The nation’s corn yields nosedived more than 25% below trend this year, with lesser damage to soybeans and other crops.
That means there’s just one little detail standing between many of the hardest hit 2012 crop disaster victims and a record $23 billion to $24 billion in crop insurance claims this year: Audits.
When the Risk Management Agency (RMA) finalized Revenue Protection’s harvest price guarantees for corn at $7.50/bu. and soybeans at $15.39/bu. on Nov. 1, it guaranteed what some expect will be claims nearly 2.5 times the all-time record in 2011.
At those prices, it won’t take much to trigger an automatic crop insurance audit or “review” this year. Government rules require anyone with a claim of $200,000 or more per crop per county in indemnity payments to be audited before checks are distributed. On 1,000 corn acres, that’s just a 27 bushel loss from a farmer’s guaranteed yield.
If the farmer’s paperwork is in order, crop insurance audits are not painful, but they could delay paychecks, say growers with personal experience.
Nan Nidlinger, who farms with her husband and brother in Decatur, Ind., considers herself a veteran. As a crop insurance agent, Nan triggers an automatic audit every year under RMA guidelines.
“Adjusters are there to gather data and complete the claim. Their intention is not to find something wrong, but to complete a claim for protection you purchased,” said Nidlinger. “If they find an error, they simply adjust your claim.” The most troublesome part is the time involved in getting all the data together for the three-year audit, she added.
Mark Longnecker, who farms in Cambridge, Iowa, experienced a crop insurance audit in 2010. “I had all my yields recorded from my yield monitor, which we calibrate at the start of harvest and spot-check with wagon loads,” he said. “Typically, our yield monitor is within 1% of actual harvested corn. We usually declare our yields off our monitor.”
Instead, the crop insurance auditor wanted settlement sheets. “This took a little longer to gather,” Longnecker said. “I thought I had saved them all, but I was missing some” as the audit went back to his 2008 crop, he said. “Fortunately, the co-op where I sold my grain provided the past settlement sheets I needed. It took three visits, but the auditor was satisfied and everything went smoothly.”
Steve Hess of Bushnell, Ill., is preparing for his crop insurance audit. “This year we experienced our lowest corn yield since 1988.” Hess had a crop insurance claim last year and knows what to expect. “We have all our settlement sheets, yield records and yield maps. When we chopped silage in two fields in July, we had the crop adjuster out. Those fields had an equivalent yield of 18 and 24 bpa when our five-year average was around 190 bpa.” On the rest of his farm, Hess, who plants most of his acres to continuous corn, harvested under 100 bpa average for corn.
“I think the audit process will go smoothly. But I’m not anticipating … (an indemnity) payment before the first of the year because of so many claims this year,” said Hess.
The preponderance of claims this year may actually speed up a farmer’s individual audit. Generally, in any review, the auditor checks three years of production/sales/feed records. But as RMA told DTN, if the policy holder has good records, certified correctly and no errors, “the auditor has the option” to decide the current year’s records are enough and a full audit of the earlier years is unnecessary.
Livestock feeders will need more documentation since they generally do not have settlement sheets for their grain. RMA will also check sales records, kill sheets and/or feeding records to get a handle on grain production.
Sometimes 50/50 landowners do not necessarily want others to know what their sales price was. “RMA really only needs delivery information,” explained Nidlinger. “The elevator can simply provide delivery confirmation, and that would be enough to prove production.”
After experiencing one audit, Iowa’s Longnecker revised his recordkeeping to be prepared for the next one. In his Quicken software, he records in the memo area for a grain payment, the amount of bushels and the year of production (such as 2010 corn) even though the check came in 2011. “It’s easy to summarize and know exactly what I produced in each year and what I sold it for,” said Longnecker.
Secondly, in an Excel file, he keeps a farm journal of each field and records all phases of production, including harvested amount.
Third, “I have a folder on my wall and as soon as I get a check from my grain buyer, I put the settlement sheet that comes with it in the folder. Now I have them all in one spot.”
Of course, his preference would be to always have a great crop and not need crop insurance. But he’s not betting the farm on that.