Record Keeping Video Transcript
Hello, my name is Erin Roche and I am the Crop Insurance Education Program Manager at the University of Maine Cooperative Extension.
And funding for our Crop Insurance Education Program is made possible through the USDA Risk Management Agency.
In the previous webinar I spoke about the crop insurance options available to Maine farmers.
In this webinar, I’m going to discuss the records needed to enroll in the different crop insurance programs. So lets begin!
So because most crop insurance programs protect the farmer’s historic average yield or revenue from loss, farmers must provide farm level records proving their yield or revenue history in order to enroll in these programs.
And really, providing accurate, organized farm records is the essential for receiving adequate crop insurance coverage for your farm. So first, I’ll go through the records needed for yield-based insurance programs.
For yield-based insurance programs, on crops such as small grains or corn, the farmer will need to provide 4 to 10 years of production records that show the crop yield and acreage planted to that crop.
For example, here are 4 years of oat yields from one farm. The agent will take an average of those yields and a percentage of that average is what the farmer is insuring with their policy. In this example, the farmer would insure a percentage of 57 bushels per acre. So lets say, what if a farmer has less than 4 years of records, the agent can plug in a percentage of what’s known as the county transitional yield for the missing years. So even if a farmer has never grown the crop, they can still get crop insurance it’s just that the transitional yield will be plugged in as a substitute.
So to prove their yields and acreage a farmer needs to provide acceptable records. Acceptable records can be farm management records that show the total acres planted and production by crop, year, and unit. Or these can be verifiable production records from a packer, processor or handler. Pick records are also acceptable.
Again, these records should be as accurate as possible. If yields are under or over reported farmers run the risk of getting inadequate coverage should they experience a loss. And the same goes for accurately reporting the number of acres planted because the farmer premium is charged on a per acre basis. So farmers don’t want to be paying too much or too little premium.
In addition to their historic yield records, the farmers must also provide the Farm Serial numbers for the acreage the insured crop will be grown on. And this number is assigned by Farm Service Agency county office.
In addition, one of the more recent changes to crop insurance is that every farmer must have Form AD 1026, or the Highly Erodible Land Conservation and Wetland Conservation Certification, on file with FSA to receive the premium subsidy on their crop insurance policy. So this is very important because the subsidy makes crop insurance more affordable to the farmer.
In addition, farmers will also need to provide their Current Entity Information, Social Security Number, an EIN number, as well as information on those with a substantial beneficial interest in the entity or what’s known as an SBI. And the important thing for these last documents is keep them up-to-date. So when any changes to the entity occur, such as a marriage, a death, a divorce, the grower needs to call their agent and may need to go in and update these forms.
So all crop insurance programs have deadlines involved and I just wanted to give you a sense of the timeline for spring-seeded crops. So March 15 is the sales closing deadline for spring-seeded crops. So for crop insurance and for the NAP program so this means farmers need to approach an agent and sign-up before this date to receive coverage for 2017.
July 15 is the deadline at which farmers need to report how many acres they actually planted to that crop that their insuring. This reporting deadline is really important. If farmers don’t report the acres planted by this date than the insurance will not be active.
August 15 is the premium billing date. And coverage ends either in the fall or early winter of that year depending on the crop. And by April of the following year the farmer must report their actual yields for the insurance year. This yield will automatically be added to the yield history and the oldest year will be bumped out.
So now I want to talk a bit about the different coverage options for yield protection programs. So with crop insurance, the farmer selects what percentage of their average yield to insure. CAT is the lowest level of insurance and it protects 50% of the average yield, meaning the farmer must experience greater than 50% yield loss in order to receive an indemnity payment. So if that’s the case, the farmer will be paid at 55% of the price election, which is the dollar per unit value set by the USDA for each crop. So while CAT isn’t a very high level of coverage, it is affordable. It costs $300 per crop per county. In addition, for beginning farmers, the catastrophic fee is waived, so CAT comes at no cost to beginning farmers. A beginning farmer is someone who has had 5 years or less insurable interest in a farm.
Buy-up is the general term referring to higher levels of coverage. Farmers can choose between 50 and 85% coverage at 5% increments and receive up to 100% of the price election. The premium is partially subsidized by the government and this makes the policies by and large more affordable to the farmers. And for NAP the highest level of coverage is 65%, so it’s a bit lower than crop insurance. Obviously the amount the farmer will pay for a premium increases with the level of coverage selected. For premium quotes I suggest calling a crop insurance agent. So again, for yield-based policies, the crop insurance premium is on a per acre basis so reporting the acres planted accurately is in the farmer’s best interest.
