FSA programs explained: Compensation for quality losses
January 7, 2011
Producers who suffer quality reductions at harvest can sure feel the pinch. The Supplemental Revenue Payments (SURE) Program has provisions to provide for compensation in these situations, but producers should take necessary steps in order to ensure that quality losses are calculated into their payment.
The SURE Program pays producers 60 percent of the difference between the SURE guarantee (115 percent X insurance coverage) and the actual revenue (actual yield X national average market price). Quality losses are calculated into the actual revenue by reducing the national average market price. However, quality reductions are not automatic and must be requested by the County Committee and approved by the State Committee.
The process should start with the individual producer who suffers a price reduction on their commodity due to quality conditions that are a result of adverse weather conditions. An example of this could be high moisture corn due to an early freeze or poor quality alfalfa due to hail. Once a quality condition is identified, producers should contact their local County Committee member in order to notify the Committee of a quality issue in the area.
The local County Committee will decide whether the quality losses are a result of weather conditions and are of such an extent as to request a quality reduction for the SURE Program. If the committee agrees, they should recommend a quality reduction rate. This rate is established in the form of a percentage and reflective of the difference in price between the expected price of the commodity at harvest and the actual price received.
For example, on average a producer in the county could expect $70/ton for good quality alfalfa, but due to thunderstorms, the alfalfa could only be sold as fair quality for $50/ton. In this example a quality reduction could be recommended at 0.7143 ($50/$70). The 0.7143 quality discount rate is multiplied by the national average market price for the commodity, thereby reducing the producer’s actual revenue in the calculation of the SURE Program Payment.
If you harvested a commodity with an approved quality reduction rate in your county or area, the quality reduction rate is not automatic. Producers must certify, when completing their SURE application, that on average, their commodity meets or exceeds the quality reduction rate. This is done in the form of a certification during the completion of the application. However, producers are required to maintain documentation, such as sales receipts, in order to prove their quality losses. All applicants that apply under the SURE Program are subject to a spot check. If you are spot checked and are unable to prove that your commodity suffered quality losses equal to or in excess of the established quality reduction rate, you will be required to pay back the difference.
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Producers who suffer quality losses on forage crops such as alfalfa have a more difficult task of proving quality losses as most hay is fed or sold without quality tests. If you believe that you have suffered quality losses on your forage crops, you must obtain quality tests from an approved forage testing facility on your hay prior to the end of the calendar year in which the hay was harvested. Testing should be completed on all acres of the forage crop and not just affected acres since the quality reduction rate applies to the entire crop. County Extension agents are a great resource for questions regarding forage testing.
The Farm Service Agency begins taking applications for the SURE Program on Jan. 10, 2011 for crop losses suffered during the 2009 crop year. Please contact your local Farm Service Agency and set up an appointment to complete your SURE Program application.
james r. neill is the county executive director for the farm service agency of meade county, sd and can be contacted at firstname.lastname@example.org. questions about the sure program or any other program administered by the farm service agency should be directed to your local farm service agency service center.