Marcinda Kester Farm Programs Chief.

Marcinda Kester Farm Programs Chief

Noninsured Crop Disaster Assistance Program (NAP)
The Noninsured Crop Disaster Assistance Program (NAP) provides financial assistance to eligible producers affected by natural disasters. This federally funded program covers noninsurable crop losses.

NAP Life Cycle

Application for Payment
NAP Life Cycle Crops Coverage Approved Yield Commodity Report Summary of Coverage Notice of Loss Application for Payment Payment Premium Billing

What’s New? In addition to CAT-level coverage, NAP will offer buy-up coverage for the 2015 through 2018 crop years Crops and grasses intended for grazing are excluded from buy-up coverage but can still purchase NAP at the CAT-level coverage. One time opportunity to prove that FSA can be successful in offering higher levels of coverage for NAP crops. Statute specifically excluded grazed forage due to the availability of LFP.

Buy-Up Coverage (Continued)
Buy-up coverage levels: Yield Level Price Level 50% 100% 55% 60% 65% 50/100 price coverage only 55/100 disaster threshold 45% 60/100 disaster threshold 40% 65/100 disaster threshold 35%

In addition to the service fee, producers who elect buy-up coverage must pay a premium equal to the lesser of: 5.25% of the guarantee 5.25% of the payment limit Guarantee acres x share x yield x coverage level (yield/price) x price x 5.25% CAP is $125,000 x 5.25% or $6563

For value loss crops, buy-up coverage will be based on the maximum dollar value for which the producer requests coverage Maximum dollar value for coverage sought means the total dollar amount elected by the NAP covered participant for which buy-up coverage may be considered for a value loss crop in a coverage period. The amount is set by the NAP covered participant for each value loss crop and represents the highest amount of field market value of the crop before disaster in a coverage period. Field market value A cannot exceed the maximum dollar value.

Service Fee & Premium FSA will waive NAP service fees and reduce buy-up premiums by 50% for: Beginning farmers (BF) Limited resource farmers (LR) Socially Disadvantaged Farmers ( SDA) CCC-860 is required. It may already be on file.

Limitations and Eligibility
$125,000 payment limitation $900,000 AGI provision Persons and legal entities. Attribution applies to both payment limitation and AGI.

NAP Life Cycle Crops Coverage Approved Yield Commodity Report Summary of Coverage Notice of Loss Application for Payment Payment Premium Billing 2015 NAP 11

Eligible Crops

Eligible Crops Any commercial agricultural crop (excluding livestock and their by‑products), commodity, or acreage of a commodity grown for food or fiber, and commercial or industrial crops for which CAT or additional coverage (non-pilot) is not available [7 CFR ] Eligible crops are any commercial agricultural crop (excluding livestock and their by-products), commodity, or acreage of a commodity grown for food or fiber for which CAT and additional coverage crop insurance (excluding pilot coverage) is not available.

Eligible Crops (Continued)
crops grown for food crops planted and grown for livestock consumption crops grown for fiber, excluding trees grown for timber, lumber, or paper Eligible crops include: crops grown for food one clarifier that came up during the 2012 frost freeze sign up that I just wanted to touch base on here. In the case where a commercial operation grows a NAP crop and then uses that crop to be processed on-farm into a value added product such as jelly or salsa, those crops are eligible for NAP crops planted and grown for livestock consumption crops grown for fiber, except trees grown for lumber, timber, or paper products however, if the trees are grown for Biomass they may be eligible This hasn’t changed however, one small change to aquaculture that I want to take a second to point out is that if the “crop” is bottom culture that the crop may now be considered eligible coverage and payment

aquaculture species, including ornamental (tropical) fish floriculture crops ornamental nursery (including propagation stock) Christmas tree crops/commodities aquaculture species, including ornamental (tropical) fish floriculture crops ornamental nursery (including propagation stock) Christmas tree crops/commodities

turfgrass sod sea oats and sea grass seed crops/commodities where the propagation stock is commercially produced for sale as seed stock for other eligible NAP crop production turfgrass sod sea oats and sea grass And seed crops/commodities For a complete list of the eligible crops refer to the crop group exhibits in 1-NAP

industrial crops (including those grown expressly for the purpose of producing a feedstock for renewable biofuel, renewable electricity, or bio based products) New for 2015! industrial crops (including those grown expressly for the purpose of producing a feedstock for renewable biofuel, renewable electricity, or bio based products) NEW - Biomass crops

Eligible Crops Additional eligible crops: Sweet sorghum
Biomass sorghum

New for 2015: NEW - Biomass crops

Biomass Crops A biomass crop is any feedstock crop grown for the express purpose of producing bio based product A biomass crop is any feedstock crop grown for the express purpose of producing bio based product. most crops have other uses and in most cases the price point is no different. biomass is not just bio-fuel, it’s any product the is made from a renewable source Camelina

Biomass Crops To be eligible for NAP assistance, producers must provide evidence satisfactory to the FSA County Committee: that a market exists for the crop the crop is grown for commercial biomass purposes For a crop to be eligible for NAP assistance, producers must provide evidence satisfactory to the FSA County Committee: that a market exists for the crop the crop is grown for commercial biomass purposes This is because there are crops out there may not have a market for that particular crop, we have to insure that a market does exist Because NAP would not normally cover this crop. Algae Bioreactor

Expanded definition of industrial crops – includes crops produced as a feedstock for: Renewable biofuel Renewable electricity Biobased products

