On December 23, 2019, the Risk Management Agency (RMA) issued Managers Bulletin: MGR-19-029, which involved determining eligible prevented planting acreage when the contracted crop acreage is reduced. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2019/MGR-19-029. RMA states the bulletin is addressing those situations where some insureds had reduced contracted acreage in 2019, which were not reduced solely due to prevented planting (e.g. an insured had a processor contract for 400 acres in 2018 and only 100 contracted acres in 2019) and the insured has exhausted all eligible prevented planting acreage and is not eligible to provide prevented planting coverage to remaining cropland acres. RMA states that section 17(h)(4) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions) indicates that if the insured is prevented from planting a crop with no remaining eligible acres, the prevented planting payment may be paid based on contract crops even though policy requirements for a processor contract have not been met.
RMA states that the current crop year’s prevented planting eligible acres for contracted crops must be determined in accordance with section 17(e)(1)(iii) of the Basic Provisions. If the insured has remaining eligible acres of other crops that are not required to be contracted with a processor to be insured, then the claim is processed using normal rules.
RMA also states that if the insured has exhausted eligible acres to provide prevented planting coverage for all insured cropland acres in the farming operation due to a reduced contract in the current crop year, the previous crop year’s contract may be used for the remaining acres.
RMA states that in accordance with section 17(e)(1)(iii)(B), when historical contract acres are used, the number of eligible acres will be determined based on the number of acres or amount of production the insured had contracted in the county in the previous crop year, less the current year’s contracted acreage. The prevented planting payment and premium will be in accordance with section 17(h)(2) of the Basic Provisions.
Further, RMA states that if the applicable Crop Provisions require that the price election be based on a contract price, and a contract is not in force for the current year, the price election will be based on the contract price in place for the previous crop year. Furthermore, if the insured did not have a processor contract in place for the previous crop year, no historical contract acres exist for that crop.
ANALYSIS – Section 17(h)(4) of the Basic Provisions state:
Section 17(e)(1)(iii) states:
(iii) For any crop that must be contracted with a processor to be insured:
(B) If a processor cancels or does not provide contracts, or reduces the contracted acreage or production from what would have otherwise been allowed, solely because the acreage was prevented from being planted due to an insured cause of loss, we will determine the number of eligible acres based on the number of acres or amount of production you had contracted in the county in the previous crop year. If the applicable Crop Provisions require that the price election be based on a contract price, and a contract is not in force for the current year, the price election will be based on the contract price in place for the previous crop year. If you did not have a processor contract in place for the previous crop year, you will not have any eligible prevented planting acreage for the applicable processor crop. The total eligible prevented planting acres in all counties cannot exceed the total number of acres or amount of production contracted in all counties in the previous crop year.
In the background section of MGR-19-029, RMA states the situation being addressed is one where the contract acreage was not reduced solely due to prevented planting. However, section 17(e)(1)(iii)(B) states that the previous year’s contracted acreage in the county can be used if the contracted acreage was reduced “solely because the acreage was prevented from being planted due to an insured cause of loss.” Therefore, it is unclear how section 17(e)(1)(iii)(B) of the Basic Provisions would apply to contracted acreage that was reduced not solely due to prevented planting. It is possible that MGR-19-029 is ambiguous regarding its applicability and it may be intended for contracted acreage reduced solely due to prevented planting. However, if MGR-19-029 is intended to be read as written, then RMA needs to explain how it can ignore the provisions in section 17(e)(1)(iii)(B) that require reductions in contracted acreage be solely due to prevented planting before the previous year’s contracted acreage can be used to determine eligible prevented planting acreage.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.