calculation. The 10 year county average
must be calculated for each year that may be in the producer's APH
database. For example, to identify whether crop year 2012 qualifies for
exclusion for irrigated corn in 2012, yield data must be compared to
crop years 2001-2011, 2011 must be compared to 2000-2010 and so forth.
These calculations must be done in all counties and for all crops where
crop insurance is available.
RMA must also make these calculations on an irrigated and non-
irrigated practice basis. In many instances, the requisite number of
years of past history is not consistently available for all crops by
practice and location. At a minimum, to assess qualifying years back to
2001 requires consistently reported county yield data from 1991 to
present for irrigated and non-irrigated practices. Therefore, RMA must
establish procedures for how to address sporadic and limited yield
histories outside of the primary growing regions to determine
qualifying years for APH adjustments. This will require imputation or
substitution of missing years or alternative approaches, if allowable,
in order to make the option widely available. For example, crop level
wheat estimates for certain counties were not published in 2008 or
2013. In addition, practice specific (irrigated vs. non-irrigated)
estimates have not been reported since 2007 for certain counties.
Before the Actual Production History adjustment in section 11009 can be
implemented, RMA will have to develop policies on these and other
issues and these policies will have to be implement in a manner and on
a timetable consistent with the obligations RMA and Federal Crop
Insurance Corporation have under the Federal Crop Insurance Act and by
agreement.
Thus, RMA does not believe that individual producers, nor crop
insurance agents are able or authorized to make these determinations
themselves unless offered in the actuarial documents, and hence ``self-
execute'' when a yield may be excluded.
As for when Section 11009 (Yield Exclusion) will be implemented,
RMA has determined that Yield Exclusion will be implemented for the
following 2015 spring crops: corn, soybeans, wheat, cotton, grain
sorghum, rice, barley, canola, sunflowers, peanuts, and popcorn. APH
Yield Exclusion is not available for crops offering both winter/fall
and spring types of coverage with a June 30, 2014 contract change date.
The 2015 crops were chosen for two reasons. First, they are crops with
revenue coverage. This allows RMA to leverage the Information
Technology (IT) applications that compute the insurance guarantee,
premium costs, and data validations for these crops. This already
existing IT infrastructure also includes the premium rating methodology
appropriate to account for the increase in insurance guarantee as
similarly used for yield trend adjustment, another program that
provides for higher guarantees. Second, RMA conducted significant
analysis and computation of county based production data to help FSA
implement Agricultural Risk Coverage/Price Loss Coverage, and that same
information can be leveraged to implement APH.
RMA has always been working to implement all parts of the farm bill
as quickly as possible. At the time RMA set implementation priorities,
the agency felt that there were not enough agency and IT contract
resources to implement Yield Exclusion for the 2015 crop year without
significant program integrity risk. However, since that time, two key
events have occurred that have allowed the agency to move Yield
Exclusion implementation forward to the 2015 crop year.
First, RMA and its IT contractors have been able to successfully
implement the farm bill planned priorities on schedule and in multiple
occasions ahead of schedule, preliminary work estimates creating an
opportunity to pursue this important initiative. For example, RMA and
its contracted IT resources are now expected to deliver the premium
estimator over two months ahead of schedule to support the upcoming
Whole Farm Revenue Protection program, while still adding Enterprise
Units and Coverage Levels by Practice to the 2015 crop year
implementation schedule.
Second, since July, RMA has worked on the development of a county
yield dataset (based on crop insurance data) to support FSA's ARC and
PLC programs, and the associated educational tools developed by
contractors. This work can be leveraged to provide the data needed to
implement Yield Exclusion for major crops in the 2015 crop year.
RMA will not be able to offer Yield Exclusion for 2015 winter wheat
because, as described above, up until October 2014 RMA's resources were
fully devoted to implementing other key farm bill initiatives,
including broad availability of SCO and STAX, offering separate
enterprise units by practice, offering separate coverage levels by
practice, beginning farmer and rancher provisions, correction of error
procedures, administrative relief for debt, native sod procedures,
whole farm revenue, and Conservation Compliance. In order to offer
Yield Exclusion for winter wheat, the necessary changes would have
needed to be made by late summer, which also was prior to completion of
the work to support ARC/PLC. RMA simply did not have the human
resources to implement the provision at that time without significant
program integrity risk, and failure to timely implement and support
other key farm bill initiatives.
While RMA fully appreciates why winter wheat growers would want to
take advantage of Yield Exclusion, there are two main reasons why RMA
is not in a position to offer Yield Exclusion for winter wheat. First,
the necessary work required to be able to offer Yield Exclusion to
winter wheat growers would not be completed for several months. After
this time, in many areas, winter wheat would have already been planted,
which means that insurance would have already be in effect. To allow
coverage levels to be changed after insurance has become effective,
would open the program up to significant program integrity issues since
producers would be more likely to know early crop conditions and
whether a loss is expected.
Second, allowing Yield Exclusion for winter wheat would violate
current existing risk sharing agreements between the USDA and the
Approved Insurance Providers (AIPs). By the time winter wheat producers
would be able to elect Yield Exclusion, the AIPs would have already
decided how much risk they want to share with the USDA for these
policies and changing the risk level after the fact would open up the
companies to risk they did not anticipate.
Question 12. At the hearing, Under Secretary Scuse left open the
possibility for a partial implementation. We greatly appreciate Under
Secretary Scuse's willingness to work with us on this extremely
important issue. Is the agency examining ways to achieve this
objective?
Answer. RMA has determined that Yield Exclusion will be implemented
for the following 2015 spring crops: corn, soybeans, wheat, cotton,
grain sorghum, rice, barley, canola, sunflowers, peanuts, and popcorn.
APH Yield Exclusion is not available for crops offering both winter/
fall and spring types of coverage with a June 30, 2014 contract change
date. The 2015 crops were chosen for two reasons. First, they are crops
with revenue coverage. This allows RMA to leverage the Information
Technology (IT) applications that compute the insurance guarantee,
premium costs, and data validations for these crops. This already
existing IT infrastructure also includes the premium rating methodology
appropriate to account for the increase in insurance guarantee as
similarly used for yield trend adjustment, another program that
provides for higher guarantees. Second, RMA conducted significant
analysis and computation of county based production data to help FSA
implement Agricultural Risk Coverage/Price Loss Coverage, and that same
information can be leveraged to implement APH.
Question 13. In regard to written responses to questions on APH
posed at the hearing, we submit the following follow-up questions. We
apologize for the specificity of the questions, but we had no
opportunity to pursue these issues fully at the hearing. Due to the
complexity of the issues, the Under Secretary properly recommended a
thorough written explanation of the issues involved. We submit these
follow up questions in hopes that they may assist in pursuing a more
timely implementation.
RMA response on APH: ``There is a significant amount of
administrative work involved in not only determining which counties
will qualify, but also which historical years will qualify for the
yield exclusion.'' Question: Could this work be contracted out? If not,
why? Is a staged implementation possible by crop or region? If not,
why? It seems to us that this would be the easiest part of the process
for major crops.
Answer. RMA has already contracted out some of the actuarial
analysis for this endeavor under the authority of an existing contract
and will be working with the contractor to make determinations when
data is limited. In addition, RMA already contracts out the automated
systems programming of the business support systems underlying the
Federal Crop Insurance Program. Adjustments to APH requires substantial
programming modifications to the core foundation of RMA's business
support systems to validate and accept the APH yield exclusions
impacting insurance guarantees and associated premium costs submitted
by Approved Insurance Providers (AIPs). These adjustments include
modifications to be able to determine those producers who may qualify
for the yield exclusion, for what years, what crops, what practices,
and tracking the producer's elections.
Furthermore, RMA's Policy Acceptance Storage System Yield and Yield
History processing records have to be modified to validate proper
eligibility for which years can and cannot be substituted. This will be
accomplished by reprogramming RMA's Actuarial Filing System to develop
a new actuarial processing standard to detail which years are eligible
for exclusion appropriately for each crop and county.