Ineligible crops by-products resulting from processing or harvesting an eligible crop, such as peanut stover, oat straw, corn stover, wheat straw etc. nonornamental nursery plants, such as strawberry plants, orange trees, etc. Exception to this ineligibility could be plants grown as seed crops home gardens or crops not being produced for commercial sale Here is the list of ineligible crops this has not changed

Ineligible crops (Continued)
experimental crops volunteer stands, except native forage livestock and their by-products trees grown for lumber, timber, or paper products And the list of ineligible crops continues to include the crops listed here. One thing that I need to point out about Experimental crops – If a crop is being produced in an area where the weather is not conducive to produce a viable crops, the COC may deny coverage for that crop (volunteer stands, such as wheat) If trees grown for biomass, they may be eligible

Ineligible crops (Continued)
CAT or additional level of insurance coverage is available Group Risk Protection insurance Crop acreage for which individual coverage is available only as a pilot product is eligible for NAP assistance. You may submit any exception requests to the National Office for approval. What is NOT an eligible crop? If RMA offers coverage (of any kind, except maybe pilot), NAP is unavailable and cannot be offered… RMA coverage that makes NAP unavailable includes: Group Risk Protection insurance is at CAT level. Therefore, if Group Risk Protection is available, the crop acreage is not eligible for NAP assistance. Crop acreage for which individual coverage is available only as a pilot product is eligible for NAP assistance. If CAT or additional level of insurance is available for a particular crop, type, intended use in the county, but is excluded for a practice, NAP eligibility may be extended to that practice, if a request is submitted to DAFP that supports an exception. Requests for exception must be in advance of the application closing date. State Offices will not submit requests for individual or isolated producer instances. Exceptions will only be considered: An example of this exception is : machine harvested crops such as cucumbers for Pickles are covered for processing cucumbers. FSA can cover Fresh harvest cucumbers in that same county

Coverage Options Overview
The Agricultural Act of 2014 authorizes FSA to offer NAP catastrophic coverage for a service fee and additional levels of NAP coverage that require payment of a premium in addition to the NAP service fee

Coverage Options Overview (Continued)
NAP coverage will be available on eligible crops at the CAT (basic) level of 50/55, or in 5 percent increments from 50 up to 65 percent of the producers approved yield at 100 percent of the average market price as established by FSA NOTE: Crops intended to be grazed are not eligible for coverage levels above the Basic CAT Level (50/55)

Coverage Options (Continued)
What level of loss is needed to trigger a NAP payment? If the Elected Coverage Level is… Then the eligible cause of loss must have reduced the expected unit production by… 50/100 50 percent 55/100 45 percent 60/100 40 percent 65/100 35 percent What level of loss is needed to trigger a NAP payment? If the Elected Coverage Level is 50/100 then the eligible cause of loss must have reduced the expected unit production by 50 percent. If the Elected Coverage Level is 55/100 then the eligible cause of loss must have reduced the expected unit production by 45 percent. If the Elected Coverage Level is 60/100 then the eligible cause of loss must have reduced the expected unit production by 40 percent. If the Elected Coverage Level is 65/100 then the eligible cause of loss must have reduced the expected unit production by 35 percent.

Electing Coverage Options
Producers are required to elect their coverage level at the time of application on the CCC-471 by the application closing date, in the administrative county for the NAP crops Election of coverage level is irrevocable after the application closing date

Electing Coverage Options (Continued)
If a producer elects NOT to purchase additional coverage levels, the level of assistance will be calculated at the Basic CAT level 50/55 Basic CAT is $250 per pay crop, per pay type. $750 max per county

Electing Coverage Options (Continued)
Coverage levels are elected by pay group, as demonstrated below: Note: You cannot elect different coverage levels for crops in the same pay group Crop Variety Pay Crop Pay Type Planting Period Coverage Level Squash Acorn 0155 001 01 55/100 Butternut Summer 002 65/100 Zucchini

Eligible Producer

Producer A producer is an owner, operator, landlord, tenant, or sharecropper, who both: shares in the risk of producing a crop and is entitled to share in the crop available for marketing from the unit, or would have shared had the crop been produced

Producer (Continued) Landowners, landlords, tenants, contract growers, or anyone else not having both a share of the risk and a valid share of a crop are ineligible for NAP

Producer (Continued) To determine producer eligibility, one of the following must be obtained: copies of: signed written leases with landowner or landlord signed rental agreements with landowner or landlord other legal documents showing land ownership or control Or...

Producer (Continued) Obtain: statement signed by:
landowner or landlord that producer had control of the acreage operator or producer that producer had control of the acreage on a farm FSA-578, producer print

“Types” of Producers Individuals (Persons) Joint Operations
Legal Entities

Conservation Compliance
To be eligible for NAP benefits, persons and legal entities must be in compliance with all HEL and WC provisions according to 6-CP

Overview The approved yield process is used as a uniform method to calculate approved yields for all producers. NAP approved yield establishment: Provides flexibility Provides a sound basis for expected production Safeguards the integrity of NAP It is to the producer’s benefit to have their NAP coverage be based on their own historical production records rather than county or area yields. For good producers, it will result in better coverage than using county yields to determine benefits and loss.

