The Risk Management Agency (RMA) issued Managers Bulletin MGR-19-015 that offers prevented planting cover crop relief. The basis for the relief is the unprecedented amount of prevented planting claims, the need for animal feed, and the flexibility around the use of cover crops planted on prevented planting acreage has made haying, grazing, and cutting for silage, haylage and balage necessary. Currently, November 1 is the first date that the a cover crop can be hayed or grazed and still receive a full prevented planting payment. If the cover crop is hayed, grazed before November 1, or otherwise harvested at any time, the prevented planting payment is reduced by 65 percent. For the 2019 crop year only, RMA is allowing cutting for silage, haylage, and baylage will be treated the same as haying or grazing and the producers will still receive a full prevented planting payment is they hay, graze, and cut for silage, haylage and balage after September 1.
ANALYSIS – Where to start . . . First, I sympathize with the plight of farmers and ranchers. This has been a brutal few years between the market disruptions from tariffs, reduced prices, and now extremely wet conditions. Further, the Market Facilitation Program is only available for planted acreage, which acerbates the problem because producers have to try to plant an eligible crop to receive any of the $16 billion authorized. This is the perfect storm of events and producers are caught in the middle. I do not question that assistance is needed. I question the manner it was provided.
In previous posts I identified concerns regarding changes RMA was making to the policy after the contract change date. The contract change date is the last date by which changes can be made to the policy and the preamble to the policy expressly states that the policy provisions cannot be waived or varied by anyone, including RMA. The policy, the Common Crop Insurance Policy Basic Provisions (Basic Provisions) (7 C.F.R. 457.8) is published as a regulation and has the force of law so waive or vary the policy after the contract change date is a violation of law. I pointed out that these modifications, and there were a few this year, created a slippery slope that could disrupt the program by creating uncertainty for producers and approved insurance providers and diminish RMA’s ability to enforce its policy and procedures. However, with MGR-19-015, it appears the slippery slope has become a cliff that RMA went over.
In MGR-19-015, RMA moved the date by which cover crops could be hayed, grazed, etc. without affecting the prevented planting payment from November 1 to September 1. RMA is also treating cutting for silage, baylage, and haylage the same as haying and grazing even though they involve harvesting the crop is defined by the Crop Provisions. RMA does not explain its authority or rational basis to make this change. With resect to the applicable law, section 508A(c)(1) of the Federal Crop Insurance Act (FCIA) states:
(1) OPTIONS ON LOSS TO FIRST CROP.—Except as provided in subsections (d) and (e), if a first crop insured under this subtitle in a crop year is prevented from being planted, the producer of the first crop may elect one of the following options:
(A) NO SECOND CROP PLANTED.—The producer may—
(i) elect to not plant a second crop on the same acreage for harvest in the same crop year; and
(ii) subject to paragraph (4), collect an indemnity payment that is equal to 100 percent of the prevented planting guarantee for the acreage for the first crop.
(B) SECOND CROP PLANTED.—The producer may—
(i) plant a second crop on the same acreage for harvest in the same crop year; and
(ii) (subject to paragraphs (4) and (5), collect an indemnity payment established by the Corporation for the first crop, but not to exceed 35 percent of the prevented planting guarantee for the acreage for the first crop.
RMA introduced cover crops into the equation in section 1 of the Basic Provisions in the definition of “second crop,” which stated in part as “A cover crop, planted after a first insured crop and planted for the purpose of haying, grazing or otherwise harvesting in any manner or that is hayed or grazed during the crop year, or that is otherwise harvested is considered to be a second crop. A cover crop that is covered by FSA’s noninsured crop disaster assistance program (NAP) or receives other USDA benefits associated with forage crops will be considered as planted for the purpose of haying, grazing or otherwise harvesting. A crop meeting the conditions stated herein will be considered to be a second crop regardless of whether or not it is insured.” In this provision, RMA is defining “harvest” as haying, grazing or otherwise harvesting in any manner and stating that cover crops who meet these conditions are second crops.
The key here is “harvest on the same acreage in the same crop year.” The November 1 date to allow haying, grazing, etc. was established because it was determined by RMA that in normal conditions harvest would be completed and the insurance period would have ended. Since the insurance period had ended, any haying, grazing, etc. after November 1 would be considered the next crop year. Therefore, producers who grazed, hayed, etc. after November 1 could keep their full prevented planting payment because the crop was not harvested in the same crop year.
So what does all this mean in relation to MGR-19-015? RMA moved the date to allow haying, grazing, cutting for silage, haylage, bailage, etc. to September 1 but most applicable crops will only be beginning harvest so this harvest occurs in the same crop year. Further, under the definition of “second crop” cover crops hayed grazed or cut for silage, haylage, or baylage is considered harvested. Under the FCIA and the regulations, if crop is harvested on the same acreage in the same crop year, the prevented planting payment must be reduced. However, under MGR-19-015 it appears that RMA disregards the statute and regulations and is allowing a full prevented planting payment when a second crop is planted for harvest on the same acreage in the same crop year. They may have some new authority to which I am not aware to disregard the law but if so, it should have been stated in the bulletin. What are the consequence for the program? Paying out funds in a manner not authorized by law can have its own consequences but more immediately, approved insurance providers can ask to be held harmless and RMA will be on the hook for 65 percent of all prevented planting payments where producers hay, graze, or cut their cover crop after September 1.
The quandary is that MGR-19-015 does not really solve what is a long term problem. Prevented planting and wanting to plant cover crops and hay and graze them is a recurring problem. Every few years there is a prevented planting disaster somewhere in the country and producers claim the need to hay or graze the cover crops planted. RMA has to start looking at a more permanent fix. Even this year, the issue of prevented planting and the scope has been known for months, which means it could have been addressed in the recent disaster legislation. Congress could have allowed cover crops to be hayed, grazed, etc. at any time this year without effecting the prevented planting payment. Going forward RMA could revisit the definition of “second crop” as it related to cover crops. RMA could create exceptions if disasters are declared or for specific cover crops so that in years like this, producers have the flexibility to receive their full prevented planting payment and use their cover crop as needed.
This year has been a challenging one but band aid fixes won’t solve the problem. Statute created the crop insurance program and regulations are used specifically to give the policies the force of law. Disregard of these safeguards for producers, approved insurance providers and RMA will make the program that more difficult to administer in the future.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.