In addition, AIPs are required to follow RMA published policy,
procedure, calculation requirements, and data processing requirements
outlined in the Standard Reinsurance Agreement. RMA has to identify and
then verify that the years excluded are eligible for exclusion and that
the resulting insurance guarantees and associated policy premium
charged are correct. The need to verify that the years excluded are
eligible is needed to provide reasonable assurance that the threats of
fraud, waste, or abuse to the Federal Crop Insurance Program are
detected, deterred, mitigated, and addressed. Without these
verifications, the Federal Crop Insurance Corporation could be in
violation of the Improper Payments Elimination and Recovery Improvement
Act of 2012 which requires us to limit fraud, waste, and abuse of the
program and ensure that improper payments do not occur.
Question 14. RMA: ``RMA must establish procedures for how to
address sporadic and limited yield histories outside of the primary
growing regions to determine qualifying years. This will require
decisions regarding imputation, substitution or other legal
alternatives of missing years and data for counties in order to make
the option widely available.'' Question: Might contiguous county
eligibility resolve much of the problem in this regard? Where it does
not, could you use RMA data?
Answer. To determine contiguous county eligibility one must first
determine the initial qualifying county which is where the sporadic and
limited data may exist. RMA is not aware of any authority or ability to
interpret the APH provisions of the 2014 Farm Bill to allow it to use
contiguous county data to make the determination for an initial
qualifying county.
Question 15. RMA: ``For example, the National Agricultural
Statistics Service (NASS) did not publish crop level wheat estimates
for Roger Mills County, Oklahoma in 2008 or 2013. In addition, practice
specific (irrigated vs. non-irrigated) estimates have not been reported
since 2007.'' Question: Importantly, this has not prevented RMA from
changing the t-yields for Roger Mills County a number of times since
2001 (four times for irrigated and three times for dryland, meaning the
agency probably looked at both four times in that timeframe). The t-
yield is essentially a 5 year yield per planted acre number while the
proposed APH adjustment compares to a 10 year yield per planted acre.
This suggests the agency has historical t-yield data for insured crops
and at the appropriate practice levels in order to satisfy the types of
coverage by practice offered. If so, might RMA use the dataset used to
calculate the 5 year averages (augmented with RMA data, as necessary)
in order to arrive at the 10 year APH adjustment benchmarks? If so,
this would indicate that the agency has the individual years of data to
compare to the average in order to establish which years can be
excluded. Is this correct?
Answer. For determining T-yields in areas where data are sparse,
RMA has the flexibility to look at information from other counties and
other practices; which is not an option for this APH provision. Unlike
T-yields, the analysis for this APH provision requires analysis to
determine if each individual year for every county by irrigated and
non-irrigated practice, for every year back to 2001, was less than 50
percent of the 10 year average.
Question 16. RMA: ``RMA is establishing a framework to address
these situations with the implementation of STAX. RMA intends to use
lessons learned from STAX in the implementation of Section 11009 (as
well as further refinement and expansion of SCO in 2016 to more
effectively align the coverage with practice (i.e., irrigated vs. non-
irrigated).'' Question: Could RMA use the county data already compiled
for STAX/SCO to calculate the counties eligible for APH adjustment?
Could RMA deal with missing county data using its own data or the
contiguous county provision?
Answer. Yes, RMA can use the county data already compiled for STAX/
SCO to calculate the counties eligible for APH adjustment; however,
additional analysis is required to determine if each individual year
for every county with an irrigated and non-irrigated practice, for
every year back to 1995, was less than 50 percent of the 10 prior year
average. Additionally, as stated in the response to Question 15, RMA is
not aware of any authority that allows it to use contiguous county data
to determine an individual qualifying county. RMA plans to use its data
along with NASS data in the analysis of qualifying counties in an
attempt to deal with missing county data.
Question 17. RMA: ``While the data compiled for SCO could be
utilized for Section 11009, this data is largely at the county level
and does not reflect or differentiate between irrigated and non-
irrigated acreage. RMA intends to utilize crop insurance data for SCO
beginning with 2016 that allows for more offers at the practice
specific level, at which time APH yield exclusions can also be
appropriately aligned.'' Question: Is data compiled for SCO practice-
specific already for counties that offer coverage by practice? In cases
where it is not, is it an all-crop offer where eligibility for the APH
adjustment would be determined on that basis?
Answer. With the exception of cotton, practice-specific data has
been compiled for SCO where such data is available from NASS. In cases
where it is not, it is an all-crop offer where eligibility for the APH
adjustment will be determined on that basis. SCO for cotton will be
based on yield data reported to RMA from insured growers and is under
development.
Question 18. RMA: ``This complexity also carries over to the IT
systems and with the effort involved in SCO and STAX there simply isn't
the manpower to get this up and running this year.'' Question: Doesn't
RMA have the ability to contract some of this out? Could RMA contract
out the data analysis/compilation portion and focus in-house activities
in this regard on the programing changes?
Answer. RMA already contracts out the programming of the business
support systems underlying the Federal Crop Insurance Program. For the
2016 crop year, RMA has contracted out additional data analysis to
assist in reviewing and expanding more crops.
Question 19. RMA: ``RMA's Actuarial Filing System (an RMA Mission
Essential Function) has to develop an entirely new actuarial processing
standard to detail to AIPs and producers which years are eligible for
exclusion appropriately for each crop and county.'' Question: Could the
eligible years be stated in the Special Provisions?
Answer. The eligible years could be stated in the Special
Provisions, but that significantly complicates the Approved Insurance
Provider's and RMA's ability to absorb the information and properly
calculate insurance guarantees and associated policy premiums. The
Special Provisions are hard copy documents that do not provide for an
automated means to portray fluid information, process the information
and validate information, but are used primarily for conveying regional
underwriting rules or constraints, which is why Special Provisions are
not the most efficient means to handle this provision. RMA's Policy
Acceptance Storage System Yield and Yield History processing records
have to be modified to validate proper eligibility for which years can
and cannot be substituted. This can only be accomplished by
reprogramming RMA's Actuarial Filing System to develop a new actuarial
processing standard to detail which years are eligible for exclusion
appropriately for each crop and county.
Question 20. RMA: ``RMA, AIP, and Agent automation tools that
include quoting software changes must be made to accommodate all the
various choices of yield exclusions and substitutions impacting the
overall guarantee and policy premium so producers can make informed
buying decisions.'' Question: Can AIP software be modified to allow
automatic or manual exclusions? Some AIPs may already have the ability
to do this manually. The key is RMA being able to verify that the years
excluded are in fact eligible to be excluded and obtaining the
resulting APH calculation once the database with the county name and
eligible years is created, isn't it?
Answer. AIPs are required to follow RMA published policy,
procedure, calculation requirements, and data processing requirements
outlined in the Standard Reinsurance Agreement. The changes necessary
to deliver this coverage may have varying degrees of complexity and
success across AIPs being able to deliver associated IT changes.
Regardless of whether a given AIP delivers this manually or
systematically, as noted, RMA has to identify and then verify that the
years excluded are in fact eligible to be excluded and that the
resulting insurance guarantees and associated policy premium charged
are correct. This is to provide reasonable assurance that the threats
of fraud, waste, or abuse to the Federal Crop Insurance Program are
detected, deterred, mitigated, and addressed. Without these
verifications, FCIC could be in violation of the Improper Payments
Elimination and Recovery Improvement Act of 2012 which requires us to
limit fraud, waste, and abuse of the program and ensure that improper
payments do not occur.