Overview (Continued) Approved yields:
are calculated by a producer’s unit for producers who: do not have records, limited to 65% of T-yield are able to provide acceptable records for 1-3 years, use a combination of actual and T-yield are new producers, may have an approved yield based on unadjusted T-yield Approved yields: Are calculated by a producer’s unit, not an individual or entity Unit definition: Separate and distinct units are: • One-hundred percent interest as owner/operator • Less than one-hundred percent interest as owner or operator • Less than one-hundred percent interest, as owner or operator in an inverse relationship For producers who: Do not have records of past production, are limited to 65% of the applicable T-yield the first year the producer and crop are considered for NAP eligibility Are able to provide acceptable records of production for 1 – 3 years of actual yields, will be calculated using a combination of variable T-yields and actual yields Are new producers of a crop, may have an approved APH yield calculated based on unadjusted T-yields or a combination of unadjusted T-yields and actual yields

Overview (Continued) Producers who report NAP crop acreage are responsible for reporting production for all crops selected on CCC-471 Approved yields do not apply to: grazed forage value loss crops controlled environment crops Approved yields do not apply to: value loss crops grazed forage controlled environment crops

Yield Type Indicators A producer’s production history is the basis for calculating an approved yield Different rules apply to different types of historical production Yield Type Indicators are an easy way to indicate the type(s) of historical production a producer has in his or her crop database Yield type indicators: A – Actual yield (A) B – Bypass year C – Added Practice, Type, IU, PP, or Unit I – New Producer O – Zero credited yield P – Assigned yield R – Replacement yield U – Substitute yield (2002 Farm Bill) V – Substitute yield T-yield (County expected yield) S – 65% of T E – 80% of T N – 90% of T T – 100% of T Z – Zero acres planted

Approved Yields (Continued)
Base period: Minimum of 4 consecutive APH crop years Maximum of 10 APH crop years Except apples and peaches - 5 years max Does not include any year the crop was: Not planted Prevented from being planted Not reported as planted The base period for APH crops is a minimum of 4 consecutive APH crop years and a maximum of ten APH crop years, not calendar years, immediately preceding the crop year for which an approved yield is calculated. Apple & peaches have a maximum of 5 years of history. An APH crop year does not include any year that the crop was: • not planted • prevented from being planted • not reported as planted or prevented from being planted

The approved yield established for the producer will be: equal to the simple average of the yields included in the APH database based on APH years of production records Reminder: The producer must maintain production records for crop years

If the producer has records for: The approved yield is the simple average of: 4-10 years Those years 3 years The 3 years + 100% of T-yield for missing year 2 years The 2 years + 90% of T-yield for missing years 1 year The 1 year + 80% of T-yield for missing years No years 65% of the T-yield for 4 years An assigned, zero credited, or substitute yield will not be considered derived from producer-certified production records for the purpose of attaining a higher percentage of T-yield This chart shows what production or variable T-yields will be used the first time an approved yield is established for a unit. This information will be covered in more detail as the presentation progresses. Software…Load what you know!!! 47

No Production Records – No Prior Approved Yield
65% The Approved Yield is calculated using ____ of the T-Yield for the 4 most recent crop years for producers who: are not New Producers have not had an approved yield previously established have no records of production Here is a very basic situation - a producer has no previously approved yield, is not a New Producer, and has no records of production. We will be going through an exercise of calculating an approved yield for this producer.

New Producer Yield Type “I” Definition:
A producer who has not been engaged in farming for a share of the production of the crop for more than 2 crop years in the county Specific rules are applicable with formation or dissolution of entities Yield Type “I” The definition of a New Producer is a producer who has not been farming for a share of the production for more than 2 crop years in the county. Certain rules apply when an entity is formed. Producers can request to COC if they don’t “fit” the new producer criteria. Regardless of whether or not the producer has provided information to FSA for NAP purposes, if the county has data to indicate the producer shared in the crop previously, new producer rules will not apply. To qualify as a new producer, the producer must not have grown the crop in the county for more than 2 out of the previous 10 years and New producer is based on administrative county.

New Producer (Continued)
The approved yield will be calculated based on: 100% of the T-yield for years during which the crop was not produced the actual yield for the 1 or 2 years for which there is a record of production When the New Producer applies the approved yield is calculated using 100% of the county T-Yield for the years that the producer did not produce the crops and any actual yields for the 1 or 2 years that he has a record of production.

Buy-up Options Audience Recall, what options are available with buy-up coverage only?

Buy-up Options Buy-up Options are applicable to crops on which Buy-up coverage is elected Options are: Direct Market Historical Marketing Percentage (HMP) Maximum Dollar Value Audience Recall, what options are available with buy-up coverage only?

Direct Market Price Option
Option is available to accommodate growers who receive a higher crop price, typically because they do not use an intermediary such as wholesaler or processor Will only matter if crop has been approved for a direct market price

Direct Market Price Option (Continued)
Marketing channels include: Direct to consumers, such as: On-farm sales, including roadside stand or store Farmer’s Market CSA U-pick Indirect, such as through: Retailer Wholesaler Packer Will only matter if crop has been approved for a direct market price

Direct Market Price Option (Continued)
Producer must provide: Actual marketing records Data for immediately preceding 3 years Direct market percentage is recalculated each year the Direct Market Price Option is selected by producer The information will be used to establish a producer’s actual marketing history. Note: Only one approved yield will be established for the pay group; however, premium billing and loss payment will be made based on the applicable direct marketing percentage.

Historical Marketing Percentage (HMP)
Option is available to accommodate growers who have a history of marketing a crop through multiple markets Markets include: Processed Fresh

HMP (Continued) Producer must provide: Actual marketing records
Data for immediately preceding 3 years The HMP is recalculated each year the HMP Option is selected by the producer Form will be developed for reporting and calculating. HMP would normally be applicable when production that goes to different uses comes off of same reported acreage (multiple-market crops generally) NO county HMP as was under SURE. HMP is only for producer. Producers who elect option but who do not report historical marketing will not have this option applied to guarantee, premium, or loss calculations.

