On May 28, 2019, the Risk Management Agency (RMA) issued Managers Bulletin MGR-19-012, and on June 5, 2019, RMA issued MGR-19-012.1, regarding the delays in terminating crops due to adverse weather. Many acres of fall-seeded crops have been appraised and released for termination but the excess moisture has prevented producers from getting into the fields and terminating the crop before the plants reach the headed or budded stage. Special Provisions preclude the insurance of spring planted crops if it follows a crop that has reached the headed or budded stage. The purpose of the provision is to conserve moisture for the spring crop because heading and budding uses more moisture.
Concerns have been raised that producers who were prevented from terminating their crop due to adverse weather will not be able to insure their spring crops. Producers were also concerned that the practice designations may change from not following another crop to following another crop. The producers argued that soil moisture is not an issue since they were precluded from timely terminating the crop due to excess moisture. Producers are asking that insurance be allowed on the spring planted crops with the same practice designation.
In MGR-19-012, for the 2019 crop year only in Illinois, Indiana, Michigan, North Dakota, Ohio, South Dakota, and Wisconsin, insurance is allowed for spring planted crops even if the prior crop reached the headed or budded stage as long as the crop was terminated no later than June 5, 2019. In MGR-19-012.1, RMA allowed the spring crop to be insured as long as the prior crop was terminated b the end of the late planting period for corn.
ANALYSIS – There is no question that this has been an incredibly wet spring in parts of the country and producers have been prevented from planting and terminating their crops due to this inclement weather. Producers are also correct that the purpose of the termination prior to heading or budding was to conserve moisture for the spring crop and that this year this is not a problem. The problem is that RMA is once again revising the policy after the contract change date. Contract change dates are generally set months ahead of the sales closing date. Almost every year there is an occurrence after the contract change date that adversely affects producers. Previously RMA has maintained the hard line that the policy could not be waived or modified after the contract change date because it would be a violation of law for those policies codified, a violation of policy, and a breach of the Standard Reinsurance Agreement (SRA) because it only reinsures policies as they are written as of the contract change date.
This year is a bad year but there will be other bad years and RMA is setting the precedent in this and other announcements this year that it will revise the policy after the contract change even if it is a violation of law and the SRA. This is a slippery slope to be on.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.