Now let’s talk about Whole Farm Revenue Protection. For this program the farmer must provide a different set of records because this is a revenue protection policy and coverage follows the farmers tax cycle. Farmers need to provide 5 years of Schedule F tax documents that show the farmers profit and loss from farming.
Here is an example, so from these records, the agent is able to figure the farmers approved adjusted gross revenue which is the revenue from the crops, livestock and nursery products produced by the farm but excludes revenue from any value-added products such as gift baskets. The Schedule F’s are the basis for the proving the farm’s historical revenue and beginning farmers, are allowed to provide 3 years of Schedule F’s as opposed to 5.
So with this program, the farmer’s historic average revenue is going to be compared to their expected revenue for the insurance year.
So farmers will have to fill out a Farm Operation report which shows the farms expected revenue for the insurance year and what type and quantity of commodities they expect to produce. If the Farm Operation Report changes from the initial report than it has to be revised during the growing season and then a final report is due at end of insurance period. So essentially, the lower of the average Schedule F revenue or the expected revenue from the Farm Operation Report is what the policy will be based off of. In this example, the policy would be based off of the Schedule F average of $200,000 and the farmer would decide what percentage of that revenue they want to insure. Remember, with this policy the farmer receives an indemnity only when their Schedule F for the tax year shows their actual revenue is below the insurance trigger.
So in addition, to the Schedule F and the Farm Operation report, if a farmer is growing a perennial crop such as apples, blueberries, a Pre-Acceptance worksheet must be completed and an inspection of those crops may be needed.
And in addition, there are various records that are required to essentially verify the revenue on the Schedule F tax records.
First, sales records are required for each year to justify the price at which commodities were sold and the quantity at which they were sold. Acceptable sales records can be verifiable records or direct market records that show the market date, crops sold, quantities sold, and the revenue received per crop.
Next, if the farmer is producing animals than a Market animal Inventory report must be kept. And this would include a beginning inventory to capture what the farmer plans on selling, and an end inventory to show what’s been sold or if marketable product is still on hand.
And then if applicable a report of accounts receivable or payable which is money the farmer expected to receive or owe is also required.
And then the other requirements we already mentioned apply to Whole Farm Revenue Protection as well. So Farm Serial number, Conservation Compliance, entity info, etc.
So the timeline for Whole Farm Revenue is such that March 15th is the sales closing date. And then in July that revised Farm Operation Report is due. So this is the time to report whether the farm plan has changed at all. Premium billing is not until the summer. And then coverage ends when your tax season ends so for calendar year filers, as is shown in this example, December 31st would be when the coverage ends. It’s important to note that if there was a loss during the insurance year the farmer still has to report that loss to the agent upon discovery of that loss but the actual claim isn’t submitted until after the farmer files their Schedule F’s. So there may be some lag time from when the loss occurs to when the farmer receives their indemnity payment, so this is important to understand. And then there’s additional paperwork to file at the end of the year, there is the final farm operation report which shows what was actually done on the farm as well as an end inventory report to show inventory still on hand.
Next, the Whole Farm Revenue Protection coverage and premium subsidy is based on the number of commodities produced on the farm. So each commodity needs to make up a significant amount of the overall revenue in order to be counted as a commodity. So farms with 1 commodity receive basic subsidy as is shown in the lighter blue and they’re eligible for coverage of up to the 75% level. So for example, at the 75% coverage level, 55% of the premium is subsidized by the government, and the remaining 45% of the premium must be paid by the farmer.
Farms with 2 or more commodities receive this whole-farm premium subsidy of 80% and by producing three commodities, the farmer is eligible for the 80 and 85% coverage levels. As well as that whole farm premium subsidy, so here we see how this program is designed to incentivize diversified farms. By being diversified, farmers are getting more premium subsidy and their also eligible for higher levels of coverage.
So that concludes our webinar about the records required to enroll in the different crop insurance programs. For more information on these policies please visit our website extension.umaine.edu/agriculture. From there you will find a link to our risk management and crop insurance homepage.
And you’ll also find my contact info on this page, please do not hesitate to contact me with questions. Thank you.