On November 25, 2019, the Risk Management Agency (RMA) published Hybrid Sweet Corn Seed Crop Provisions for the 2020 and succeeding crop years and a Product Management Bulletin: PM-19-0066. RMA states that it is clarifying the definitions of “hybrid sweet corn seed processor contract” and “amounts of insurance per acre.”
ANALYSIS – The bulletin is a little scant on details. The Hybrid Sweet Corn Seed policy is a dollar plan of insurance. For the 2019 crop year, the “amount of insurance per acre” was defined as “A dollar amount determined by multiplying the county yield by the by the price election and subtracting any minimum guaranteed payment, not to exceed the total compensation specified in the hybrid sweet corn seed processor contract and selecting a coverage level.” For 2020, the definition was revised to read “A dollar amount determined by multiplying the county yield by the price election and subtracting any minimum guaranteed payment and then multiplying the result by the coverage level percentage you elected; not to exceed the total compensation specified in the hybrid sweet corn seed processor contract multiplied by the coverage level percentage you elected.” For 2019, it was not clear that the total compensation specified in the hybrid sweet corn seed processor contract was multiplied by the coverage level selected. For 2020, the language has been properly clarified.
With respect to the definition of “hybrid sweet corn seed processor contract”, for 2019, it read “A legal contractual written agreement executed between a hybrid sweet corn seed producer and a seed company containing, at a minimum: (a) The producer’s promise to plant and grow male and female parent plants and to deliver all field-run commercial hybrid sweet corn seed produced from such plants to the seed company; (b) The seed company’s promise to purchase the commercial hybrid sweet corn seed produced by the producer; and (c) A stated value, compensation, or method to derive a value that will be paid to the producer for the production as specified in the hybrid sweet corn seed processor contract or contract addenda (excluding any incentives or overproduction compensation that may apply) for the conditioned commercial hybrid sweet corn seed variety.”
For 2020, the definition of “hybrid sweet corn seed processor contract” states “A legal contractual written agreement executed between a hybrid sweet corn seed producer and a seed company containing, at a minimum: (a) The producer’s promise to plant and grow male and female parent plants and to deliver all field-run commercial hybrid sweet corn seed produced from such plants to the seed company; (b) The seed company’s promise to purchase the commercial hybrid sweet corn seed produced by the producer; and (c) A stated total expected value; total compensation; expected yield and price per unit; or other method to derive a total expected value that will be paid to the producer for the production as specified in the hybrid sweet corn seed processor contract or contract addenda (excluding any incentives or overproduction compensation that may apply) for the conditioned commercial hybrid sweet corn seed variety.”
The change appears to be in paragraph (c) where the word “total” was added before “compensation” and the language “expected yield and price per unit; or other method to derive a total expected value that will be paid to the producer for the production” was added. The additional language provides flexibility in calculating the amount to be paid under the contract. It is unclear how much flexibility is being provided or whether there could be unintended consequences that would allow over-insurance. There are no examples or explanation regarding what other methodologies could be used to calculate the compensation to be paid under the contract than those previously stated in the definition.
Further, the definition of “amount of insurance per acre” simply refers to the “total compensation specified in the hybrid sweet con seed processor contract.” Total compensation is only one of the descriptions in paragraph (c). The others include total expected value, expected yield and price per unit, and now some other method to derive the total expected value. None of these terms are referenced in the definition of “amount of insurance per acre” and paragraph (c) is not drafted in such a manner as to make it clear that the total expected value, expected yield and price per unit, and now some other method to derive the total expected are just a means to calculate the total compensation for the purposes of the amount of insurance per acre. Paragraph (c) may need further revision.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.