USDA RMA Updates Pecan Revenue Policy
As a result of talks with the National Pecan Federation, the USDA Risk Management Agency announced last week some changes under the Pecan Revenue policy for calculating approved average revenue for insured pecan orchards, recovering from hurricane damage. These changes can help some growers impacted by Hurricane Michael and may provide support to pecan growers recovering from future storms.
Revenue Adjustments for Damage due to Hurricane Michael
The underwriting procedures will provide authorization to Approved Insurance Providers for calculating approved average revenue in lieu of requesting RO Determined Yields when insured pecan orchards, under good management practices, have recovered from hurricane damage, and the insured’s database contains actual revenues from 2016 to 2020. Where applicable, the procedures are expected to provide an increase of up to 40 percent in the approved average revenue, which will apply to both years of the two-year coverage module. Insureds not meeting this requirement may still request a RO Determined Yield for consideration of an increase to the approved average revenue.
An adjusted approved average revenue to be calculated by Approved Insurance Providers using the Regional Office Underwriting guide is proposed to be determined by taking the greater of the following:
1) The average of the actual revenues with substitution of the actual revenues for 2018 and/or 2019 crop years with an assigned revenue based on NASS prices when the calculated assigned revenue value is higher than the actual revenue; or
2) The average of the actual revenues with substitution of the actual revenues for 2018 and/or 2019 crop years with an assigned revenue based on the historical prices for reported production for the database when the calculated assigned revenue value is higher than the actual revenue.
Assigned revenues would be calculated as follows to remove the effect of the price change between the 2016/2017 crop years and the 2018/2019 crop years:
1) Assigned Revenue with NASS prices.
i. Average the actual revenues in the database for the 2016 and 2017 crop years;
ii. Divide (i) by the NASS average price of 2.45 for 2016 and 2017 crop years;
iii. Multiply (ii) by the NASS average price of 1.75 for the 2018 and 2019 crop years;
iv. Multiply (iii) by 0.60 (factor used in APH yield adjustment) to determine the assigned revenue.
2) Assigned Revenue with the historical prices for the database acreage. This method may only be used if a non-zero actual revenue was reported for crop years 2016 to 2018.
i. Calculate the average price received for each of the 2016 through 2018 crop years;
ii. Average the actual revenues in the database for the 2016 and 2017 crop years;
iii. Divide (ii) by the average price received for the 2016 and 2017 crop years.
iv. Multiply the value from (iii) by the average price received for the 2017 and 2018 crop years;
v. Multiply the product of (iv) by 0.60 to determine the assigned revenue.
Higher Coverage Levels and Subsidy Increase for Enterprise Units
For the 2021 crop year, RMA is increasing the maximum coverage level available under the Pecan Revenue program from 75 to 85 percent. This change allows pecan producers to cover a larger portion of their expected revenue. RMA also revaluated enterprise unit discounts and enterprise unit subsidy levels available under the Pecan Revenue policy for the 2021 crop year. This change recognizes the reduction in risk associated with coverage at the enterprise unit level for pecans and brings the associated subsidy to the same level as other major crops. This provides pecan growers an additional and more affordable option to consider in their risk management strategy. The following table shows the coverage level and subsidy changes from 2020 to the 2021 crop year.