"Prevented Planting" Insurance Plows up Wetlands, Wastes $Billions

April 28, 2015

Boondoggle: Attempted Fixes Have Failed

To its credit, USDA's Risk Management Agency has tried repeatedly to refine the standards that loss adjusters must meet when determining whether a prevented planting payout should be made. The agency must rely on loss adjusters to apply these standards and to secure the documentation needed to ensure that prevented planting payouts are made only on acreage that can be planted when the weather is normal.

The crux of the matter is determining whether seasonal wetlands should be insurable in the first place, let alone eligible for a prevented planting payout. In insurance jargon, this boils down to determining whether the acreage is "physically available for planting" under normal conditions.

The agency first tried to tighten the definition of "physically available for planting" in its Prevented Planting Loss Adjustment Standards Handbook (PLASH) for the 2006 crop year, which excluded "acreage that in normal weather patterns is normally wet throughout the final and late planting period and that would only be available to plant in abnormally dry conditions." It added that acreage that is normally wet from year to year "is likely to have well-established cattails, perennial weeds, and perennial grasses that increase the likelihood of the acreage being unavailable for planting even in the driest year." In February 2012, RMA issued a Final Agency Determination (FAD-110) that upheld the 2006 provisions, stating: "Normal weather conditions are not a covered cause of loss."

In its PLASH for the 2011 crop year, the agency tried to further refine and clarify the definition – specifying that acreage that has or recently had marsh vegetation was not insurable. The new standards reiterated that acreage that was normally wet during the planting period and "would only be available to plant in abnormally dry conditions" could not be considered "physically available for planting." Moreover, the new document recognized that acres that are too wet to plant in the spring but might be dry enough to till or plant in the fall could not be considered insurable in the spring – and therefore were not eligible for a prevented planting payout due to excess moisture.

In 2012, the agency began issuing so-called Special Provisions that were specific to the Prairie Pothole Region and sought to further tighten the definition of acres that could be considered physically available for planting. In January 2014, RMA issued another Final Agency Determination (FAD-201) that upheld the 2012 definition and added: "If the approved insurance provider establishes that the only time the acreage is available for planting is when the area is abnormally dry, then the acreage is not eligible for prevented planting."

The agency has issued dozens of bulletins and Final Agency Determinations in addition to the list above in its attempt to ensure the integrity of prevented planting coverage

Still, the history of payouts in the region clearly demonstrates that, sadly, the agency's repeated attempts to clamp down on payouts on acres that are too wet to plant in normal conditions have not worked. The flow of cash to the same handful of North and South Dakota counties that have generated payouts year after year continues unabated, and the threat to critically important wetlands intensified when crop prices boomed.

"In 2012, an even more stringent prevented planting rule went into effect for five prairie pothole states – Minnesota, Iowa, North Dakota, South Dakota and Montana. The Risk Management Agency ruled that growers in those five states must plant and take a crop to harvest at least once every three years to be eligible for prevented planting the following year. (Some insurance company executives had complained privately that some insured fields 'had perch swimming on them.')

"In addition to that one-in-three rule, the acreage must also be 'insurable.' Acreage that under normal weather patterns is normally wet through the crop insurance final and late planting period – and that normally has cattails and perennial weeds and grasses growing on it – would not qualify. That could potentially disqualify some Dakota cropland that was planted thanks to 2012's extreme drought.

"What officials said they wanted to correct were repeated claims on wetlands RMA considers farmable only under abnormally dry conditions."

Marcia Zarley Taylor
DTN-Progressive Farmer, May 13, 2013