Question 21. Given that section 11009 was made effective on
February 7, 2014 and the provision is self-executing, is RMA concerned
about the potential for litigation by producers who would be denied the
relief the law provides to them? For example, the disclaimer in RMA's
Common Crop Insurance Policy reads: ``AGREEMENT TO INSURE: In return
for the payment of the premium, and subject to all of the provisions of
this policy, we agree with you to provide the insurance as stated in
this policy. If there is a conflict between the Act, the regulations
published at 7 CFR chapter IV, and the procedures as issued by FCIC,
the order of priority is: (1) the Act; (2) the regulations; and (3) the
procedures as issued by FCIC, with (1) controlling (2), etc. . . . The
disclaimer in the SRA similarly reads: ``Unless specifically provided
for in this Agreement, if there is a conflict between a provision of
the Act, the regulations, or FCIC procedures with the terms of this
Agreement, the order of precedence will be: (1) the provisions of the
Act; (2) the regulations; (3) this Agreement; and (4) FCIC procedures,
with (1) controlling (2) and (2) controlling (3), etc.'' (emphasis
added). If a producer files a lawsuit seeking the relief that section
11009 was intended to immediately provide them and both the policy and
the SRA (naturally) declare that the statute controls where there is
any conflict between the statute and a policy or a contract, etc., how
does the agency intend to prevail in the event of such a lawsuit when
the law, the policy, and the SRA are all opposed to the agency's
position? Please provide a detailed explanation.
Answer. RMA cannot speculate on the outcome nor discuss any
potential legal strategy of any potential lawsuit; however, as
indicated above in FFAS 17 above, RMA does not believe section 11009 is
self-executing.
Question 22. Finally, we have heard at least some rumbling that the
agency may choose to set rates for producers that wish to exercise
their right under this provision at so high a level that the producer
would not elect to exclude any yield. We trust the agency would not set
rates artificially high to frustrate the laws of Congress. Does RMA
intend to have proposed rates for the APH adjustment and other
provisions peer reviewed by actuarial experts to ensure their
appropriateness? If not, what assurance can the department provide to
Congress that rates are being set appropriately?
Again, we greatly appreciate Under Secretary Scuse's willingness to
look into ways to partially implement this extremely important
provision.
Answer. RMA establishes premium rates based on the risk of loss,
and does not set rates high to dissuade certain buying decisions or
actions by producers. RMA is commissioning an external review of the
application of the premium rating methodology approach to be used for
the APH adjustment. As required by the Federal Crop Insurance Act, 7
U.S.C. 1506(n), RMA must operate in an actuarially sound manner.
Specialty Crops
Question 23. We understand that the Whole Farm Revenue Protection
product was recently approved to combine the AGR and AGR-Lite policies.
While the intent is good, we are hearing concerns about two specific
changes that were apparently made. The first change is the disallowance
of CAT as an underlying policy. The second change is that the Whole
Farm Buy-up level has to be the same as the underlying coverage. We
believe these changes need to be dropped or risk crop insurance taking
a major step backward for specialty crops. Can you provide details on
how the agency is implementing the Whole Farm Revenue Protection
product, specifically in regards to these two issues?
Answer. RMA has changed the requirement for similar coverage levels
to simply require producers who choose to have an underlying policy to
choose any level of additional (buy-up) insurance. Allowing the use of
a fully subsidized CAT level MPCI insurance policy to offset the cost
of the WFRP policy effectively increases the overall subsidy rate for
WFRP coverage. In addition, CAT coverage has not been offered as an
option for any other revenue product--once again due to its being fully
subsidized. Therefore, RMA plans to maintain the restriction on
purchasing a CAT policy with WFRP.
Crop Insurance Implementation Funding
Question 24. Section 11021 of the farm bill provides a substantial
amount of new funding every year for the department to implement crop
insurance provisions of the farm bill, including $70 million over FY
2014-FY 2018 for information technology and an additional $9 million
per year for, among other things, reimbursing expenses incurred for the
operations and review of policies, plans of insurance, and related
materials. Regarding the additional $9 million per year, the Secretary
was given added discretion in allocating those funds. Can you tell us
how much of the funding made available for FY 2014 has been spent and
exactly how that funding has been spent? Also, can you tell us how the
agency intends to spend future dollars required to be made available
under this section.
Answer. First, I want to express appreciation to Congress for
providing funding that will enable the Risk Management Agency (RMA) to
hire additional staff and contract resources. The additional staff and
contract resources will allow RMA to implement the program changes
included in the 2014 Farm Bill, maintain current and new programs, and
to improve program integrity. RMA intends to use all of the $9 million
per year to improve program integrity and to aid in program maintenance
and farm bill implementation in FY 2015. Due to the time needed to
recruit and hire employees, all of the money was not allocated for FY
2014. However, these funds have already allowed RMA to hire new
employees to improve RMA's program integrity efforts, and to implement
programs from the 2014 Farm Bill. For FY 2014, RMA has obligated
approximately $5.3 million of the $9 million made available from
Section 11021. RMA has used these funds on SCO implementation and for
program integrity efforts. Specifically, RMA entered into contracts for
additional work that allow a significant expansion of SCO crops for
2016 and to address backlogged arbitration awards and settlements. RMA
also entered into an agreement to improve improper payments and update
program integrity processes. In addition, in an effort to improve the
integrity of the tobacco crop insurance program, RMA partnered with the
Agricultural Marketing Service to implement a tobacco crop insurance
grading system.
RMA plans to hire approximately 60 employees once RMA's hiring plan
is complete. These employees will be focused upon operation and day to
day maintenance of farm bill programs and issues related to program
integrity. While RMA was not able to bring on board all the employees
in FY 2014, many are now arriving and are on board. Starting in FY
2015, RMA expects the full $9 million to be obligated annually.
Peanut Revenue Coverage
Question 25. Will the new peanut revenue policy be available in
time for the 2015 crop year as required by section 11018 of the farm
bill and as indicated by both the agency and the department? Does the
peanut revenue policy provide a possible roadmap for producers of other
crops where such crops are primarily sold under contract and not
publicly traded on an exchange?
Answer. On September 18th, 2014 the FCIC Board approved a peanut
revenue policy. The peanut revenue policy will be it available for the
2015 crop year. While it is premature to know whether the peanut
revenue can be used as a roadmap, experience with peanut revenue will
provide insights into whether it is a possible roadmap for other crops
that are not publicly traded on an exchange.
Information Sharing and Authority to Correct Errors
Question 26. Section 11019 reads in relevant part: ``. . . the
Corporation shall establish procedures that allow an agent or an
approved insurance provider . . . at any time, to correct electronic
transmission errors that were made by an agent or approved insurance
provider, or such errors made by the Farm Service Agency or any other
agency of the Department of Agriculture in transmitting the information
provided by the producer for purposes of other programs of the
Department to the extent an agent or approved insurance provider relied
upon the erroneous information for crop insurance purposes.''
The background in the interim rule similarly states, ``Lastly,
electronic transmission errors, such as transpositions, committed by
the insurance provider, agent or any agency within USDA can be
corrected by the insurance provider at any time the error is
discovered.''
However, in the actual amendments to the regulations, the interim
rule states, ``At any time, any incorrect information if the incorrect
information was caused by electronic transmission errors by us or
errors made by any agency within USDA in transmitting the information
provided by you for purposes of other USDA programs.''
We are concerned that the actual amendment is not consistent with
the background in the interim rule nor, more importantly, with the
statutory text. The correction of transmission errors that are made by
an agent or approved insurance provider is not confined to the
correction of errors ``caused by electronic transmission errors by us
[the Risk Management Agency] or errors made by any agency within USDA
in transmitting the information provided by you for purposes of other
USDA programs.'' This limitation applies only to ``such errors made by
the Farm Service Agency or any other agency of the Department of
Agriculture.'' If Congress had meant to subject the correction of
electronic transmission errors made by an agent or approved insurance
provider to this limitation we would have drafted the language as
follows: ``. . . the Corporation shall establish procedures that allow
an agent or an approved insurance provider. . . at any time, to correct
electronic transmission errors that were made by an agent, approved
insurance provider, the Farm Service Agency, or any other agency of the
Department of Agriculture in transmitting the information provided by
the producer for purposes of other programs of the Department to the
extent an agent or approved insurance provider relied upon the
erroneous information for crop insurance purposes.''