Maximum Dollar Value Option is available to all producers of value loss crops to select an amount of coverage based on the highest value of inventory they have at any given time Premium will be based on the dollar value selected. Note: If FMV A is less at time of loss than the dollar value selected, NAP loss payment will be based on FMV A.

Calculating Guarantees

Calculation of Guarantee - Yield Based Crops
Eligible Acres X Producer Share X Approved Yield X Elected Yield Coverage = Production Guarantee X *Applicable price *Applicable average NAP price is based upon NAP participant’s application for coverage and documentation that proves producer qualifies for a Direct Market Price or Organic Price, if applicable. If not, the regular or traditional NAP pricing will be used in the calculations. NOTE – Producer must indicate the choice for organic or direct market price on the CCC-471 and then provide evidence to support the increased price prior to acreage reporting deadline for the crop(s). If direct market has not been approved for a location or crop for a coverage year, checking that box on CCC-471 will not impact NAP coverage. X Elected Price Coverage = NAP Guarantee

NAP Guarantee Example 1 – Yield Based Crop
Variables Crop (Type/IU/Prac/PlntPer) Pumpkins (SUG/FH/NI/01) Producer Share 1.000 Acres Certified 20 Approved Yield 100 cwt Price $ Coverage Level 65/100 Calculate Guarantee Calculation Eligible Acres 20 X Share 1.000 X App. Yield 100 X Elect Yld Lvl 0.65 Production Guarantee = 1,300 cwt X Price Start with a simple, yield-based crop calculation What is this “49,833” NOT payment amount NOT estimated payment amount NOT maximum payment amount NAP Guarantee IS “Maximum coverage level dollar amount for premium calculation” $49,833

NAP Guarantee Example 1 – Comparison to Basic CAT Level
Calculated NAP Guarantee at elected 65/100 Buy-up is $49,833 Compare 65/100 guarantee to a “guarantee” for Basic CAT Level (50/55) Production guarantee = 1,000 cwt NAP “guarantee” at 50/55= $21,083 Buy-up is a significantly higher guarantee Basic CAT level Production Guarantee = 20 acres x 100 cwt x share x yield coverage = 1,000 cwt Basic CAT level NAP “Guarantee” = 1,000 cwt X X 55% =

NAP Guarantee Example 1 Per Acre – Yield Based Crop
Variables Crop (Type/IU/Prac/PlntPer) Pumpkins (SUG/FH/NI/01) Producer Share 1.000 Approved Yield 100 Price $ Coverage Level 65/100 Calculate Guarantee Calculation for Per Acre Share 1.000 X App. Yield 100 X Elect Yld Lvl 0.65 X Price X Elect Price Lvl 1.000 Extra Credit 1: What is the per acre guarantee AND why would we want to know that? ($2492/acre, producer may make coverage decisions and planting decisions based on this) Extra Credit 2: When would we be able to calculate the “per acre” NAP guarantee? (once approved yield is calculated and HMP established, if applicable) and when would we be able to calculate the total NAP guarantee? (after acreage reporting) Producer at Application for Coverage filing wants to know what the guarantee might be, but doesn’t know final planting intentions. Producer may also be making coverage decisions. To determine a “Per Acre” estimate, simply EXCLUDE the acres from the calculation. $2,492

NAP Guarantee Example 2 – Yield Based Crop
Variables Crop (Type/IU/Prac/PlntPer) Apples (COM/FH/NI/01) Producer Share 1.000 Acres Certified 32 Acres Determined 28 Approved Yield 350 bu Price $13.600 Coverage Level 65/100 Calculate Guarantee Calculation Eligible Acres 28 X Share 1.000 X App. Yield 350 X Elect Yld Lvl 0.65 Production Guarantee = 6,370 bu X Price 13.600 Start with a simple, yield-based crop calculation Extra Credit 1: What is the per acre guarantee AND why would we want to know that? ($3094/acre, producer may make coverage decisions based on this) Extra Credit 2: When would we be able to calculate the “per acre” NAP guarantee? (once approved yield is calculated and HMP established, if applicable) and when would we be able to calculate the total NAP guarantee? (after acreage reporting) X Elect Price Lvl 1.000 $86,632 Comparison to Basic CAT Production Guarantee = 4,900 bu NAP Guarantee = $36,653

NAP Guarantee Example 2 – Per Acre Yield Based Crop
Variables Crop (Type/IU/Prac/Plnt Per) Apples (COM/FH/NI/01) Producer Share 1.000 Approved Yield 350 Price $13.600 Coverage Level 65/100 Calculate Guarantee Calculation for Per Acre Share 1.000 X App. Yield 350 X Elect Yld Lvl 0.65 X Price 13.600 X Elect Price Lvl 1.000 Showing how to calculate a per acre basis. Simply exclude Acres from calculation. What would a 55/100 coverage level guarantee per acre be? ($2,618) How is that determined? (Elect Yld Lvl from 0.65 to 0.55) LOOKING AHEAD: You can also estimate a per acre premium at this point (3069 x = $161.12/acre) $3,094

Basic Calculation of NAP Guarantee – Value Loss Crops
Producer Elected Value on CCC-471 Application for Coverage (applicable to Buy-up only) X Producer Share X Elected Coverage Level (65%, 60%, 55%, or 50%) Producer reports value of crop at the time of application. Use the available yield coverage elections of 50/55/60/65 “Determining Premium”: “value loss crops – the product of the maximum dollar value for which participant seeks coverage, subject to applicable payment limitation, times the 5.25% premium factor.” The producer elected value does effectively limit the FMV A = NAP Guarantee

