Crop Insurance Update: USDA Grows Crop Insurance Supplemental Coverage Option

Written by M. Sean High

On October 20, 2015, the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA) announced an expansion of the federal government’s crop insurance program. According to RMA, beginning with the 2016 crop year, the crop insurance program’s Supplemental Coverage Option (SCO) will now be made available in select counties “for buckwheat, sweet corn, extra-long staple cotton, cucumbers, processing beans, dry beans, flax, silage sorghum, green peas, various hybrid seeds, millet, mustard, peanuts, popcorn, pumpkins, sesame, sunflowers, and sugar beets.” The inclusion of these newly eligible crops is in addition to the thirty-three crops previously approved for SCO protection for the 2016 crop year.

SCO is a crop insurance option that is intended to provide agricultural producers with an extra layer of risk management protection by providing coverage for a portion of an underlying crop insurance policy deductible.  When available, SCO may be purchased as an endorsement to a crop insurance policy for Yield Protection, Revenue Protection, Revenue Protection with the Harvest Price Exclusion, or Actual Production History.  

Accordingto UDSA, “[t]the amount of SCO coverage depends on the liability, coverage level, and approved yields for your underlying policy.”  Importantly, USDA notes that “SCO differs from the underlying policy in how a loss payment is triggered.  The underlying policy pays a loss on an individual basis and an indemnity is triggered when you have an individual loss in yield or revenue.  SCO pays a loss on an area basis, and an indemnity is triggered when there is a county level loss in yield or revenue.”

Interested agricultural producers must select SCO “by the sales closing date… [of] the underlying crop insurance policy” and may only purchase the additional coverage from the same company providing the underlying crop insurance policy.  Significantly, if selected as part of a federal crop insurance policy, “[t]he Federal Government [will pay] 65 percent of the premium cost for SCO.”

Additional information regarding SCO can be found at: http://www.rma.usda.gov/news/currentissues/sco/index.html 

Crop Insurance Update: Fruit and Nut Producers Granted Greater Crop Insurance Options

In a news release dated July 23, 2015, the United States Department of Agriculture (USDA) announced that the federal crop insurance program will be expanding to provide fruit and nut producers with greater coverage options.  According to USDA, under the new program, producers in select counties will now have the ability to purchase a Supplemental Coverage Option (SCO) and the Actual Production History (APH) Yield Exclusion as part of their overall crop insurance coverage.

USDA stated that “SCO is an area-based policy endorsement that can be purchased to supplement an underlying crop insurance policy.  It covers a portion of losses not covered by the same crop’s underlying policy.” As a result of the new program expansion, “almonds, apples, blueberries, grapes, peaches, potatoes, prunes safflower, tomatoes, and walnuts” are eligible for SCO in select counties in 2016. 

USDA further asserted that “[t]he APH Yield Exclusion allows farmers, with qualifying crops in eligible counties, to exclude low yields in exceptionally bad years (such as a year in which a natural disaster or other extreme weather occurs) from their production history when calculating yields used to establish their crop insurance coverage.”  As a result of the announced change to the crop insurance program, “apples, blueberries, grapes, peaches, potatoes, prunes safflower, tomatoes, and walnuts.” will now be eligible for APH in select counties in 2016.

According to Agriculture Secretary Tom Vilsack, “[p]roviding these [crop insurance] options for our producers of fresh fruit and nuts gives them the stronger safety net they need to continue farming, even after particularly bad years.”

For additional information regarding crop insurance, please click here.

Written by M. Sean High - Staff Attorney

July 27, 2015