We appreciate that there was opposition to this section within the
Department and we have no doubt that the opposition was motivated to
protect program integrity which we also strongly support. However, we
worked with the Department to arrive at an acceptable provision, taking
into account these concerns. To administratively unravel what was
agreed to in the legislative process would be a breach of the agreement
we all worked hard together to reach in order to arrive at an outcome
acceptable to all parties. Is the Department committed to adhering to
what was agreed to during the farm bill as it is expressed in the
statutory text and explained in the background of the interim rule as
opposed to the actual amendment which does not reflect the agreement
reached?
Answer. The preamble to the Common Crop Insurance Policy Basic
Provisions, published at 7 CFR 457.8, provides, in pertinent part,
that throughout this policy, ``you'' and ``your'' refer to the named
insured shown on the accepted application and ``we,'' ``us,'' and
``our'' refer to the insurance company providing insurance. This
preamble is similarly applied to other regulations that were impacted
by the interim rule. Therefore, the limitations of who can correct an
error is not limited to just RMA or any other USDA agency, but also
includes the AIP. Additionally, consistent within the crop insurance
program, references to the AIP, also include the agent or AIP
representative who does business on behalf of the AIP. This is
consistent with the farm bill provision which articulates that
electronic transmission errors committed by the insurance provider, its
agent, RMA, or any other USDA agency may be corrected at any time to
the extent an agent or approved insurance provider relied upon the
erroneous information for crop insurance purposes.
Conservation Compliance
Question 27. This excerpt from the Interim Final Rule has generated
considerable concern: ``This means that an insured who is determined to
be non-compliant on June 1, 2015, (2015 reinsurance year) will, unless
otherwise exempted, be denied premium subsidy effective July 1, 2015,
the start of the 2016 reinsurance year, and will not be eligible for
any premium subsidy for any policies during the 2016 reinsurance year.
Even if the insured becomes compliant during the 2016 reinsurance year,
the insured will not be eligible for premium subsidy until the 2017
reinsurance year starting on July 1, 2016.''
Chairman Conaway, in his opening remarks, and Rep. Noem, during
questioning, raised this issue during the hearing. Rep. Noem
specifically inquired whether a producer found to be out of compliance
in 2015 would then be ineligible for crop insurance premium support
during the 2016 reinsurance year and not be eligible for reinstatement
of such support until the 2017 reinsurance year even if the producer
had acted in good faith (i.e., without intent to violate compliance
requirements) and came back into compliance for 2016. To this question,
Under Secretary Scuse affirmed that a producer in such a circumstance
would, in fact, be denied premium support in the 2016 reinsurance year
but then stated several times that the producer would have a period of
time to come back into compliance so as not to lose premium support for
the 2016 reinsurance year. The Under Secretary stated that the amount
of time permitted to the producer to come back into compliance would be
established under the rule. Can the Department assure us that Under
Secretary Scuse, and not the excerpt from the Interim Final Rule, is
correct? Nobody that we are aware of intended that a producer who acts
in good faith and who comes back into compliance should still be
penalized by losing premium support. Should the Interim Final Rule be
correct, it would not only harm producers relying on crop insurance but
also conservation efforts on the farm. We predict this would also
result in the repeal of the conservation compliance provision in fairly
short order.
Answer. It is important to distinguish between failure to certify
compliance and a substantive violation of wetland or highly erodible
land (HEL). Producers that do not certify compliance with WC and HEL by
June 1, 2015, which means not having an AD-1026 on file with FSA by
June 1, 2015, will not be eligible for premium subsidy for the 2016
reinsurance year. As for substantive violations of wetland and HEL, as
in the producer planted on HEL without a conservation plan or converted
a wetland and planted an agricultural commodity, the producer may have
one or more reinsurance years to come back into compliance before
losing premium subsidy. The 2014 Farm Bill provides extra time for
producers that are new to compliance, acted in good faith, have access
to a new crop insurance policy, or are unable to comply due to the
actions of their landlord. These exemptions will be explained in a
regulation to be published by USDA early next year.
Question 28. Chairman Conaway inquired whether a producer who is in
compliance with conservation requirements today for purposes of title I
eligibility would be in compliance for purposes of crop insurance
conservation compliance under this section of the farm bill provided
the producer took no action to fall out of compliance. Under Secretary
Scuse stated that such a producer would in fact be in compliance with
conservation compliance requirements for crop insurance purposes.
Chairman Conaway further inquired whether the goalposts for
conservation compliance would be moved to put such a producer out of
compliance and Under Secretary Scuse stated that, no, the goal posts
would not be moved and the producer would be good to go, in Chairman
Conaway's words. Is the Committee correct in understanding that if a
producer is considered in compliance for purposes of title I for the
2014 crop year that the producer, absent any action by the producer to
affect compliance, would be considered in compliance for purposes of
the crop insurance conservation compliance provision?
The AD-1026 appendix indicates that; ``Producers obtaining
federally reinsured crop insurance will not be eligible for any premium
subsidy paid by the Federal Crop Insurance Corporation (FCIC) for any
policy or plan of insurance if the producer has not filed a completed
Form AD-1026 with FSA certifying compliance with HELC and WC provisions
OR is not in compliance with HELC and WC provisions.''
Answer. Yes, a person who participates in Title I programs for 2014
and is in compliance with the conservation compliance provisions for
purposes of 2014 program benefits under Title I that are subject to the
provisions is also in compliance with the provisions for purposes of
eligibility for Federal crop insurance premium subsidy, absent any
action by the person that would change that status.
Question 29. The 2014 Farm Bill states that producers who are not
planting an ``agricultural commodity'' (defined as one requiring annual
tilling of the soil) are exempt from the conservation compliance
mandate. By definition, exempted crops are in compliance with HELC and
WC provisions since none exist. Therefore, it is unnecessary for
producers not planting an ``agricultural commodity'' (as defined in
statute) and only growing an exempted crop to do anything other than
certify that they are not planting an ``agricultural commodity'' (or
certify that they are growing only exempted crops). Why is it necessary
for the AD-1026 form to require any additional information be filed for
those crops or for USDA to require/undertake any additional action?
Answer. The 2014 Farm Bill does not ``exempt'' any producer from
the conservation compliance provisions. Section 1221(c)(3)(E) of the
Food Security Act of 1985 as amended by section 2611 of the 2014 Farm
Bill, requires any producer receiving premium subsidy for crop
insurance to certify that they are in compliance with HELC and WC
provisions.
Question 30. The production practices within the specialty crop
industry vary by commodity. In many cases, exempted commodities engage
in regular replanting of new trees, vines, shrubs, etc. to keep an
orchard healthy. In other cases, phytosanitary issues or lack of
adequate water may require acreage to be placed in an idle state
temporarily. It is our understanding that permanent crop acreage that
is replanted or made temporarily idle will remain in its exempt status,
so long as an exempted crop is intended to be planted there in the
future. Is this an accurate understanding?
Answer. The 2014 Farm Bill does not exempt any producer or land
from the conservation compliance provisions. USDA does not consider a
perennial growers' rotation practices as constituting an annually
tilled crop. Therefore, generally, leaving land idle with no
agricultural commodity planted or produced on the land is not a
violation of the provisions. Producers are encouraged to contact their
local USDA Service Center to obtain information and assistance
regarding their specific farming operation situation.
Question 31. Does the mere filing of an AD-1026 form require NRCS
to make site visits on farms to verify the type of activity (exempt or
covered) that is occurring there? If not, how will the information be
confirmed?
