A large number of Iowa farmers are likely to make a claim for crop insurance losses as a result of the 2012 drought. A key figure to keep in mind is a $200,000 claim. A claim at that level or higher for at least one crop in a county will trigger an audit or review as required by the USDA Risk Management Agency. That $200,000 amount could be due to loss of either production or price, depending on type of policy purchased, says Steve Johnson, an Iowa State University Extension farm management specialist.
Those farmers will need to provide actual production history or APH records, which will include an APH review for 2009, 2010 and 2011 crops as well as the 2012 crop to be harvested. Prior to 2012, the trigger amount was a loss of greater than $100,000.
Even with the dollar amount of the review trigger doubling, a large number of reviews are anticipated, notes Johnson. Reviews will be carried out by insurance company representatives.
Payment for crop insurance claims hinges on completion of review
Farmers are advised to start collecting documents as soon as possible to help expedite the review. These reviews are normally triggered once a claim has been worked and determined to be over the $200,000 threshold for at least one crop in a county.
This review process typically is done during the harvesting period, he says. Purpose of the review is to validate reported production, which means a variety of documents can be used, including settlement sheets, load records, bin measurements, loss papers, livestock feeding records or other approved records that would verify acres and production.
The farmer's main responsibility is to provide three years of verifiable production evidence for the units of the crop being reviewed, says Johnson. Claims for 2012 will not be paid until this process is completed. This could delay receiving an indemnity payment at a time when many farmers have cash flow constraints resulting from the drought.
Consider using these recommendations from Johnson to help you prepare for an APH review and for any spot checks or reviews in the future:
* Keep all of your production records for at least three years. Separate production records by crop, practice, type, unit and the crop year in which the production actually occurred. Sort production records by the FSA Form-578 (to identify each crop and separate them by unit and county), settlement sheets and soft records.
* If your grain is farm-stored, have grain bin measurements taken by a third party representative including 2012 production. If you had the grain weighed before you stored or sold it, provide any scale tickets that contain weight and volume measurements. If scale tickets are used from grain carts, the print on these tickets can become unreadable with time--make photocopies.
* Do not split truckload tickets and bins between units unless you have soft records for production that is commingled.
* Print combine monitor records and keep them with your settlement sheets. These records must show location of field, name of crop, date and pounds or bushels harvested. Also, records should provide the unit number that correlates with the field identification.
* Even if you have only a share of a crop, make sure you will be able to provide records for the entire crop if necessary. If you feed the grain, records should be kept at the time the grain is fed, preferably as a record ledger with dates and amount fed.
* Keep and file all signed appraisals. If a claim will total $500,000 or more, RMA will be notified and a representative can be chosen to participate in the review.
Note that soft records are primarily used for breaking out production by a unit such as load records and yield monitor records, while hard records would be actual production numbers such as settlement sheets, scale tickets, appraised production, adjuster measured production, or feed production records.
"Farmers who anticipate a claim of $200,000 or more for at least one crop in a county should begin working now with their crop insurance agent to prepare for the APH review," says Johnson.
Summing up: If you claim a 2012 loss of $200,000 or more for crop insurance, take note. USDA's Risk Management Agency will audit or review those claims during harvest this fall. Affected farmers will have to provide APH records as evidence of production.
For farm management information and analysis go to ISU's Ag Decision Maker site www.extension.iastate.edu/agdm and Extension farm management specialist Steve Johnson's site www.extension.iastate.edu/polk/farmmanagement.htm.