On June 25, 2020, the Risk Management Agency (RMA) issued Product Management Bulletin: PM-20-040 regarding changes made to the Malting Barley Endorsement effective for the 2021 and succeeding years. https://www.rma.usda.gov/Policy-and-Procedure/Bulletins-and-Memos/2020/PM-20-040. RMA stated that the Federal Crop Insurance Corporation Board of Directors approved changes to the Malting Barley Endorsement on March 5, 2020. The changes include:
- Expansion to 35 Ohio counties;
- Quality adjustment determined using Local Market Price; and
- Quality adjustment impacting barley actual production history.
The counties added include: Allen, Butler, Champaign, Columbiana, Crawford, Darke, Defiance, Delaware, Erie, Fairfield, Fayette, Fulton, Hancock, Hardin, Henry, Knox, Licking, Lorain, Lucas, Madison, Mahoning, Marion, Miami, Ottawa, Pickaway, Preble, Putnam, Ross, Sandusky, Shelby, Trumbull, Union, Wayne, Wood, and Wyandot Counties in Ohio.
ANALYSIS – The 2021 Malting Barley Endorsement is found at https://www.rma.usda.gov/-/media/RMAweb/Policies/Small-Grains/2017/Small-Grains-Crop-Provisions-17-0011/Malting-Barley-Endorsement-21-0091b.ashx. RMA states that quality adjustment will be determined using the local market price. “Local market price” is defined as “In addition to the definition contained in the Small Grains Crop Provisions, the cash grain price per bushel for U.S. No. 2 barley on the date the malting barley is rejected by the buyer due to its failure to meet contract specifications.” In accordance with the Endorsement, eligible contracted malting barley production rejected for use as malt by a buyer and that was rejected and disposed of in accordance with the terms of this Endorsement will be reduced by multiplying the amount of such production by the local market price divided by the applicable harvest price that is determined in accordance with section 4 of this Endorsement, with such ratio limited to a maximum value of 1.000. Using the ratio between prices as a means to reduce production to count is common in crop insurance. since it converts the dollar amount of the loss into a production loss under actual production history plans of insurance.
RMA also states that quality adjustment will now impact barley actual production history. However, this change is not included in the summary of changes provided in the 2021 Malting Barley Endorsement nor can it be readily found in the Endorsement. It is unclear how this change was effectuated or what effect it has on the policy.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.