Answer. No, filing the form does not automatically result in a NRCS
site visit. NRCS may visit a farm or ranch if the producer indicates
``yes'' in any of the boxes in Part B, HELC/WC Compliance Questions or
when the producer's farm or ranch is selected for quality assurance
purposes. When a producer's farm or ranch is selected for a spot check
NRCS will verify the accuracy of the certification, which may require a
site visit.
Question 32. Many specialty crop producers are involved in
diversified operations that may include both exempt and covered crops.
Assuming that these are affiliated entities where crop insurance has
been purchased for each individual crop, if such a producer becomes out
of compliance on a covered crop, how will that status affect their
ability to purchase crop insurance for the exempt crops that are part
of his/her operation?
Answer. As required in the 2014 Farm Bill, a producer found to be
in violation of the conservation compliance provisions will not be
eligible for premium subsidy on any crop insurance policy. This
approach is consistent with FSA's current rules which applies a
violation to all farms not just the farm where the violation occurs.
The 2014 Farm Bill did provide for a tenant exemption, which would
limit the impact of the provision in certain cases. USDA will publish
rules explaining the tenant exemption as well as other exemptions in
early 2015.
Question 33. For diversified operations involving affiliated
entities that comprise both exempt and covered crops where the producer
has elected NOT to purchase crop insurance on their covered crops (or
if no policy is available), how will that status affect their ability
to purchase crop insurance on their exempt crops? Will their covered
crops be required to be compliant, even if they receive no benefit via
the Federal crop insurance subsidy?
Answer. The conservation compliance provisions do not effect what
crops may be insured or a person's ability to obtain Federal reinsured
crop insurance. The Food Security Act of 1985 requires the conservation
compliance provisions apply to all land in which the person has an
interest, not just the land or crops for which the person is seeking
program benefits or crop insurance. Therefore, a person must be in
compliance with the conservation compliance provisions on all their
land in order to be eligible for Federal crop insurance premium
subsidy. This approach is consistent with FSA's current rules, which
applies a violation to all farms not just the farm where the violation
occurs.
APH Issue for Peaches
Question 34. The farm bill statement of managers expressed the
intent that downward trending adjustments be discontinued with respect
to perennial crops including peaches. The 2008 Farm Bill required a
study on this issue. USDA conducted a study and found that using a
shorter APH period of 4-6 years was adequate to reflect the lower yield
expectation in the earlier years of a perennial crop. Regional offices
on the East Coast discontinued the downward trending adjustment for
perennials, including peaches, from Maine to North Carolina and west to
Michigan. South Carolina and Georgia peach farmers, however, have
remained subject to this unnecessary penalty that exacerbated their
losses from the spring freeze of this year. Amendments to agriculture
appropriations were introduced in both Chambers and would have been
adopted had the bills not been pulled from floor consideration. The
amendments continue to enjoy strong, bipartisan support and the
Committee remains committed to their inclusion in the final
appropriations measure. Will the relief sought by Rep. David Scott and
others for Georgia and South Carolina peach producers be granted by
RMA?
Answer. After considerable consultation and outreach with
producers, RMA released a Manager's Bulletin on October 15, 2014,
addressing this issue.
Policy Development and Approval Issue for Grain Sorghum
Question 35. The farm bill statement of managers expressed the
intent that high priority be placed on the approval of a specialized
irrigated grain sorghum policy that establishes improved rates and t-
yields based on a certain high level of crop management. What is the
status of implementation?
Answer. RMA has discussions with private parties working on such a
policy; however, as of December 10, 2014, no submission has been
submitted under Section 508(h) of the Act. If the private parties do
not prevail in developing such a policy, RMA will consider contracting
for a feasibility study and developmental efforts if warranted.
Administration--FSA County Office Closings
Question 36. Please update the Committee on the Central, Branch and
Satellite office structure and describe the criteria being used to
determine office closures? In addition, does your agency plan to close
any county offices before the end of calendar year 2014?
Answer. No office closure plan has been approved at this time and
the Agency has not developed a list of offices to close. FSA recognizes
that overall reductions in funding limit the ability to staff field
offices to levels as in the past. FSA offices traditionally have used a
one-size-fits-all model, with each of its 2,124 locations processing
the full array of FSA programs. With overall staffing levels down by
roughly 20 percent since FY 2010, many FSA offices now are staffed
inadequately or aligned improperly with program activity level.
FSA is working on a service center structure concept to realign
workforce and invest in technology to improve quality customer service
to the full range of FSA programs, including expanded customer
flexibility and options in program delivery, while serving as a
referral gateway to other agricultural and rural services.
The concept will establish a more flexible footprint in each State
to best use staff resources, improve program outreach to new and
current customers and enhance cross training of FSA employees.
Consistent with provisions of the Food, Conservation, and Energy
Act of 2008 (P.L. 110-246), FSA will hold public meetings in each
impacted communities. Following the public meetings, UDSA will issue
notification to Congress at least 90 days before any closure is
approved by USDA.
Question 37. The Committee understands that FSA periodically
conducts workload analysis to determine state and county specific
staffing levels. How does the agency determine these staffing
recommendations?
Answer. FSA determines staffing allocations in part based on
workload. FSA programs, including assumptions for new programs (i.e.,
ARC/PLC and Disaster programs) and FSA program activity files are used
as a basis for measuring the time required to support FSA customers and
program implementation activities in county offices. The measurement of
work associated with the actual units (i.e., number of farms, producers
and program participation in each state) with a standard time component
applied to each unit, provides a projection of our overall staffing
needs. The estimated total workload is factored against our available
resources for distribution to state and county offices.
Questions Submitted by Hon. Collin C. Peterson, a Representative in
Congress from Minnesota
Crop Commodity + Disaster Programs--FSA
Question 1. Have you started training your field staff on the
details of the ARC and PLC options as well as the base and yield update
opportunities for landowners?
Answer. National ARC/PLC training for FSA staff is planned for
later this summer and will occur before the implementation of the ARC/
PLC programs. Also later this summer, FSA plans to provide producers
with written information on their current base acres, yields and 2009-
2012 planting history, and offer them an opportunity to verify this
information with their local FSA office, in preparation for later this
fall, when producers will have the opportunity to update yields and
reallocate bases.
Question 1a. In your testimony you also mention that Extension
specialists will be trained by late summer. How are these trainings
being held?
Answer. The universities developing the tools have agreed to
conduct in-person training, which may be attended by extension
specialists, or, if preferred by extension, the training will also be
available by webinar.
Question 2. Has USDA calculated how many minutes or hours it will
take producers to go through the various options available to them,
starting with the base and yield update decisions, plus then sign-up
for either ARC or PLC?
Answer. It is difficult to estimate the amount of time that it will
take owners and producers to explore the various options, including
electing and enrolling in ARC/PLC, because it depends on the complexity
of the operation and the owner's or producer's knowledge of the
program. USDA is working to ensure that owners and producers will have
the information, education, and time that they need to become fully
prepared to make these decisions. A large part of this preparation will
include access to the online tools and learning opportunities through
the extension services.
Question 2a. And can landowners or their tenants do any of the work
online or via a website? Or do they have to come in to the local
office?
Answer. Owners and producers may use the online tools to make their
reallocation and yield update decisions before visiting the County
Office. However, owners and producers must visit the County Office to
reallocate base acres and update yields; elect PLC, ARC County Option
(ARC-CO), or ARC Individual Option (ARC-IC); and then enroll in ARC/
PLC. They will also be able to use the online tools to prefill forms
before visiting the County Office.
Question 3. The livestock disaster programs were made permanent in
the last farm bill, which is a very good thing. There has been
significant flooding in some parts of the country, so which livestock
disaster program do producers apply for if they have lost their feed
source due to flooding and how does that program work?
