NEW RISK MANGEMENT PRODUCTS
WASHINGTON, Feb 28, 2002 - The Agricultural Risk Protection Act of 2000 (ARPA), enacted in June 2000, significantly changed the manner in which the Risk Management Agency (RMA) conducts research and development for new risk management programs on behalf of the Federal Crop Insurance Corporation (FCIC) which is authorized under ARPA to enter into: (1) contracts to carry out research and development to increase participation in underserved states, areas, and agricultural commodities, and (2) partnerships with public and private entities for the purpose of increasing the availability of loss mitigation, financial, and other risk management tools for producers.
Contracts have been awarded to conduct research and feasibility studies for several new risk
management products. If the research during this first phase indicates that a viable program can be
developed, a second phase of contracts will be awarded to carry out the development of the
product. Just a few of contracted activities are as follows:
- Cut Flower Research will examine the best techniques for insuring cut flowers and cut
cultivated floral greens;
- Hawaii Tropical Fruits and Trees will research the best methods to provide risk management
for several varieties of fruits and trees in Hawaii;
- Research is being conducted to determine the viability of a risk management tool for
producers subject to quarantine regulations;
- A study to determine the feasibility of a risk management product for tree, vine, and bush
growers who suffer losses due to perennial pathogens;
- Review new and existing Revenue Coverage Plans for feasibility and improvement;
- Fresh Vegetable research to determine the feasibility of new risk management tools for
several types of fresh vegetables;
- New methods of insuring rangeland and pasture
- Research and development of a Cost of Production Insurance Program for 12 different
crops.
RMA has also entered into several partnerships to study the feasibility of developing new risk
management programs. A few of the programs being studied are:
- Potential markets for specialty crops;
- Viability of a risk management product to protect against specific weather events such as
excess precipitation or extreme temperatures;
- Feasibility of developing a risk management program for several species of aquaculture;
-
Revenue insurance for cattle and hog producers; and
- Optimal strategies for dryland grain producers to manage risk with crop insurance and
futures contracts.
An alternative mechanism for the development of new policies is through the Federal Crop
Insurance Act's, Section 508(h). This section permits anyone to develop policies or plans of
insurance. When approved by the FCIC Board of Directors they will be reimbursed for their
research and development costs and maintenance costs.
Several new plans of insurance were submitted and approved under the 508(h) in 2001, including:
- Nutrient Best Management Practice (BMP) product that will protect producers from the risk
that BMP fertilizer recommendations might fail.
- Hybrid Corn Seed Price Endorsement, which offers additional, price protection for hybrid
corn seed producers.
Two livestock programs have been approved:
-
A Livestock Risk Protection program protects against declining hog prices, and
- Livestock Gross Margin program protects the gross margin between the value of hogs
and the cost of corn and soybean meal.
Other products previously approved under the 508(h) approach are:
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