NAP Guarantee Example 3 – Value Loss Crop
Variables Crop (Type/IU/Prac/ PlntPer) Grass (WRG/SO/IR/01) Producer Share 1.000 Producer Selected Value $115,000 Coverage Level 65/100 Calculate Guarantee Calculation Maximum Dollar Value $115,000 X Share 1.000 X Elect Cov Lvl 0.65 $74,750 Guarantee and premiums are “joined at the hip”. Therefore, Value loss NAP participants will need to know NAP prices for crops such as sod and Christmas trees at coverage application time to not “over-cover” or “under-cover”. Will be paying premiums on maximum dollar value elected, but if their elected value is way over or under what could reasonably have on hand, they might be “overpaying” or “under-covering”. Over insuring Example Value Loss Crop Grass Type WRG Int Use SO Practice IR Plnt Per 1 Highest Possible Inventory =15 acres (72,600 sq yd) Price /sq yrd Yield Level 0.65 Price Level : Highest possible FMV A based on NAP Price = $85,305 (X .65 =$55,448 X = $2911) Actual calculation: Maximum $ Value $ 115, (from 471) Guarantee = $ 74, (65% of Selected Value) Premium = $ 3,924 (5.25% of Guarantee) Under insuring Example Value Loss Highest Possible Inventory =40 acres (193,600sq yd) Price /sq yd Yield Level 0.65 Price Level : Highest possible FMV A based on NAP Price = $227,480 (X .65 =$147,862 X = $7763 Capped at $6563) Actual calculation: Maximum $ Value $ 115, (from 471) Guarantee = $74, (65% of Selected Value) Premium = $ 3,924 (5.25% of Guarantee) NOTE: Guarantee is based on Producer Selected Value as reported on CCC Established NAP Price used for FMV A or B is only used by FSA for loss calculation purpose.

Basic Calculation of NAP Guarantee – Grazing Crop
Total Acreage by crops with same carrying capacity and grazing days / Carrying Capacity X Days in Grazing Period X Producer Share X 0.50 (Basic Coverage Level; no buy-up) X Price X .55 (Basic Price Coverage; no buy-up) = NAP Guarantee

NAP Guarantee Example 4 – Grazing Crop
Calculation Variables Crop (Type/IU/Prac/PlntPer) Mixed Forage (LGM/GZ/NI/01) Producer Share 1.000 Acres Certified 80 Acres/AU (NCT) 2.0 Grazing Days 223 Price $1.413 Coverage Level Basic (50/55) Calculate Guarantee Eligible Acres 80 / Acres/AU 2.0 X Grazing Days 223 X Share 1.000 X Coverage Lvl 0.50 X Price 1.413 X Price Lvl 0.55 First determine the expected AUD (acres divided by capacity multiplied by grazing days) Check Knowledge: Are crops intended for grazing eligible for higher coverage levels (buy-up)? (NO) $3466

Acreage Reporting Accurate Reporting
County Office’s will review acreage reporting data with the producer to verify accuracy Producers must sign acreage report Accurate acreage reports ensure program eligibility Inaccurate acreage reports can result in loss of benefits or improper payments Total cropland report, all cropland on a farm must be reported to ensure program eligibility

Acreage Reporting (Continued)
Timely reporting Acreage reports must be filed by the final acreage reporting date

Notice of Loss Crops Coverage Approved Yield Commodity Report Summary of Coverage Notice of Loss Application for Payment Payment Premium Billing

Notice of Loss/ Application for Payment

Eligible Causes of Loss
Loss must occur from an eligible cause of loss during the coverage period before or during harvest Eligible causes of loss apply the same to basic and buy-up coverage

Damaging Weather Drought Hail Excessive Moisture Freeze Tornado
Hurricane Excessive Wind Insufficient Chill Hours* (Limited) Insufficient chill hours apply only to specific crops and locations determined by FSA in advance of a coverage period. Losses can be a combinations of the above damage weather causes of loss.

Adverse Natural Occurrences
Earthquake Flood Volcanic eruption Any combination of the above

Related Conditions Conditions resulting from damaging weather or adverse natural occurrence, including but not limited to: Heat Insect Infestation Disease Related conditions are not an eligible cause of loss in and by themselves. They need to have occurred as a result of damaging weather or adverse natural occurrence. Has to occur during harvest Has to directly cause, accelerate or increase of the destruction or deterioration of the crop. See the CCC-471 BP.

Ineligible Causes of Loss (some)
Losses that are not direct result of an eligible cause of loss in the coverage period Failure to reseed or replant when practicable Failure to follow good farming practices Water contained or released NOTE: See CCC-471 NAP Basic Provisions which you will get a copy of at the time of application for coverage. Here are some ineligible causes of loss.

Low Yield and Allowable Value Loss - Notice of Loss Filing
File Notice Of Loss by the earlier of: 15 days after the damaging weather or disaster occurrence or date the damage is first apparent to the producer 15 days after the normal harvest date

Notice of Loss (Continued)
Low Yield Hand harvested crops Notify County Office within 72 hours, and File NOL within 15 days of earlier of occurrence or loss becomes apparent Other crops as determined by DAFP Notify County Office within 72 hours, and File Notice Of Loss within 15 days of earlier of occurrence or loss becomes apparent 72 hours will insure the agency gets an accurate and prompt appraisal. Other crops are defined as not hand harvested crops but crops that DAFP determines need to follow the 72 hour notification requirement.