Answer. The Emergency Assistance for Livestock, Honeybees and Farm-
Raised Fish Program (ELAP) provides emergency assistance to livestock,
honeybees and farm-raised fish producers that have suffered eligible
losses due to an eligible adverse weather event or loss condition,
including floods. The following type of livestock feed losses are
considered eligible if incurred due to a flood:
purchased and mechanically harvested forage or feed stuffs
that is damaged or destroyed
additional livestock feed purchases above normal quantities
required to maintain the livestock until additional feed
becomes available
Costs associated with transporting livestock feed to
eligible livestock including, but not limited to, costs
associated with equipment rental fees for hay lifts and snow
removal.
Payments for eligible grazing losses are calculated based on a
minimum of 60 percent of the lesser of:
the total value of the feed cost for all livestock owned by
the eligible producer based on the number of days grazing was
lost, not to exceed 150 days of daily feed costs for all
livestock; or
Grazing lost for eligible livestock based on the normal
carrying capacity of the eligible grazing land for the number
of grazing days lost, not to exceed 150 days of lost grazing.
Payments for eligible livestock feed losses are calculated based on
a minimum of 60 percent of the producer's actual cost of livestock feed
damaged/destroyed, additional costs incurred for transporting livestock
feed, and additional cost of purchasing additional livestock feed above
normal.
ELAP signup deadline for 2014 losses, losses incurred from October
1, 2013, through September 30, 2014, ends November 1, 2014. To apply
for ELAP, producers must submit, to their local FSA service center, an
application for payment before November 1, 2014, and a notice of loss
within 30 days of when the loss is apparent.
Question 4. Where do things stand with the agencies under your
mission area in regard to streamlining two sets of data on the same
farm? I believe you streamlined some aspects already, including crop
reporting, but can the agencies readily share information with each
other?
Answer. FSA and RMA continue to finalize data element definitions
to make them consistent between agencies to support the Acreage Crop
Reporting and Streamlining Initiative (ACRSI) as mandated under the
2014 Farm Bill. Regular weekly meetings are being held on this. The
agencies have been sharing basic producer, acreage, production, and
loss data for several years under the Common Information Management
System (CIMS); however, the goal under ACRSI is to support one-stop
acreage and production reporting that can be used by both agencies. The
agencies are developing an acreage reporting pilot project expected to
be rolled out in 2015. The agencies have authorized an outside third
party using standardized data elements to participate in this pilot
alongside traditional acreage reporting channels.
Question 5. In your testimony you said that producers who have LGM-
Dairy contracts through 2015 will be allowed to participate in the new
margin protection program once their contract is up. Some of these
producers entered into these contracts before the ink was dry on the
farm bill. What if producers would like to end their contract early in
order to participate in the margin program when it is ready in
September? Is this something RMA would consider given the uncertain
timeline for the farm bill?
Answer. Because the LGM-Dairy plan of insurance is a legal contract
between the insurance provider and the insured, RMA and the Farm
Service Agency worked together to develop a transition period for
producers currently enrolled in LGM-Dairy. This transition period will
allow producers to switch over to the MPP-Dairy program once they have
fulfilled the LGM-Dairy plan of insurance contract requirements. RMA
released these guidelines at the end of June.
Question 6. When will USDA start publishing margin numbers for
dairy producers? I believe this is something that doesn't have to wait
until all the rules are written. I understand that it currently takes a
full month for USDA to calculate and release price information. Is
there any way USDA can get this information out on a timelier basis? Is
this something USDA is looking to improve? In this electronic day and
age it seems we should be able to quickly provide price information to
producers.
Answer. The statute provides that the calculations used in MPP-
Dairy be made as soon as practicable using the full-month price of the
applicable reference month. Full month prices are available a month
after the applicable reference month. Therefore, there will be at least
a 30 day delay in monthly price announcements.
Question 7. The way that this year's growing season is turning out,
there is likely the potential need for large scale grain drying. The
ability to store larger amounts of propane obtained during non-peak
periods is one of the few tools that producers have to deal with the
spot shortages experienced during previous harvests.
Can producers who finance the installation of grain bins under the
Farm Storage Facility Loan Program include the cost of new or
additional propane tanks as part of their loan? If not, can you explain
the reasoning?
Answer. Farm Storage Facility Loan (FSFL) provisions were recently
amended to make liquefied petroleum (LP) tanks to fuel dryers are
eligible.
Question 8. Where do things stand with getting guidance to the
field regarding a landowners' ability to prepare their expiring
contract acreage, TIP acres, or early out CRP acreage for planting for
the 2015 crop prior to the October 1st contract expiration? In other
words, can all three types of landowners do ``early land prep'', and if
so, when are you going to notify them of that ability and let the
county offices know how to answer those landowners' questions?
Answer. USDA restarted the CRP Continuous Signup and Transition
Incentives Program last month and is currently working to clarify
policy on early land preparation. In the upcoming weeks, policy will be
issued to Farm Service Agency State and County office staff, providing
them guidance regarding all three issues.
Crop Insurance--RMA
Question 9. The Livestock Gross Margin (LGM) program has been
successful in the dairy industry but has had limited success with the
other livestock sectors. What outreach have you done with the beef and
pork industry to make this LGM product something they will utilize?
Could we expect changes to any of these programs in the near future?
Answer. RMA continues to work with various organizations, including
the National Pork Producers Council to create awareness of programs
like the Livestock Gross Margin (LGM) program. RMA also provides
feedback received from producers about potential changes to the plans
of insurance to the private entities that own the products.
Moreover, the Risk Management Education and Community Outreach
Program will award 16 projects specifically directed to promote
livestock insurance education this year. Since these are privately
developed products, any changes would have to be considered by the
owner's, go through a review process and be approved by the FCIC Board.
At this time, RMA is not aware of any upcoming changes to these
programs.
Question 10. Is there a way to make an LGM product that would be
helpful to hog producers that are dealing with PEDv?
Answer. The Livestock Gross Margin Insurance Plan for Swine (LGM-
Swine) provides price protection using Chicago Mercantile Exchange
Group futures contracts. However, the owner of the LGM-Swine product
never intended to cover loss of livestock due to death or diseases.
Question 11. What is the status of meeting the farm bill
requirement for price elections for organic crops by the 2015 crop
year? Is RMA working with other USDA agencies on sharing data that may
be collected already on organic and directly marketed crops?
Answer. RMA has made significant progress in the development and
implementation of organic price elections for Federal crop insurance
programs. RMA has separate organic price elections, projected prices,
and harvest prices are currently available for 16 crops: almonds
(California), apricots (fresh--Washington), apples (fresh and
processing--Washington), avocados (California), blueberries
(California, Oregon, and Washington), corn, cotton, fresh stonefruit:
freestone peaches, nectarines, and plums (California), grapes for juice
(Washington), mint (peppermint), oats, pears (Oregon and Washington),
processing tomatoes (California) and soybeans. For the 2015 crop year,
RMA will add ten more crops with organic prices elections, which brings
the total to 26. The crops to be added for 2015 are as follows: millet,
figs, walnuts, flax, popcorn, corn silage, hybrid seed corn, grain
sorghum, silage sorghum, and hybrid sorghum seed. RMA has started
analyzing crops to be added for the 2016 crop years.
Price elections are developed whenever adequate organic price data
is available that allow us to meet statutory mandates to be actuarially
sound. We have also developed viable alternatives that increase the
amount of organic coverage provided. These options include price
coverage under the Contract Price Addendum, the Actual Revenue History
plan of insurance, and the Whole Farm Revenue Protection plan of
insurance.
To gather organic price data and information, RMA has also funded
research studies and organic price and production surveys. RMA will
again contract with NASS to collect organic acreage, production and
sales data from certified organic growers for the 2014 crop year. NASS
will survey all producers who identified themselves as producing some
amount of organic production in the 2012 Census of Agriculture, making
the survey the most complete form of data collection RMA is able to
obtain. The NASS data from this survey, combined with data from the
earlier surveys, will provide three non-sequential years of organic
price data during a seven year span.
