Last year is still going down as one of the toughest growing seasons ever for U.S. farmers – certainly the most expensive. From a crop insurance standpoint, it's still not over. Neither is it over for farmers struggling to replace lost feedstuffs and reclaim flood-damaged farmlands.
Crop insurance payments, as of March 12, approached $10.3 billion to cover agricultural losses due to high crop values and volatile weather, according to U.S. Department of Agriculture's Risk Management Agency. That's a historic record, surpassing the previous record of $8.67 billion set in 2008 by nearly 19%.
Insured losses will climb even higher, says Tom Zacharias, president of National Crop Insurance Services at Overland Park, Kan. With close to 5% of claims still outstanding, indemnity payments could approach $11 billion – more than 25% above the previous record.
Mired in bureaucratic mud
Slow payments caused by federal reporting rules have caused "painful situations," acknowledges Gene Gantz, RMA's Pennsylvania coordinator. Federal rule-making is causing hardships for insured farms, particularly in the Northeast. According to Gantz, a dairy (herd) may have gone to auction because of it.
A Monday RMA email from Tim Hoffmann, a division director, shed more light on the hold-ups. Crop insurance claims on flooded mature crops were yet to be finalized "because an insured peril is still preventing access to the fields."
The explanation: "Some crops were contaminated (i.e. the flood waters flowed over the grain portion of the crop). RMA has a long standing policy of assisting the Food and Drug Administration in preventing contaminated grain from entering the food chain.
"The Loss Adjustment Manual Standards contains specific procedure preventing payment of a claim until the contaminated crop is destroyed. FDA issued an advisory that stated when the grain portion of the crop was covered by flood waters it was not fit for human or animal consumption."
RMA and insurance providers require destruction of the contaminated crop destroyed before claim settlement to prevent the grain from entering the marketplace. But Hoffmann concedes that much of the remaining contaminated crops have likely deteriorated to the point that they couldn't ever be used for human or animal consumption.
If that's the case, as determined by claim adjusters, they can finalize the claim. But the insured claimants will need to sign a certification form indicating that the crop will be destroyed.
Fresh versus processing losses
Fruit and vegetable producers also hit crop insurance indemnity payment snags – claim rejections – over not having substantial enough records of fresh product sales. There, crop values can range from $14 to $15 a bushel for fresh market apples versus $2 a bushel for processing apples, notes Gantz.
But, for instance, when a fresh market variety is pocked by hail stones, it becomes a processing apple. "In 2011, growers needed adequate records to substantiate their claims," he says. "For 2012, they only need evidence of marketing fresh fruit from the farm."Gantz also notes that USDA/RMA has a mediation/arbitration service that producers can bring their crop insurance claims to. With adequate records, he suggests that producers are most likely to benefit.