Grazing Notice of Loss Grazing losses will be determined by:
Independent assessments: Notice Of Loss allowed to be filed any time up to the final application for payment date Similar Mechanically harvested forage: Notice Of Loss must be filed within 15 days of occurrence or loss becomes apparent Grazing losses with assessments - File by final application payment date. Grazing losses with Similar Mechanically harvested - Need to file with 15 days that loss is apparent.

Prerequisites to an Application for Payment
Report of acreage is filed CCC-576 Part B is filed and approved Acceptable production evidence provided Acceptable production records would need to meet the requirements of reliable and verifiable data. Approved yield needs approved to process application for payment

Prerequisites to an Application for Payment
Any document required to establish producer eligibility Other documentation needed to determine the correct payment amount

Application for Payment Deadline
Beginning in 2015, no later than 60 days after the coverage period ends for all crops on the unit Exception: County Office Committee has the authority to grant an extension up to 180 days. The request must be filed by the producer in writing Grazing application example - If grazing period ends December 1st - Would have till January 30th to file the loss. Yield application for payment - Would need to be 60 days after coverage period.

Introductions and General Session
NAP Life Cycle Crops Coverage Approved Yield Commodity Report Summary of Coverage Notice of Loss Application for Payment Payment Premium Billing Introductions and General Session

What will be covered in this segment
How is NAP Buy-up Premium Calculated Examples of Calculating Premium

Calculating Premium – Statutory Changes (Continued)
A producer must pay the regular service fee and calculated premium amount based on each eligible crop enrolled and coverage level elected Remember this is all current year crops SEC : Section 196 of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7333) is amended

How do we calculate the Premium? Start by multiplying the number of acres devoted to the eligible crop by… Number of Eligible Acres For Premium calculation, this will be done with reported acres. This means that a premium will not be calculated until after the producer certifies his total acres and signs off on the FSA-578

How do we calculate the Premium? the approved yield on the CCC-452 for the producer by… Number of Eligible Acres NAP Approved Yield For Premium calculation, all APH data will need to be gathered and approved in the NAP online Software in order to have an approved CCC-452 to calculate the premium from

How do we calculate the Premium? the producer’s share in the crop by… Number of Eligible Acres NAP Approved Yield Producer’s Share Again this shows the importance of STCs approving NAP yields and rates timely, as we would like to be able to calculate a premium when the FSA-578 is certified, making that the last piece of the puzzle in order to send the SOC and the Premium Billing.

How do we calculate the Premium? the coverage level elected by the producer…so, what coverage levels are available? Number of Eligible Acres NAP Approved Yield Producer’s Share Coverage Level

But wait there is more… So What’s Next?? Let’s move forward, we are getting closer to the grand total!!

How do we calculate the Premium? Now we multiply everything by the applicable average market price as determined by the State Committee. Then… This could be anything from Organic price, Direct Marketing Price or Average Market Price

How do we calculate the Premium? Finish the calculation by multiplying all the previous data by the 5.25 percent premium factor This premium is capped at $6,563 (based on the payment limitation of $125,000 times 5.25 percent) It’s important to remember that not all payment limitations are the same, depending on the setup of the producer. For example, if all members of an GP have 125,000 limitations, their total premium will be capped at 5.25 percent of their total limitation. For instance, at 125,000 at 5.25% the maximum amount of premium for a single producer would be capped at $6,563, however a 3 person GP, each with 125,000 limit would not be capped until 19,689 as their liability would be increased along with their payment limitation. Also, premium is by person or legal entity who is a NAP producer. Premium is not attributed like payment limitation. For example, the person and corp each has premium cap of $6563 even though attribution may limit payments more.

Premiums will be calculated by: Unit FSA administrative county Each tax ID number Crop definition according to pay group Seed crops are also calculated separate by pay group as well. A producer’s total premium amount will be the sum of the premiums calculated for each crop, type, and intended use for which a producer has obtained NAP coverage.

Calculating Premium Examples – Yield Based Crop
Yield Based Example – Pumpkins: 20 Acres Certified Current Approved Yield: 100 cwt. per acre NAP Price: $ per cwt. Coverage Level – 50-65 Producer Share – 100 % In this example we are going to go through all different premium calculations from the 50% all the way to 65%

Calculating Premium – Examples – Yield Based Crop (Continued)
Yield Based Example – Pumpkins: Coverage Level Guarantee Maximum Benefit Premium Calc Max 65/100 $149,500 $125,000 $7,849 $6,563 $49, 833 $2,616 Guarantee: Acres (20) x Approved Yield (100) x Coverage Level (.65) x Price ($38.33) We know that the max benefit a producer can get is 125,000, should we be selling a 65% coverage policy? (Remember, just because that is the maximum, doesn’t mean that the producer may not want this coverage, the loss level for payment starts at 35%, that may be incentive enough especially when you move forward on the costs per on each other coverage level) Acres Approved Yield Coverage Level Price Share 20 60 100 CWT .65 $ 100%

Calculating Premium Examples – Yield Based Crop (Continued)
Yield Based Example – Pumpkins: Coverage Level Guarantee Maximum Benefit Premium Calc Max 65/100 $149,500 $125,000 $7,849 $6,563 60/100 $138,000 $7,245 $49,833 $2,616 $45,999 $2415 Guarantee: Acres (20) x Approved Yield (100) x Coverage Level (.60) x Price ($38.33) Guarantee comes down as does the premium calculation, but that’s all. Coverage comes down, but the max benefit and max premium remain the same.