RMA will continue to pursue opportunities for the acquisition of
additional organic price data and information. We will also continue to
work toward developing crop-specific organic price elections consistent
with our data quality requirements. RMA has also been working with AMS
and FSA to explore what information may be available to be shared
between Agencies to offer additional coverage for organic crops.
Question 12. The FSA released an updated AD-1026 Form which I
understand all producers who are participating in crop insurance have
to fill out by June 1st of next year. However, I noted that on the
actual form, it mentions the original Swampbuster date of December 23,
1985 in regard to drainage work. For producers who haven't previously
been subject to compliance, they are only subject to penalties if they
take action to drain or alter a wetland after February 7, 2014,
correct?
Do you think it is confusing to those producers, many of whom may
have never seen an AD-1026 Form before, to only include the 1985 date
on the actual form?
Answer. The 2014 Farm Bill states that eligibility for Federal crop
insurance premium subsidy is not lost due to wetlands conversions prior
to February 7, 2014. However, such conversions do result in
ineligibility for Title I program benefits subject to the conservation
compliance provisions. USDA has used Form AD-1026 since the 1980's to
have producers certify compliance with the provisions. The 2014 Farm
Bill states that the Secretary shall use existing processes and
procedures for certifying compliance. Therefore, the form accommodates
certification of compliance for programs that are subject to different
dates. The question on Form AD-1026 regarding wetland conversions
includes an entry for producers to identify the year the conversion
activities took place. The Form AD-1026 Appendix, which is provided to
every producer certifying compliance, has additional information about
the dates applicable to the different programs. In addition, the USDA
Service Center staff where the producer files Form AD-1026 is available
to assist the producer to ensure they understand the form and answer
any questions the producer may have.
Question 13. Your testimony and the FAQs for the RMA Interim Rule
indicate that any producer who receives a premium subsidy under crop
insurance is subject to the conservation compliance provisions included
in the 2014 farm bill. However, in the Background portion of the
Interim Rule, it discusses the definition of ``agricultural commodity''
in Section 1201 of the 1985 Food Security Act. This definition only
includes commodities ``planted and produced in a state by annual
tilling of the soil, including tilling by one-trip planters or
sugarcane.'' There is also a mention of these new provisions being
applied ``unless specific exemptions apply.''
Can you clarify whether any producer who receives a premium
subsidy, regardless of the type of crop, forage or livestock that they
produce, is covered by the 2014 compliance provisions?
What are the ``specific exemptions'' that apply?
Answer. The 2014 Farm Bill did not exempt any producer or crop from
conservation compliance provisions. To be eligible for a premium
subsidy for the 2016 reinsurance year and to be in compliance with HELC
and WC provisions, a completed and signed form AD-1026 must be on file
with FSA by June 1, 2015. The 2014 Farm Bill provided several
exemptions that are applicable only to eligibility for Federal crop
insurance premium subsidy, such as tenant relief and good faith
exemptions for wetland violations only, persons subject to the
conservation compliance for the first time because of the 2014 Farm
Bill, when certain crop policies become available for the first time,
and an exemption to pay an equitable amount instead of mitigating
certain wetland conversions. Also, there are exemptions that apply to
eligibility for both Federal crop insurance premium subsidy and Title I
program benefits, such as tenant relief and good faith exemptions for
high erodible land violations, and an exemption for noncommercial
production of agricultural commodities on highly erodible acres of 2
acres or less. USDA will publish a regulation in early 2015 that will
provide further details about these exemptions.
Question 14. You mentioned the $9 million provided in the farm bill
to address program maintenance and integrity. Can you tell us what this
funding will be used for?
Answer. First, I want to express appreciation to Congress for
providing funding that will enable the Risk Management Agency (RMA) to
hire additional staff and contract resources. The additional staff and
contract resources will allow RMA to implement the program changes
included in the 2014 Farm Bill, maintain current and new programs, and
to improve program integrity. RMA intends to use all of the $9 million
per year to improve program integrity and to aid in program maintenance
and farm bill implementation in FY 2015. In fact, these funds have
already allowed RMA to hire new employees to improve RMA's program
integrity efforts, and to implement programs from the 2014 Farm Bill.
For FY 2014, RMA has obligated approximately $5.3 million of the $9
million made available from Section 11021. RMA has used these funds on
SCO implementation and for program integrity efforts. Specifically, RMA
entered into contracts for additional work that allow a significant
expansion of SCO crops for 2016 and to address backlogged arbitration
awards and settlements. RMA also entered into an agreement to improve
improper payments and update program integrity processes. In addition,
in an effort to improve the integrity of the tobacco crop insurance
program, RMA partnered with the Agricultural Marketing Service to
implement a tobacco crop insurance grading system.
RMA plans to hire approximately 60 employees once RMA's hiring plan
is complete. These employees will be focused upon operation and day to
day maintenance of farm bill programs and issues related to program
integrity. While RMA was not able to bring on board all the employees
in FY 2014, many are now arriving and are on board. Starting in FY
2015, RMA expects the full $9 million to be obligated annually.
Question 15. I hear from producers in my district that RMA's APH
transfer policy has allowed more established producers to come in and
outbid younger producers on land rents. I also understand that the APH
transfer policy is what led in part to the call for the Sodsaver
provision in some parts of the country. Did RMA examine their policy
and how you have impacted land conversion in the countryside?
Answer. RMA's procedures allow insured producers who add land to
their existing operation within a county to use the simple average of
their own actual production history for the crop in that same county to
establish their insurance yield for the added land. Simple average
transitional yields (SA T-yields) are available for use by any producer
with one or more years of experience in the county to establish the
yield for an added land Actual Production History (APH) database when
the average of their yield experience in the county is greater than the
applicable county T-yield published by RMA.
RMA has implemented Section 11016 of the Agricultural Act of 2014
(2014 Farm Bill) which provides enhanced benefits for Beginning Farmer
and Ranchers (BFRs). Benefits include exemption from paying
administrative fees, an additional ten percentage points of premium
subsidy, and expanded use of the production history of farming
operations BFRs were previously involved in the decision making or
physical activities of a farm or ranch operation, and an increase from
60 to 80 percent of the applicable T-Yield for Yield Adjustment when
replacing a low actual yield due to an insured cause of loss.
The SA T-Yield does not apply to native sod acreage that would fall
under the Sodsaver provision (native sod). On native sod acreage the
producer's reduced yield is applied using the T-Yield published in the
actuarial documents, and the producer of native sod acreage is required
to use the published T-Yield for the reduction regardless if the
producer is established or a beginning producer. By reducing the yield
guarantee, the reduction is carried out uniformly for all producers.
With the constantly changing market conditions affecting land
conversions, RMA has taken steps to determine if/how crop insurance
plays a role in these conversions. RMA enacted procedures to identify
land that has been converted to cropland from acreage that has never
been in crop production before (native sod); identify land that has
been converted to cropland from acreage that has previously been in
crop production, but has been idle for several years (new breaking);
and to identify land that has been in USDA programs (such as the
Conservation Reserve Program) for several years and is being converted
to cropland acreage upon the expiration of the program contract. In
addition to identifying the acreage, the yield guarantee for this
acreage has been reduced for native sod (a maximum yield guarantee of
65 percent of the T-Yield published in the actuarial documents) and new
breaking acreage (a maximum yield guarantee of 80 percent of the T-
Yield published in the actuarial documents). As these procedures have
been in effect for only a few years, the full impact of crop insurance
on land conversion is not known at this time.
Various parties have conducted studies regarding land conversion in
the countryside, including the Economic Research Service; however, no
study has concluded that the RMA procedures for added land contribute
to such conversion.
Question 16. What new technologies is RMA looking at to enhance
efficiencies in administering the Federal Crop Insurance Program?
