Posted August 11, 2014
Facts Out on New Program
Kansas wheat growers are one step closer to accessing a new county-level crop insurance product designed to cover “shallow losses.” In late July, the Risk Management Agency released rules and coverage maps for the Supplemental Coverage Option contract (SCO) which drafted in the 2014 Farm Bill. SCO was created to cover so-called “shallow losses” - revenue losses that are deep enough to cause a loss, but to shallow to trigger an indemnity payment from a producer’s traditional crop insurance coverage.
A Band of Revenue
SCO is designed to supplement and not replace a producer’s existing yield or revenue insurance. It is chosen as an endorsement and the coverage level follows the underlying policy, meaning that it will cover a band of county-level revenue or yield from 86% down to the coverage level of the producer’s existing insurance. For example, if a producer purchases a 75% revenue protection contract, they could then also purchase an SCO contract to cover expected county revenue from 75%-86%. However, if a producer only purchased farm revenue protection at the 70% level, they could purchase the county-level SCO from 70% - 86%.
It is important to note that because of the county-level nature of SCO both guarantees and losses will be determined by county-level yields. The RMA was scheduled to release an online calculator on August 12th that will allow farmers to explore coverage levels and prices in their own counties. It can be found along with other SCO materials at www.rma.usda.gov/news/whatsnew.
An Acronym Soup
SCO is available to producers who do not choose to enroll in the 2014 Farm Bill’s Agriculture Risk Coverage program (ARC) as they are designed to cover similar types of risk. We’ll remember that the 2014 Farm Bill set-up two different programs to replace the old suite of direct and counter-cyclical payments – ARC and Price Loss Coverage (PLC), which is a new target price program, but based on base acres and historical yields. A producer can enroll in PLC and SCO, but not ARC and SCO. In the event that a producer initially elects to take SCO coverage this fall, but then decides to enroll in the ARC program, (making them in-eligible for the SCO coverage), they can withdraw from SCO up to December 15th.