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    Crop Insurance News and Analysis – May 27, 2020 – Suspended Sales of Livestock Risk Protection (LRP) for Lamb

    June 22, 2020 By //  by Kim Arrigo

    On May 27, 2020, the Risk Management Agency (RMA) issued a National Press Release and Managers Bulletin: MGR-20-014 announcing that RMA was suspending the sales of the LRP-Lamb because data was no longer available to make offers and settle contracts. https://www.rma.usda.gov/en/News-Room/Press/Stakeholder-Information/2020-News/FCIC-Suspends-Sales-of-Livestock-Risk-Protection-for-Lamb; https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/MGR-20-014. The data necessary was from the Agricultural Marketing Service (AMS) but it has suspended reporting the National Weekly Slaughter Sheep Review formula price to comply with confidentiality requirements. RMA states that this means it cannot publish ending values on any active LRP-Lamb endorsement in a manner that reflects current market conditions.

    RMA announced that on May 21, 2020, the Federal Crop Insurance Board of Directors (Board) suspended the sales of LRP-Lamb. RMA states that effectively immediately it will publish the ending values for active endorsements by replacing the National Weekly Slaughter Sheep Review formula price with the comprehensive price. RMA states that the comprehensive price includes formula price transactions in addition to negotiated prices and is designed by AMS to allow price reporting to continue during periods when the formula price report is suspended. RMA also states that because the comprehensive price includes formula price transactions, it closely follows the formula price. RMA states it will use the comprehensive price unless AMS publishes a formula price on the ending date of the endorsement and the previous four weeks.

    ANALYSIS – There has always been a risk with using the data from other USDA to make insurance offers. In years past, NASS data collection has been stopped, suspended, or consolidated for some crops, leaving RMA unable to establish yields for the purposes its Area Risk Protection Insurance policies. This has lead to scrambles to find other data, often litigation, and losses paid even if the new data uses did not support the claims. RMA fixed the problem by allowing the use of its own data to establish these yields but it appears that there are other policies, such as LRP-Lamb, that are also at risk. Given the shrinking budgets and staff within USDA and the government as a whole, this problem will continue in the future and RMA and submitters will need to look at more stable sources of the data it needs and adjust policies to include alternative sources of data.

    All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.

    Filed Under: Blog

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