Yield Based Example – Pumpkins: Coverage Level Guarantee Maximum Benefit Premium Calc Max 65/100 $149,500 $125,000 $7,849 $6,563 60/100 $138,000 $7,245 55/100 $126,500 $6,641 $49,829 $2,616 $45,996 $2415 Guarantee: Acres (20) x Approved Yield (100) x Coverage Level (.55) x Price ($38.33) Again, the guarantee comes down as does the premium calculation, but that’s all. Coverage comes down, but the max benefit and max premium remain the same. $42,166 $2,214

Yield Based Example – Pumpkins: Coverage Level Guarantee Maximum Benefit Premium Calc Max 65/100 $149,500 $125,000 $7,849 $6,563 60/100 $138,000 $7,245 55/100 $126,500 $6,641 50/100 $115,000 $6,037 $49,829 $2,616 $45,996 $2415 Guarantee: Acres (20) x Approved Yield (100) x Coverage Level (.50) x Price ($38.33) For the first time in this example, the guarantee comes down, and no matches the max benefit. The Premium Calculation falls under the maximum Premium cost of $6,563 and therefore the Max Premium and the Max Premium Calc match. Remember coverage level is now the same as the $250 coverage, but the price goes from 55% of NAP Price to 100%, a large increase. $42,163 $2,214 $38,333 $2,012

SDA, BF and/or LR Status:
NAP Participants with Socially Disadvantaged (SDA) Beginning Farmer (BF) and/or Limited Resource (LR) Status SDA, BF and/or LR Status: The premium fee for buy‑up coverage will be reduced by 50 percent for producers who meet the definitions for underserved, BF and LR status and is capped at $3282 for all crops grown in all counties. 7 CFR 718 Note: The definitions for SDA, BF and LR producers can be found in the NAP Basic Provisions and form CCC-860 page 2.

LIMITED RESOURCE APPLICANTS
A Limited Resource Farmer or Rancher or Forest Owner is: A person with direct or indirect gross farm sales not more than $176,800 (for FY2015) in each of the previous two years. AND A person with a total household income at or below the national poverty level for a family of four or less than 50 percent of county median household income in each of the previous two years. Or you can go to the following website and it will determine it for you based on your county info:

Beginning Farmer A Beginning Farmer or Rancher means an individual or entity who: Has not operated a farm or ranch, or who has operated a farm or ranch for not more than 10 consecutive years. This requirement applies to all members of an entity, will materially and substantially participate in the operation of the farm or ranch.

Socially Disadvantaged Farmer
Socially disadvantaged group- a group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities. The definition that applies to Titles I, V, and VI includes members of a group subject to gender prejudice, while the definition that applies to Titles II, IX, XII, and XV does not. Title XIV and the Education and Risk Management Assistance provision in Title XII do not make specific reference to the statutory definition of socially disadvantaged farmer or rancher. Socially disadvantaged Farmer or Rancher- a farmer or rancher who has been subjected to racial or ethnic prejudices because of their identity as a member of a group without regard to their individual qualities. This term means a farmer or rancher who is a member of a socially disadvantaged group. Specifically, a group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities. Those groups include African Americans, American Indians or Alaskan natives, Hispanics, and Asians or Pacific Islanders.

Crops Coverage APH Crop Report Notice of Loss Application for Payment Payment Premium Billing

Payment Calculation

Crop Definition Crops are defined by pay group and consist of:
Pay Crop Code Pay Type Code Planting Period

Loss Calculation – Yield Based Crops
Yield based crop losses are determined as follows: Eligible Acres x Share x Approved Yield X Coverage level (50%, 55%, 60%, 65%) = Disaster Level – Production = Crop Loss (for payment) Eligible acres x share x approved yield results in the producer’s expected production. The disaster level is calculated by multiplying the expected production by the basic (50%) or buy-up (50%, 55%, 60%, 65%) coverage level. The production for the loss year is subtracted from the disaster level to determine the production loss. Note: There may be an assignment of production for ineligible cause(s) of loss, which will increase the amount of production and reduce the crop loss for payment.

Loss Calculation – Value Loss Crops
Value loss crop losses are determined as follows: Lesser of Field Market Value A or Maximum Dollar Value for Coverage X Coverage Level = Disaster Level – Field Market Value B (Inventory after Disaster) = Crop Loss (for payment) Now that participants can provide a maximum dollar value for coverage for value loss crops, the “starting point” for determining crop loss for value loss crops is the lesser of field market value (FMV) A or the maximum dollar value for coverage that was provided by the participant. There may be assignments of production for ineligible causes of loss which would be added to the FMV B to increase FMV B and reduce the crop loss.

Calculation of NAP Payment - Yield Based Crops
Eligible Acres X Producer Share X Approved Yield X Yield Coverage level = Disaster Level - Production to Count = Net Production for Payment X Applicable Price This is the calculation for a yield based crop without and HMP or Direct Market option *Applicable average NAP price is based upon NAP participant’s application for coverage and documentation that proves producer qualifies for a Direct Market Price, if applicable. If not, the average market price will be used in the calculations. NOTE – Producer must indicate the choice for direct market price on the CCC-471 and then provide evidence to support the increased price prior to acreage reporting deadline for the crop(s). Now, lets see an example. X Price Coverage Percentage (buy-up 100%; basic 55%) X Payment Factor (Harvested or Unharvested) - Salvage Value ($ amount) = Calculated NAP Payment

