Crop Insurance Update: Understanding the Actual Production History Yield Exclusion

Written by M. Sean High—Staff Attorney

Under the 2014 Farm Bill, the United States Department of Agriculture (USDA) Risk Management Agency (RMA) offers crop insurance policy holders the potential to exclude certain bad production years when calculating yields used to establish crop insurance coverage.  Known as the Actual Production History (APH) Yield Exclusion (YE), this provision allows for the exclusion of certain years when the average per planted acreage yield for a specific county is at least 50% below the simple average for the previous 10 consecutive crop years.

According to RMA, the agency conducts a review of the crop insurance actuarial documents to identify years that will be eligible for APH YE.  RMA states that the agency primarily uses RMA data to identify eligible years, but “[i]f RMA data is not sufficient for any given crop year, National Agriculture Statistics Service data is used, if available and appropriate, and then, in a limited number of situations, the applicable county transitional yield may be used, as appropriate, to complete a 10-year consecutive period.” Information regarding eligible APH YE years can be found at: http://prodwebnlb.rma.usda.gov/apps/MapViewer/index.html.

According to RMA, to be permitted to exclude bad production years when calculating yields used to establish crop insurance coverage, an agricultural producer “must choose the Actual Production History Yield Exclusion Option by the sales closing date for [their] insurance policy.” Importantly, RMA states that this option is continuous, and once chosen, “will automatically exclude all eligible crop years from your actual production history database, unless you specifically opt out of the exclusion for a specific crop year because you wish to retain your yield for an eligible crop year in your actual production history database.” Consequently, if the policy holder decides to end this coverage, they must request a cancellation of the option by the sales closing date.

Finally, RMA states that the exclusion of bad production years may result in “an increased approved yield, a higher insurance guarantee and greater indemnity payment could occur due to the yield exclusion.” Because of this potential benefit, the policy holder claiming the exclusion will have their policy premium adjusted to reflect the higher effective coverage level.