On March 17, 2020, the Risk Management Agency (RMA) issued two Final Agency Determinations: FAD-293b and FAD-293c, regarding the Hybrid Seed Corn Crop Provisions (Crop Provisions). https://www.rma.usda.gov/en/Policy-and-Procedure/Final-Agency-Determinations/Hybrid-Seed-Corn-Crop-Provisions-12d-FAD-293b; https://www.rma.usda.gov/en/Policy-and-Procedure/Final-Agency-Determinations/Hybrid-Seed-Corn-Crop-Provisions-12e-FAD-293c. Both FAD-293b and FAD-293c involved an interpretation of production to count under section 12(d) and 12(e) of the Crop Provisions. The first requestor stated that production to be counted as seed production and non-seed production does not include payment to a producer that are not determinable as a fixed or final amount of bushels or dollars as of the time planting is complete and are based on an amount of imputed, and not actual bushels of non-seed corn with the amount of bushels being determined formulaically with respect to location-specific average yields.
The second requestor states if a policyholder is provided with a minimum guarantee that is to be calculated by a formula outlined in the seed corn contract wherein the payment is based on a percentage of location-specific average harvested yields for the year at a to-be-determined price, then such payment, if any, must be taken into account for claim purposes when determining the “amount of insurance per acre” so as to properly calculate any indemnity that may be owed.
RMA states that it agrees in part with the first requestor’s interpretation of sections 12(d) and 12(e) that payment, including minimum contract payments, associated with a policyholders seed contract are not used to determine production to count. RMA states that minimum contract payments are used to determine the amount of insurance in accordance with section 1 of the Crop Provisions.
ANALYSIS – RMA is correct that minimum contract payments are used to reduce the amount of insurance and are not counted as production to count for seed or non-seed production. However, it appears that the fundamental dispute is what is considered a minimum contract payment and the first requestor suggests that minimum contract payments do not include payments that cannot be determined as of the time of planting or that are based on an amount of imputed bushels determined formulaically from location-specific acreage. The second requestor states that payment based on an amount of imputed bushels determined formulaically from location-specific acreage must be taken into account for claim purposes when determining the amount of insurance.
For the most part, this issue was addressed in FAD-293a. RMA has determined that the minimum guaranteed payment must be determined not later than the acreage report. However, RMA also stated that any payment made to the insured by the processor regardless of the quantity of seed produced would be considered a minimum guaranteed payment. While not specifically addressing the point, RMA’s determinations in FAD-293a would seem to reject the second requestor’s interpretation that the minimum guaranteed payment could be based on a formula in the contract whereby the payment is based on a percentage of a location specific average harvested production for the year at a to be determined price. The second requestor’s formula would seem to be based on the amount of production from at least some of the acreage and would not qualify as a minimum guaranteed payment under RMA’s interpretation.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.