NAP Payment Example 1 – Yield Based Crop
Variables Crop (Type/IU/Prac/Plnt Per) Pumpkins (SUG/FH/NI/01) Producer Share 1.000 Acres Certified 20 Approved Yield 100 cwt Price $ Coverage Level 65/100 Harvested? Yes Production 600 cwt Calculation Eligible Acres 20 X Share 1.000 X App Yield 100 X Yld Coverage Lvl 0.65 = Disaster Level 1,300 cwt - Production 600 cwt Net Production for Payment 700 cwt Start with a simple, yield-based crop calculation. This is the same scenario for which we calculated guarantee. But, I recall that MY GUARANTEE WAS $49,833? You mean that wasn’t my payment. Look at “Disaster Level”. To what is the disaster level equivalent to in guarantee? (Answer: Production Guarantee) What is this “49,833” NOT payment amount NOT estimated payment amount NOT maximum payment amount NAP Guarantee IS “Maximum coverage level dollar amount for premium calculation” = X Price $ X Price Lvl Coverage 1.000 $26,833

NAP Payment Example 1 – Comparison to Basic CAT Level
Calculated NAP Payment at elected 65/100 Buy-up is $26,833 Compare this calculate payment to the same scenario with Basic CAT level Disaster Level= 1,000 cwt NAP payment at 50/55= $8,433 Buy-up results in significantly higher calculated payment ($26,833 vs $8,433) Here is a good example of the added value for the producer to enroll in the buy-up option. Basic CAT level Net Production for Payment = 20 acres x 100 cwt x share x yield coverage = 1,000 cwt (rather than 1300 cwt with 65/100) – production of 600 cwt =400 CWT Basic CAT level NAP “Guarantee” = 1,000 cwt X x .55

Pumpkin Overview CROP COVERAGE LEVEL GUARANTEE PREMIUM PAYMENT
% OF LOSS PUMPKIN 20 ACRES 65/100 $49, 833 $2616 PLUS $250 ADMIN FEE= $2866 54 % Loss in Production $26,833 50/55 CAT LEVEL $21,083 No premium $250 admin fee 54% Loss In Production $8433 2014 Farm Bill NAP Training

Calculation of NAP Payment - Value Loss Crop
Smaller of Actual FMV A ($ Value of Pre Disaster Inventory) OR Producer Selected Maximum Dollar Value X Coverage Level Percentage (65%, 60%, 55%, or 50%) = Disaster Level FMV B ($ Value of Post Disaster Inventory + $ Value of Ineligible causes of Loss) - = Crop Loss X Producer Share Producer reports value of crop at the time of application. Use the available yield coverage elections of 50/55/60/65 “Determining Premium”: “value loss crops – the product of the maximum dollar value for which participant seeks coverage, subject to applicable payment limitation, times the 5.25% premium factor.” The producer elected value does effectively limit the FMV A X Unharvested Factor X Price Coverage Level Percentage = Calculated NAP Payment

NAP Payment Example 3 – Value Loss Crop
Variables Crop (Type/IU/Prac/ Plant Period) Grass (WRG/SO/IR/01) Producer Share 1.000 Producer Selected Value $115,000 Coverage Level 65/100 $ Value Before Disaster $ 200,000 FMV B $ 50,000 Unharvested Factor 0.60 Calculation FMV A $115,000 X Elect Cov Lvl 0.65 = Disaster Level $74,750 - FMV B $50,000 = Crop Loss $24,750 Guarantee and premiums are “joined at the hip”. Therefore, Value loss NAP participants will need to know NAP prices for crops such as sod and Christmas trees at coverage application time to not “over-cover” or “under-cover”. Will be paying premiums on Producer Selected Value, but if their Selected Value is way over or under what could reasonably have on hand, they might be “overpaying” or “under-covering”. Overcovering Example Value Loss Crop Grass Type WRG Int Use SO Practice IR Plnt Per 1 Highest Possible Inventory =15 acres (72,600 sq yrd.) Price /sq yrd Yield Level 0.65 Price Level : Highest possible FMV A based on NAP Price = $85,305 (X .65 =$55,448 X = $2911) Actual calculation: Selected Value $ 115, (from 471) Guarantee = $ 74, (65% of Selected Value) Premium = $ 3,924 (5.25% of Guarantee) Under covering Example Value Loss Highest Possible Inventory =40 acres (193,600sq yd) Price /sq yd Yield Level 0.65 Price Level : Highest possible FMV A based on NAP Price = $227,480 (X .65 =$147,862 X = $7763 Capped at $6563) Actual calculation: Selected Value $ 115, (from 471) Guarantee = $74, (65% of Selected Value) Premium = $ 3,924 (5.25% of Guarantee) X Share 1.000 X UH Factor 0.60 X Price Cov Level 1.000 = $14,850

Loss Calculation – Grazing Crop
Grazing crop losses are determined as follows: Producer Acres (acres x share) ÷ Carrying Capacity = Animal Acres X Grazing Days = Expected Animal Unit Days (AUDs) X Loss Level (Similar Mechanical or STC Approved) = AUD loss (for payment) The loss level is determined by similar mechanically harvested production on the farm or similar farms or the STC approved loss level.

QUESTIONS??? Contact Information: Marcinda Kester Farm Programs Chief (859) Website:

Marcinda Kester Farm Programs Chief.

Similar presentations

Presentation on theme: "Marcinda Kester Farm Programs Chief."— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Marcinda Kester Farm Programs Chief.

Similar presentations

Presentation on theme: "Marcinda Kester Farm Programs Chief."— Presentation transcript:

Similar presentations

About project

Feedback