USDA’s Risk Management Agency (RMA) held a conference call with commodity groups to discuss 2013 crop insurance premium rates. Nationally, average premium rates for upland cotton will not change. However, the average of individual states will see varying increases and decreases. Premium rates for extra-long staple cotton also will be affected but that data has yet to be generated by the RMA.
A map with state averages for commodities, including upland cotton, is included in a RMA backgrounder at www.rma.usda.gov/news/2012/11/2013premiumrateadjustment.pdf.
The RMA’s news release is at www.rma.usda.gov/news/2012/11/rateadjustment.html.
Last year, the RMA began using a new rating methodology for corn and soybean producers. For the 2013 crop year, this new methodology will be expanded to include cotton.
While moving cotton and other commodities to the new methodology, the RMA also updated various rate factors that “individualize” the county base rate to a specific grower's situation as a normal course of business. The new rates will update the premium subsidy percentage at varying levels of coverage to reflect recently accumulated loss data. There will be an update of county reference yields (mid-point average of the county). If a producer is above the reference yield, then they have received a discount, and if they were below, they received a surcharge.
With this update, the RMA now is using data from the insurers and not National Agricultural Statistics Service data. The RMA also has considerably more prevented planting information and has updated the rate adjustments to reflect actual experience. In addition, producers will have the option of an APH yield trend adjustment for the 2013 crop year. This initially will only be available in major growing counties. This adjustment was offered to corn and soybean producers last year and had a 55 percent participation rate.
After all of these adjustments, the RMA determines the target rates for commodity and county but this only reflects information through the 2011 crop year. The RMA will phase in the new rates limiting year-to-year premium changes to limit potential increases due to significant 2012 losses as a result of drought. This approach will help keep premiums stable and provide predictable rates.
For 2013, the RMA will fully implement targets that result in 15 percent or less change (increase or decrease) in yield protection premium on average. The RMA will partially implement targets beyond 15 percent, not to exceed the maximum of 20 percent change on average. As more specifics become available from the RMA, the NCC will provide members with that information.