Answer. RMA is enhancing its technology platform on several levels
to increase efficiencies within the program. It is currently re-
engineering and modernizing some internal processing systems,
particularly its accounting and reporting systems, to reduce costs,
increase transparency, and add flexibility to business process
improvements. Additionally, RMA is taking part in the Department's
Acreage Crop Reporting Streamlining Initiative (ACRSI) with FSA to
reduce the producer burden of filing reports to the government. In
particular, RMA is upgrading the Common Information Management System
(CIMS) to facilitate real-time data sharing between RMA and FSA used in
reporting and reconciliation. These changes will also allow Approved
Insurance Providers (AIPs) quicker access to the producer data to which
they are entitled to better serve those customers. Finally, RMA has
developed an educational tool to aid producers in purchasing decisions
of key farm bill products like SCO and STAX. This tool is currently
available as a web application and as a mobile app for iOS and Android.
Question 17. Could new technologies, such as those delivered by
unmanned aerial systems, help RMA to improve accuracy of field mapping
and crop loss monitoring, and ultimately save Federal resources?
Answer. RMA continually evaluates new technologies that may
increase efficiencies in the Federal Crop Insurance Program. Unmanned
Aerial Systems (UAS) are one of the new technologies that RMA is
monitoring. UAS have a host of applications applicable to agriculture,
and some may be directly applicable to the delivery and servicing of
crop insurance risk management tools. Currently, there are a wide
diversity of UAS platforms (the `flight vehicle,' e.g., multirotor,
helicopter, and fixed-wing unmanned aerial vehicle (UAV)) and a
diversity of sensor payloads (the camera or remote sensing instrument
mounted on the UAV). Each UAV/sensor combination has a distinct use-
case as applied to field mapping and crop loss monitoring. In addition,
RMA is currently following the development of regulations related to
UAS technology, how early case studies document the benefits of their
use, and how producer privacy concerns weigh into the application of
these technologies.
Question 18. Section 11024 of the 2014 Farm Bill adds the purpose
of improving the analysis tools regarding crop insurance compliance to
the existing partnerships program. How will the RMA be reaching out to
third parties to carry out this new purpose? Will there a specific
request for proposals? Or are individual entities welcome to approach
the Agency with their ideas?
Answer. RMA has not determined how it will implement this
provision.
Question 19. I understand that you are working with the barley
industry on a malting barley policy, which will be of great importance
to the growers in my district. Will the malting barley policy be
available for the 2015 crop?
Answer. No, the new policy will not be available for the 2015 crop.
A new Malting Barley Revenue policy has been approved by the Federal
Crop Insurance Corporation Board of Directors. However, the private
submitter is still in the process of finalizing all the relevant policy
materials and has advised that they will not have completed their work
in time to implement the new policy for the 2015 crop year, and have
therefore requested the policy be implemented for the 2016 crop year.
Question 20. The RMA fact sheet on Sodsaver implementation
indicates that producers will have to bring proof that the land to be
insured was ``previously tilled'' to their approved insurance provider.
Was the crop insurance industry consulted on the best way to handle the
certification?
Answer. Yes, the crop insurance industry was consulted and given
the opportunity to review the draft procedures developed by RMA for the
native sod provisions.
Administration--FSA County Office Closings
Question 21. Are the computer systems in the FSA county offices up
to the job of handling another round of base and yield updates as well
as the multiple options that were set up by the final commodity title
provisions?
Answer. Yes, the computer systems in the FSA county offices are up
to the job. FSA incrementally provided information to the farmers and
software to the FSA County Offices to update base and yield information
in order to make a final election. All software to support the base
acre reallocation and yield update has been provided, with election
capability to be provided later this year.
Question 22. How does FSA plan to utilize the $120 million that the
Committee made available for administrative costs? What is the
breakdown between staffing, computer programming, and other expenses?
Answer. FSA will use the $100 million that was made available in FY
2014 and FY 2015 for implementation of Title I programs for cost for
developing software, hiring temporary employees, training field office
staff and producer outreach and education. FSA and RMA are working
collaboratively to develop a plan for implementing ACRSI at which time
a spending plan for the $20 million ($10M in FY14 & $10M in FY15) will
be determined.
Below is the breakout between FY 2014 and FY 2015 of cost by
category for the $100 million:
------------------------------------------------------------------------
Item FY 2014 FY 2015 \1\ Total
------------------------------------------------------------------------
Staffing $2,470,000 $27,037,000 $29,507,000
Computer Programming $8,978,000 $20,370,000 $29,348,000
Other Expenses $4,437,122 $31,827,390 $36,264,512
-----------------------------------------------
Total $15,885,132 $79,234,390 $95,119,522
------------------------------------------------------------------------
\1\ FY 2015 is reduced for sequestration.
Question 23. Are you planning on utilizing temporary employees to
get through the initial heavy workload from now until early next
calendar year? And are there temporary folks still available out in the
countryside or are you having to train new folks? I have the feeling
that many of your former temporaries may have taken permanent positions
from county office staff that retired since the last farm bill.
Answer. FSA is committed to delivering new farm bill programs and
policies in an efficient and timely manner. The use of temporary
employees is critical to achieving successful program implementation
and FSA plans to have temporary employee resources in the field during
both FY 2014 and FY 2015. During the last quarter of FY 2014, FSA had
more than 650 full-time temporary employees on board and approximately
another 900 intermittent (hourly) temporary employees on the roles and
available for program and customer support. Many of these same
employees may be extended into FY 2015, as FSA has made available to
States, FY 2015 1st and 2nd quarter temporary staffing levels of 830
FTEs. These initial FY 2015 FTEs will carry FSA through peak farm bill
workload as the Agency continues to assess temporary staffing needs and
available resources for FY 2015.
Question 24. The Administration's FY15 budget submission indicated
that you were looking at closing 250 FSA field offices. Do you have
more details to share with the Committee yet on these plans? Are you
still planning to not close any offices before October 1st of this
year?
Answer. No offices will be closed before October 1, 2014. Moreover,
no office closure plan has been approved at this time and the Agency
has not developed a list of specific offices to close.
Question 25. It is my understanding that your budget submission did
not take into account possible farm bill workload. Has the Farm Service
Agency done a recent workload analysis that takes into account the
potential workload for state and county offices with the new crop and
dairy programs to administer? Can you share with the Committee for the
record the most recent analysis and what it shows for staffing levels
by state?
Answer. The Farm Service Agency has developed a data driven
workload analysis that included reoccurring activities that the agency
performs to administer farm and farm loan programs. The new programs as
a result of the Agricultural Act of 2014 such as the Agricultural Risk
Coverage/Price Loss Coverage, Dairy- Margin Protection, Livestock
Disaster, and new portions of the Non Insured Assistance program were
not implemented at the time FSA's workload analysis was completed.
Assumptions were made as to the potential workload that could be
derived as the new programs are implemented and therefore, an updated
analysis would need to be made once the new programs were implemented.
Similarly, the Stacked Income Protection Plan (STAX) for cotton has now
shifted some FSA workload to RMA. The new program workload assumptions
were not totally inclusive in the recent workload analysis. Since
further review of new program participation must be conducted to
adequately determine how they will affect the distribution of staffing
for states and counties, the workload analysis was only used a guide to
allocate staffing to the states. Once this review and update is
completed, the agency will have a more comprehensive analysis that can
provide a more comparative and qualitative distribution of staffing in
the future.
Question 26. Is the same true that your FY15 budget submission also
did not take into account staffing needs and that's part of the reason
for the reduction of 815 FTE (Full Time Equivalent) positions? Does the
Department still feel there is a need for this reduction?
Answer. The FY 2015 budget submission was developed well before the
enactment of the 2014 Farm Bill. Certain assumptions regarding staffing
requirements were made based on the information available at the time;
however, there was much about the final farm bill that simply was not
known. The Department believes that there remain opportunities to
streamline and right-size Farm Service Agency operations. The Farm
Service Agency has developed a data driven workload analysis that
includes reoccurring activities that the agency performs to administer
farm and farm loan programs. This analysis must be revised and updated
based on the new workload requirements of the 2014 Farm Bill.
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